Expert: Foreclosures to dominate real estate in 2009

By Brian Wargo (contact), In Business reporter

Fri, Feb 20, 2009 (2 a.m.)

Real Estate in Crisis

Report: Median home sale price drops another $10,000 (2-19-2009)
Nevada's foreclosure rate tops nation once again (2-12-2009)
Realtors' numbers show need for stimulus (2-13-2009)

Foreclosure filings in Nevada dipped in January, but no one should take that as a sign the housing market is closing in on a recovery.

Nevada continues to hold the top spot in foreclosure filings as a national push is intensifying to do something about the problem.

RealtyTrac posted numbers that show foreclosure filings in Nevada decreased 4 percent in January compared with December, but the total is still 134 percent higher than January 2008.

In January 3,848 homes were foreclosed — 136 more than in December. The reason filings dipped is the 6,064 notices of default filed against homeowners was 402 fewer than in December.

One in 76 Nevada homes faced a foreclosure filing in January. California was a distant second with one in every 173 homes; Arizona was third with one in every 182 homes.

The major difference is that Fannie Mae and Freddie Mac, the government-controlled mortgage finance companies, suspended foreclosure sales through the end of January and have temporarily halted evictions.

Both JPMorgan Chase & Co. and Citigroup have announced they have halted foreclosures on homes occupied by owners until the Obama administration develops a plan for preventing foreclosures. The plan may include subsidizing troubled homeowners’ mortgage payments and setting standards for modifying loans.

But while the government is working out a plan to help those people, the concern for Las Vegas and other markets is that homeowners who can afford monthly payments will still walk away from their homes because the values have dropped so sharply in the past year.

Bob Hamrick, chairman of Coldwell Bank Premiere Realty, says he expects foreclosures to dominate the market in 2009 based on the notices of default reported. The good news is that although bank-owned inventory continues to increase, the rate of growth is slowing. It was high as 9 percent month-to-month in early 2008 and that slowed to 2 percent to 3 percent in the final months of 2008. But foreclosures are still a problem, he says.

“We anticipate that market will continue for the next one to two years,” Hamrick says. “It is going to continue to put downward pressure on pricing.”

Much of that downward pressure will be for higher-priced homes of $400,000 and above, which is likely to be the next wave of foreclosures because the lower-priced homes have already been hit, Hamrick says.

“At the current levels, I am convinced that there is little more that we can go to from a pricing standpoint (of lower-priced homes),” Hamrick says. “Some of those properties are priced lower than when I got into the business in 1980. Some of it to me is quite surprising. There is a debate whether some of the lenders are dumping properties below what they need to get them sold.”

That is creating some great values and buying opportunities, Hamrick says. Many investors are stepping in to buy them, not only for cash flow but with the expectation they have great equity gains, Hamrick says.

Hamrick’s further take on market

Because there were so many transactions during the peak of the housing market, 31 percent of the homes listed are short sales, Hamrick says. All together, 69 percent of listings are short sales or foreclosure sales, he says.

That is the reason why 65 percent of the properties on the market are vacant, Hamrick says. That’s 12 percent higher than mid-2008. With 8 percent of the homes rented out, that means only 27 percent of the homes on the market are lived in by owners

Although new foreclosures are slowing the real estate and economic recovery, sales are up substantially (his firm’s sales rose 58 percent in 2008), dropping inventory from 28,000 to 20,000, Hamrick says.

The reason is the affordability that prospective buyers are finding in the marketplace, Hamrick says. Someone buying a 1,535-square-foot home in 2006 — the median size of those bought — had a monthly payment of $1,606 if they put 10 percent down. Today, the monthly payment on a similar sized home, given price drops and better interest rates, is $852 a month.

“If anything, 2008 showed us that housing markets are working with prices moving toward their long-term trends,” Hamrick says.

The one market segment that didn’t see sales increase in 2008 was existing luxury single-family homes of more than $1 million, Hamrick says. They were down by nearly half from 414 to 212. Those priced from $1 million to $1.5 million fell from 246 sales in 2007 to 124 in 2008. Those priced from $1.5 million to $2 million fell from 84 to 34 sales. In the $2 million to $3 million category, sales fell from 45 to 33. The one category with an increase was homes priced from $3 million to $4 million. There were 16 sales in 2008, up from 15 in 2007. Five homes $4 million and above sold in 2008, down from 24 in 2007.

A home in Summerlin’s Ridges was the most expensive sold in the valley in 2008. The 13,943-square-foot home sold for $11.5 million in October.

In other news:

• Daniel Doherty of Colliers International was named 2008 people’s choice broker of the year and top producer in awards by the Society of Industrial and Office Realtors.

Brian Wargo covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at wargo@lasvegasun.com.

Discussion: 8 comments so far…

By Babyboomer

2/20/09 at 5:32 a.m.

Suggest removal

Foreclosures for 2009 will still be a major headline in 2009,that goes without saying.This is a situation no one has ever seen.Being able to stop anymore would be a great headline I'd like to see
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By short_fat_hairy_back

2/20/09 at 6:47 a.m.

Suggest removal

How about a list of the top realtors and loan agents who sold homes to people that could not afford them? Just the top fifty would do.

These people should be outed. Put their pictures on the front page just like the LVRJ did with those prostitutes last week.
By user9000

2/20/09 at 7:31 a.m.

Suggest removal

Realtors are not responsible for buyer's stupidity. A Realtor's job is to match a buyer with a home. Any buyer who doesn't talk with their CPA about their income vs. monthly expenses before they buy a home is a moron is and deserves to lose their home.
By Houstonjac

2/20/09 at 7:45 a.m.

Suggest removal

I basically agree with this article. The only thing that may improve the foreclosure situation is a very aggressive federal rescue plan in which there is a highly focused effort to modify existing loans to reduce principal values to match current market values. I wonder what the major real estate firms like Coldwell Bankers Premier are doing to train their agents how to capitalize on harvesting this bank owned property market?
By LasVegas2009

2/20/09 at 11:51 a.m.

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user9000: "Realtors are not responsible for buyer's stupidity. A Realtor's job is to match a buyer with a home. Any buyer who doesn't talk with their CPA about their income vs. monthly expenses before they buy a home is a moron is and deserves to lose their home."

You must be a realtor!
I dont have a CPA so your saying I should lose my house? Your an idiot! "Buyers stupidity"?? Its the salespersons job to inform and educate the customer about the product. Realtors played a big role in the whole mess we now find ourselves in. Brokers, realtors, and Banks all took advantage of people. Now that the truth is out everyone wants to blame the victim. So sad!!
By mlimberg

2/21/09 at 8:43 p.m.

Suggest removal

Define EXPERT?

I don't have a problem with Realtors until they tell people that real estate values only go up, and oversell whatever, just to make a buck at someone elses expense.

Some day people will realize you don't need a Realtor to buy or sell Real Estate. Why give someone good money to hold your hand?
By lasvegas4us

2/24/09 at 9:49 a.m.

Suggest removal

Unfortunately people tend to stereo type and although some of the Las Vegas Realtors deserve all that come they way not all Realtors are dishonest. I am a Las Vegas Realtor and did not do a transaction for 18 month because I didn't want to sell people at 3%. Instead I designed a compressive real estate web site for Las Vegas, www.Lasvegas4us.com.
Secondly, I have provided all types of Las Vegas real estate market statistics and what buyers have to do to get the best deal, however people don't like to read and choose to blame others for their mistakes.
By lasvegasrealestate411

3/7/09 at 3:50 a.m.

Suggest removal

I have to agree with lasvegas4us... We were advising all of our investors to sell in 2005 when the rent vs. buy ratios were completely out of wack. $400,000 homes that only rent for $1,300 made absolutely no sense... Unfortunately people were being sold on unrealistic appreciation rates of 20%+ a year.

In 2007 we also devoted much of our time on improving www.LasVegasRealEstateHome.com when the market was in a stalemate and have provided plenty of information on our www.LasVegasRealEstate4u.com blog about real estate conditions.

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