THE ECONOMY:

Report: 58.2 percent of Las Vegas homes have negative equity

Number of homes with upside down mortgages expected to grow

Wednesday, March 4, 2009 | 12:07 p.m.

Real Estate in Crisis

‘More pain to come in this Vegas land market’ (3-1-2009)
New-home sales plummet again with no signs of improvement (2-27-2009)
Las Vegas counts on Obama housing rescue (2-27-2009)
Report: Las Vegas home prices at July 2003 levels (2-24-2009)
Economist: Vegas housing market to recover in 2010 (2-23-2009)
How Obama's mortgage relief plan pencils out (2-21-2009)

Fifty-eight percent of Las Vegas homes with a mortgage are underwater and that number is likely to grow, according to a report released today by First American CoreLogic.

While 234,538, or 58.2 percent, of all Las Vegas properties with a mortgage are in negative equity, an additional 14,088 mortgages, or 3.5 percent, are near that point, the firm noted. That brings the total to 61.7 percent of all outstanding mortgages, the report said.

The increase does not bode well for the Las Vegas housing market. It makes it more likely people will walk away from their homes and let them fall into foreclosure, further depressing home prices.

As for states, Nevada was ranked No. 1 in the nation and well above the national average with 55 percent in the state, the firm reported.

Negative equity is also referred to as underwater or upside down and means borrowers owe more on their mortgage than the home is worth.

More than 8.3 million U.S. mortgages, or 20 percent of all properties with a mortgage, are underwater as of Dec. 31, the firm reported. About 700,000 more properties became upside down in 2008’s fourth quarter, and 2.2 million more are approaching that point, the firm noted.

Michigan was ranked second in the nation with a negative equity share of 40 percent, Arizona was third at 32 percent and Florida and California were tied for fourth at 30 percent.

The average loan to value ratio for properties with a mortgage in Nevada was 97 percent, or less than $8,000 in equity, leaving the typical mortgaged homeowner with virtually no cushion for the rapidly declining home values, the firm reported.

Discussion: 18 comments so far…

By jfnance32

3/4/09 at 2 p.m.

Suggest removal

So essentially, 62% are in a rent-to-own situation.

Eventually, the taxpayers will own the banks/financial instutitions who hold the mortgages who own the houses.

LOL......the circle completes. A person indirectly will own his own via the Uncle Sam.

But not really........the government is generating tons of debt to buy the banks. Whoever owns that debt owns Uncle Sam and therefore owns the houses. The Chinese and the good people of Saudi Arabia own the houses.

Should we start to learn Chinese?

Which way is Mecca? Do we face Sunrise Mtn to pray to Allah?
By James_P_Reza

3/4/09 at 3:52 p.m.

Suggest removal

If this trend continues or worsens (which, based on the nationwide pricing bubble and the rash of over-leveraging that took place based upon it, it might), then even AAA mortgagees with otherwise spotless credit and a high sense of responsibility will walk away from their loans, particularly since the banks already received more than enough money than was necessary to right the toppled real estate cart.

Right now, there's not much incentive to stop someone with cash from walking away from a loan and then buying back the property at a foreclosure fire sale. Who cares about seven years of bad credit in an economy in which credit is worthless anyway, especially if it means rewriting your life and saving your sanity?

The government -- hell, We the People -- needs to decide if America should be a nation of renters or a nation of property owners. If the decision is the latter, then the government should consider quickly re-appraising and re-mortgaging every single at-risk property to Current Market Value, using funds from the Economic Recovery Plan to pay off the negative equity to the mortgage holders.

That would stabilize depreciation almost immediately.
By tannsummers

3/4/09 at 4:14 p.m.

Suggest removal

Great information from this writer, who always does a great job. Sad information, but at least it's well done and understandable.
By That_Anonymous_Guy

3/4/09 at 4:42 p.m.

Suggest removal

The nightmare scenario -- what happens when the negative equity situation in Las Vegas becomes so severe that a trickle of people ditching underwater mortgages becomes a flood? Someone who might consider sticking with a mortgage that's $20,000 underwater might well give up and toss in the towel if the balance hits six figures.

Hate to say it, but the banks may have no choice but to consider en masse principal writedowns on Las Vegas mortgages. It smacks of moral hazard, but the banks will lose a heck of a lot more if the flood of jingle mail begins and home prices crater further.
By bdover

3/5/09 at 12:55 a.m.

Suggest removal

Jingle mail. Now that's a good line, AG.

Bought my house in Henderson for 143G in 2000. 20% down. Worth 300G (strip view) in 2006. Now worth 20 dollars. So what? Not leaving, taxes will go up some, but you know the schools will continue to produce tip dependent dropout dumbbells, so the impact should be minimal. What a country....
By yetis

3/5/09 at 4:49 a.m.

Suggest removal

tannsummers, your kidding me! LV Sun once again needs to check the quality of its sources. This is the same company that valued the mortgage pools so very INCORRECTLY, that got us into this mess in the first place!
https://www.corelogic.com/services/inves...

Look at its wonder "partial list" of clients...
https://www.corelogic.com/about-corelogi...

This company needs to create the most shocking analysis possible, to attract people to the company, as it looks to rebrand itself away from the its prior core growth segment.

If people wall away, where do they go? Very few states don't have income tax and the if they rent, that props up property values.
By azsk8fan

3/5/09 at 5:37 a.m.

Suggest removal

James Reza, I agree. I see people who bought a house for 600,000 and now the same house can be picked up at a foreclosure sale for around 400,000 (and sometimes even less). How in the hell is someone supposed to deal with a 200,000 upside figure like that? If the banks are so willng to sell to a stranger for 200,000 less then why not work out a deal with the current owner and save everyone a whole lot of headaches.
By judgesmales

3/5/09 at 6:58 a.m.

Suggest removal

No principal reductions. You bought it, you pay for it. If you can't, go through foreclosure or bankruptcy. But don't steal my tax money just because your housing lotto ticket turned out to be a loser.
By nightmare

3/5/09 at 8:02 a.m.

Suggest removal

There is a very good reason your mortgage company will not write down your principal to its current value or allow you to buy your own foreclosure. If they did this, then you would tell your neighbors and then every single homeowner in Las Vegas will want the same thing. Therefore, the bank would rather go through the cost and hassle of auctioning your home to anyone else instead of re-selling it to you.

The motive for their actions is not about you, its about the consequences it would have on other existing loans.
By letsciencedecide

3/5/09 at 8:47 a.m.

Suggest removal

If banks are willing to write down a mortgage shouldn't they also be willing to write down a car loan? So the minute we drive that new car off the lot and it loses 20% of its value the bank should just let us have a new loan structure. Should grocery stores refund us money when our food goes bad after a few weeks and becomes worthless? How about our clothing, last years stuff is out of style - who is going to refund our money? Shouldn't we be protected from all our stupid purchases? Hell no, and banks should not be writing down mortgages!

Why do we assume the value of houses should be guaranteed to go up? We accept that very other major consumer purchase that we make immediately starts loosing value (even if we buy it on time).

This whole mess continues to ignor the fact that most of these people agreed to their loans - and most have not changed their financial circumstances - they just don't like the fact that their value has gone down - well boo hoo to you.

Be responsible!
By That_Anonymous_Guy

3/5/09 at 9:35 a.m.

Suggest removal

OK, let's consider what happens under your "let's let the market go into free fall" scenario.

House 1 goes into foreclosure on a $200,000 mortgage. Bank sells it for $150,000, taking a $50,000 hit.

House 2, just down the block, sees its value decline to $150,000 due to the distressed sale comp. Owner has a $250,000 mortgage. He's $100,000 underwater. He mails in the keys and walks away. Bank forecloses, sells for $125,000, taking a $125,000 hit.

House 3 now declines to $125,000 in value. Owner of that house has a $200,000 mortgage. He's now $75,000 underwater. He gives up, mails in the keys. What do you think the bank's going to get for that house? Think they're going to recover even 50% of that mortgage?

See where I'm going with this?

Forget the government. I'm not talking about the government. I'm talking about the banks taking proactive steps to protect their mortgage portfolios by writing down mortgages to levels that discourage hundreds of thousands of homeowners from throwing in the towels on their mortgages. If that happens, the banks stand to lose an enormous amount of money. And with 59% of LV mortgages now underwater, we're dangerously close to that scenario.

I don't see everyone squawking on these message boards when Station Casinos, MGM or Harrah's attempts to swap out old bonds for new bonds at 40 to 50 cents on the dollar. It's accepted as a rational effort to stabilize a company's finances. And bondholders often take it because they realize they'll never recover as much in bankruptcy.

Exactly why should we be treating home mortgages differently?
By uddeboda

3/5/09 at 10:18 a.m.

Suggest removal

bdover,

You were frank and straight to the point, perfect.

The great United States of America are on a loosing streak, and any recovery seems to be light years away. The whole world is suffering because of the stupidity of a few 1000 people who were so full of greed, that they couldnt see what was happening.
Other countries will pull through eventually, but I feel that the USA is a lost cause, and when the future $ bills have to be paid for by the people, there will be civil unrest across the country.
Other countries that already have almost a 50% tax burden, this has been worked on for 50-60 yrs, but the USA will have to raise taxes within a decade, and these taxes will be of gigantic proportions. SORRY
By goingbust

3/5/09 at 11:42 a.m.

Suggest removal

I wonder what companies sell PMI insurance? They all have to be out of business by now.
By robbedinvegas

3/5/09 at 2:42 p.m.

Suggest removal

Yea! Yucca is dead! What a waste of time and money. Now we can give all of that money to Detroit! Excepting Ford, of course.
By vegasgurl4fun2

3/6/09 at 8:09 a.m.

Suggest removal

As a real estate agent with access to the MLS, 62% is incredibly low. I'd say it's more like 90%.
By azsk8fan

3/7/09 at 1:56 p.m.

Suggest removal

Comparing apples to oranges (car loans vs mortgage loans). Cars are EXPECTED to devalue the minute you drive it off the lot. People act like it's the buyers fault that their homes have declined in value. I guess the bank can stand on principle and not work with the homeowner to offset the imbalance of equity - but then the bank needs to shut up about the number of foreclosures they have on their hands - it's cutting off their nose to spite their face - while it's not an ideal situation the fact remains the bank can opt to work with the current owner and get SOMETHING every month or they can have the house back and sit and lose money every day until it's resold. This is the fault of the appraisers who over-inflated values in order for people to get their loans, the realtors who knew this was going on as well as the banks. Most of the buyers were pawns in this whole real estate mess - I'm glad I wasn't dumb enough to get sucked into the buying frenzy - when 10 people wanted the same house and were willing to pay the over-inflated price based on a bogus appraisal I knew it was time to sit back and continue to rent - I wouldn't play their silly game and I am very grateful I didn't let the desire to own a home overshadow my common sense.
By robynG

9/24/09 at 4:01 p.m.

Suggest removal

I wanted to let everyone know on here and in Las Vegas! There is help available to homeowners who are underwater on their mortgages. It is not a loan modification, but an actual refinance that homeowners can do that will not only save their home, but will contribute to saving the market.

This is no joke and it is not too good to be true. The US is not a lost cause, the banking formula just had to be broken down to a science and made to make sense for all parties involved. This has been done.

If the bank was to refinance a property for 90% of what it is currently worth, that will give the homeowner 10% equity in the home, the ability to afford the mortgage, and the choice to stay or to sell the home. This will stimulate the market. This will stimulate the economy. There is 7 billion dollars of taxpayer's money available to write off this loss by the bank as long as it done before June of next year. The bank can take the toxic loan and turn it into a paycheck. The homeowner will gain what will otherwise take years to recoup. This is not an option for most homeowners. Spread the word. It is available and it is out there. Do not give up hope for this country.