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Underwater mortgages mount
Fri, May 22, 2009 (3 a.m.)
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- Report: Vegas home prices at 1998 levels as sales surge (5-19-2009)
- Foreclosure filings drop (5-15-2009)
- Valley home prices plummet toward ZIP (5-15-2009)
- As home prices sink, sales pace skyrockets (5-15-2009)
Beyond the Sun
More than 80 percent of the homes bought in Las Vegas from 2005 to 2007 are underwater, a reflection of the danger that still lingers for the housing market.
The real estate Web site zillow.com released a report that shows 67 percent of Las Vegas homeowners owe more on their homes than the houses are worth — the No. 1 ranking in the nation. Stockton, Calif., was second with 51 percent. Twenty-one percent of the nation’s homes are underwater, the report said.
“Considering the bulk of those homes were bought in 2004 to 2007, that is not a surprising figure,” said Steve Bottfeld, executive vice president of Marketing Solutions. “The key question is how long can those people hold on and how rapidly prices come back. Nobody has the answer to either of those questions.”
The rising number of homeowners underwater has raised the specter that many will walk away from their homes and let them go into foreclosure. Las Vegas is ranked No. 1 in the nation in foreclosure filings, and that has prompted prices to fall more than 50 percent from their peak in June 2006.
“I think we are getting to the point where people are realizing they don’t want to be stuck in this house where they literally are buried and the prices aren’t going to come back in any realistic time frame,” said Richard Plaster, president of Signature Homes. “What I see is the number of foreclosures are definitely going to increase.”
Under the Obama administration’s plan, homeowners can only be underwater up to 5 percent to receive assistance. For those greater than 5 percent, lenders would have to agree to assist homeowners but that has been rare, Zillow spokeswoman Katie Curnutte said.
“I have to be worried about these people walking away because pundits are telling them that is the thing to do and go to the end of the block and buy something cheaper,” Bottfeld said, adding that that is a mistake because people will take a hit on their credit.
Plaster has been one of the people urging others to walk away even though he said he would never do so because he needs good credit for his business.
Banks aren’t interested in helping out homeowners and reducing the loan amount, and they are the ones who are benefiting from the bailout, Plaster said. It can take several months for banks to foreclose and, in the meantime, the homeowners can horde their cash, he said.
These people only need to wait three years to qualify for a Federal Housing Administration loan and four years for a conventional loan and prices should remain low for a while, he says.
Plaster said he doesn’t understand the criticism leveled against people who walk away from their homes. Local developers have done it on master-planned communities and no one bats an eye. And when casinos are unable to make debt payments, no one criticizes them, Plaster said.
Plaster said the more people who walk away from their homes, the quicker the housing market and prices will stabilize.
“If you are paying $2,500 a month on something that you can rent across the street for $1,200, it is not the brightest course to stay in that house,” Plaster said. “The banks have been bailed out. Why should the homeowners be the ones to suffer?”
Dennis Smith, president of Home Builders Research, said the high number of homeowners underwater doesn’t bode well for the housing market’s recovery anytime soon. Many of those homeowners won’t be in a position to sell their house and move up to a pricier home.
“We may not see any changes in the move-up market for some time,” Smith said. “Maybe two years.”
The boost in home sales has been driven by houses at the lower end of the scale. The median price of existing-home sales was $125,000 in April, according to SalesTraq.
The inventory is already expected to swell because of the 10,000 to 25,000 homes in foreclosure that banks are holding out of the market for now, Smith said.
“I don’t think anyone expects the foreclosure part of the market to change significantly for three years, and we haven’t even heard from high rises yet,” Smith said.
Markets such as Las Vegas that had a lot of construction have had the highest number of homes underwater, Curnutte said. There is no indication the Las Vegas housing market is recovering because prices continue to fall at the same rate, she said.
According to Zillow’s numbers, the median price has fallen 49.3 percent between the first quarter of 2006 and first quarter of 2009.
“Vegas is one of those markets that is not showing improvement (in terms of prices),” Curnutte said.
Over the past five years, 75.4 percent of homes purchased are underwater, according to zillow.com. Ninety-five percent of homes lost value but the median percentage of owner equity was 29.6 percent, it reported.
Homes bought in 2007 had the highest percentage of homeowners underwater at 82.7 percent. Eighty percent of the homes bought in 2005 are underwater. That lessened to 65.4 percent for homes bought in 2008. In a reflection of falling prices, 22.6 percent of the homes bought in 2009 are underwater, zillow.com reported.
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GOOD! That's what they deserve for keeping 500,000 US VETERANS HOMELESS, living on the streets and in HORRIFYING SICK & NASTY prison-like VA & POVERTY PIMP shelters. Now they will know what it's like to have NOTHING!
The problem with walking away is that the lender can go after the "walker" for the balance of the mortgage once they sell it. So, walk away and get a lien on your new property down the street. Doesn't make sense to me!
Duh! When you buy a home with an interest only loan in the peak of a housing market, of course you'll be upside down when the market crashes.
Sounds like a good time to by rental property
Journey, you are dead wrong. No bank is going after anyone after they walk away. None. The IRS doesn't care, either. We have 25,000 foreclosures here in the Valley, and to think that the banks will place a lien on all the properties is fiction. Never happens, never will. The only thing that happens is that your credit score gets dinged. So what? Richard Plaster is a builder who realizes that to continue paying $2,500 for a house worth 1/3 of that is foolish. And you are foolish, too. Go back to Iowa...
Remember Richard Plaster was the guy out there seeling these over priced homes a few years ago. Now he wants you to walk away and buy another one from him and let the bank take a hit. He should be ashamed of himself for his statements.
Finally someone gets it! Bravo to you, Richard Plaster. You have my respect.
Now if you could only start a publicity campaign or movement to inform all these ignorant underwater homeowners that the sooner they stop paying their mortgage and short sell or walk away, the sooner this foreclosure crises will end. As long as underwater homeowners keep paying, this foreclosure crises will be protracted and prices will continue to plummet.
The banks have already been bailed out. Do you think they are looking out for you, smalltime homeowner? Of course not. They are looking out for their own bottom line. The government is not looking out for you either. They gave $750 billion to the bank bailout and only $75 billion to the homeowner bailout Hello? Who's the government looking out for? Not you, smalltime homeowner.
Stop paying, short sell or walk away, and get over it already. The sooner you do it, the sooner this foreclosure crises will end. We can then expect some kind of normalcy in housing values, which historically has appreciated an average of below 5 percent per year. The 2002-2006 years were abnormal real estate years and brought us the bubble that has popped, and where we are now. This is a battle between you and the bank. Who are you going to stick it to, underwater homeowner? Yourself or the bank?
Concerned Citizens, would you all just relax!!!
We have our DEMOCRAT friend in office and they are going to fix this for you.
OBAMA,PELOSI,REID and the TEAMSTERS are going to get your home back that you could not afford in the first place and they are going to put a free electric car in the driveway.
Fret no more, for people like MYSELF who can pay my mortgage(because of my fiscal responsibility) We will pay yours and you will be happy for ever after.
If your going to commit and buy on credit, make sure you are commited to paying the loan in full so responsible people do not have to pick up your slack and watch you feel sorry for yourselves.
We all should take care of our elderly, verterans and handicaped and forget about the slackers.
2uall,
You are 100% right, but the article is saying that it is stupid to pay three times what something is worth. If I was in the position to save 1500 a month, I would let my credit go to hell and save the 18,000 a year. Some people may have overextended, but that is becasue people (creadted, by realtors, media, name it) thought if they didn't buy a house they would be a million in two years.
We buy a vehicle for $40.000 and finance it knowing it will depreciate in value the second we take it off the lot and we are commited to repay the loan back in four years regardless of depreciation or appreciation in value.
So why is it that when we buy a house and agree to a (15)or(30) year mortgage and because of market fluctuations their house depreciates do they think that it will be better to walk away from the loan?
So the house depreciates because of market values, whats the big deal, a person signed the contract for the long term ("RIGHT") and the person bought the house to put their family in it and they could financially afford it when they bought it ("RIGHT") so the best thing you could do is continue to keep a roof over your familys heads and make the payments.
There is no guarantee that you are going to make money off your investment of a house purchase but you did guaranty that you would pay for it.
Home values will come back up so there is no need to dump on your mortgages, if you were honest and truly could afford them.
And for those who bought their house to make money on and sell in (2)or(3)years consider this, your not a home owner you are an investor and that is the chance you take.
just wait...
it is really NOT a good time to buy a rental property.
there's more and more supply added every day and less and less reason for new people to move to las vegas ( no jobs ) and that will create that good old "supply and demand" pricing structure.
rent prices will go down, and people won't be able to cover that mortgage, and we'll have a whole new wave of foreclosures.
i work in rentals. i see more and more homes added every day, and it's taking longer and longer to get them rented.
I understand people walking away from their homes that they can no longer afford, (probably shouldn't have purchased them to begin with). But advocating that people walk away from their responsibilities when they can afford to make the payment is just not right. People agreed to buy these homes, they agreed to the overinflated prices, they agreed to the terms of the loans, and they agreed to sign binding contracts.
The questions for the submerged thinking about foreclosure are 1) whether you can handle the credit hit following you for 7 years?; and 2) whether you are willing to roll the dice that they will not come after you for the deficiency - - which may always follow you?
For those with less than lofty ambitions, I imagine that those are two consequences that are likely palatable. For those of us expecting better days ahead, it's better to tread water rather than sink.
in the past, banks didn't go after people who walked away from loans because the banks could sell the houses to recoup the cost of the mortgage.
now when people walk away from a mortgage, the banks may go after them for the difference since they can't sell the house for the cost of the mortgage. i hope the banks nail these deadbeats.
Me too, but I also hope someone nails the banks as well!
Banks have five years to go after them. They will sooner or later and those that don't will just sell the debt to collectors.
9 BILLION in lost equity in just two years...
The home builders in Clark County are to construction what Bernie Madoff is to wall street.
and no one is looking at the head of this Ponzi scheme... the builders...
The home builders were thick as thieves with the mortgages companies... during these past few years.
1. The builders would set a price and the mortgage companies would justify the price through speculative appraising.
2. Then the builders would raise the price on the same home to justify the mortgage companies speculation.
3. Then the mortgage companies would set new speculative appraisal numbers.
4. Where upon the builders would set new higher prices....
Del Webb rose their home prices 20% in one month ... how could that be? It normally took five years to go up 20% ...
Just like Ponsi the builders knew when the bubble burst the would not loose their money..
Side not.. some of the investors with Madoff claiming poverty .. had already double and triple their money and greed kept them in the game ... and when their own greedy game went bust they want to be bailed out.
In the builder's Ponzi game all the home owners went bust no one made money...
Lots of banks are willing to remodify right now. CountryWide (now Bank of America) has actually been ordered by law to do so.
bank don't modify the investor who has your loan they can said yes and no. i am going to fill out application for loan modification for gmac and indymacbank. i fill one out for indymac last year they denied this time if they denied i might walk away
In some states by law the bank cannot come after you for the remaining debt. If Nevada is not one of these look out. There is too much money out there to be made. Collection agencies will spring up faster than realtors during the boom and buy these loans cheap from the banks. You don't know how miserable life can be until a collection agency gets on your case when there big dollars involved.
It's probably more like 95% are upside, because you have to add in the people that took out home equity loans against their previously bought homes or refinanced and took cash out based on the dramatic appreciation of property values. So with a first mortgage and a second or a refied loan based on that previous appreciation, you're talking about many others who are upside down in their properties. This market will take a long time to recover. There's too much inventory and not enough buyers. Don't forget the market was also flooded by the builders' new home inventory.
Corrected: It's probably more like 95% are upside down, because you have to add in the people that took out home equity loans against their previously bought homes or refinanced and took cash out based on the dramatic appreciation of property values. So with a first mortgage and a second or a refied loan based on that previous appreciation, you're talking about many others who are upside down in their properties. This market will take a very long time to recover. There's way too much inventory and not enough buyers. Don't forget the market was also flooded by the builders' new home inventory.
There isn't going to be a recovery. The state of Calif. is going to run out of cash in six weeks. GM has only a few days before it files for bankruptcy I work at a big box store and sales have not improved AT ALL in the last 4 months. If I had kids I would tell them not to go to college because in 4 years there aren't going to be a lot of jobs but there are going to be a lot of collection agencies trying to collect on student loan debt and all other kinds of debt.
As I see the problem from afar, the average American family wants more and more of what they cant afford. Bigger and more expensive homes, just to be better than everybody else, bigger and more expensive vehicles, just to stand on the ""show off driveways"", then when the downtime comes along, these people are running about like headless chickens wanting handouts, everybody else has got them, so why shouldnt we, the poor hard-up suckers who thought that the dream would go on for ever.
let's bring in millions more imagrunts that will increase the demand for the cheaply built cracker boxes, also when the economy gets worse there maybe riots and a lot of them (houses) could be burnt down, reducing inventory.
I am a Realtor and can only tell you that the foreclosure crisis has only begun. Prices have not hit bottom yet and I know that sounds crazy but it is inevitable.
Now let me get this. Obama bails out the banks who would be in trouble because people didnt pay their mortgages. THEN the banks STILL want the properties or the payments from the homeowners. Isnt that double dipping ?
Why didnt the banks at least allow people to pay less if they cant afford the whole payment and add it to the end? That way at least the houses dont sit idle and get trashed. There are 5 foreclosed properties on my block and they all have been trashed.
The banks were so eager to loan the fed's money a few years ago that they funded this bubble. People took out the equity that the bank SAID THEY HAD and spent it. Now the bank wants to be made whole. Its really hard for me to feel sorry for the banks even though they are technically owed the money from the homeowners.
Obama just gave our money to the banks cause he has friends there.
I have an idea. If banks take TARP funds, they should take their entire pool of mortgages and reduce the amounts owed by homeowners evenly so that at least the TARP funds went for something other than the profits of the banks.
when there talking about can't afford their loans,because of arms or what!!I know someone who bought a home for 125,000 and when time was good decided to refinance it and did 6 times can anyone spell DUMBASS I laugh all the to the bank on that one,it's so upside down they'll be keeping this baby for a while.....ex's are messes..
I want to thank all the dumb, poor people who thought that making $8 an hour was enough money for you to buy a home. Now we're ready to buy and the selection of homes and prices are in our favor. Thank you
Despite the absents of real estate type postings, over the pass couple days the next door neighbors loaded-up a U-Haul, I suspect there may be some kind of front-yard posting in the not too distant future.
Hasta la vista, baby?
Taxation is theft; theft is wrong, any system funded through taxation/theft deserves failure.
With the us dollar heading south perhaps the foreign ownership will be the answer. As a Canadian that owns several houses in vegas I believe Vegas has a sustainable industry. Poor people gamble more than rich people. Once you settle into your new socialistic world, all should be well for vegas. There wont be as many private jets sitting at McCarran but there will be more greyhounds and motor homes. Change is a comin I hope its the change you expected.
Foreclosures are going to rise and we will not see a recovery for 3 to 4 more years. If you buy right, less than $70.00 SF you will make money renting. Tenants more often than not pay their rent on time every month than those who buy homes. Most families want to pay and can afford to pay when the pricing is below $1,500.00 monthly. Figure this out, buy places where the payment is less than that with all costs tabulated then rent.
If you're not getting a 1% return on your investment monthly then don't buy, in best cases you can get a 1.5% return month, just don't use realtors to do your negotiating. They'll suck you dry all in the name of the commission. Their goal in inherently in conflict with your goal, your goal is to buy at the lowest price and their goal in to maximize the price for the seller which increases their commissions received.
Every major development in the valley, excluding Ascaya and McDonald Ranch are either in foreclosure or has filed for Bankruptcy. The developers created the housing boom prices by spending in excess of $225,000.00 per undeveloped acre of land when purchased from BML in early 2002. Prices paid to BLM in 2005 exceeded $299,000.00 per undeveloped acre of land and in 2007 exceeded $350,000.00 per undeveloped acre of land. Keep in mind these properties were considered dry isolated desert when purchases were made and the developers speculated on rising single family home prices to continue. The banks and bond holders are left holding the notes; i.e. taxpayers bailing out the banks.
Builders then in turn purchased large pieces of land from the developer; the pricing paid to the developer was substantially more than the developer paid. The appraisers who worked for places like Countrywide, DR Horton, KB Homes, and so on all jumped on the wagon to over inflate the pricing to increase the values of the home for future phases to increase base sale price.
What no one is asking BLM; where did BLM put all this money they generated from all the land sales? The Federal Government made trillions upon trillions USA wide selling large parcels of land to developers throughout the USA for amounts that no one has never paid in the history of the BLM.
A lot of people made out like bandits, including banks, sellers, developers, construction companies, etc. Why single out BLM? It's not like they'll give money back.
Itstohot, Realtors will not suck you dry if you have an agent who represents you as the buyer only. They will negotiate to get the lowest possible purchase price. Buyers must never have the listing agent represent them because they work to get the highest possible price for their seller.
9ballguy:
I see you are a real estate. If this is the case and you can practice what you preach then I would suggest you put your email on you postings and inform potential buyers that you will work in their best interest. This will be generating a good income for you.
Friday:
Single out BLM for just that reason. Obama and his group are going to raise our taxes for bailing out Wall Street, Banks, Welfare, Social Programs, etc... Etc... Etc... My question, where did the money go? They haven't put this money back into the system, it is being spent on some dumb social welfare or some other program and we're not being told.
Its2hot: I thought we were all having a friendly discussion here and exchanging ideas. Not telling each other how to run our businesses.