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October 21, 2014

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Report: Nevada’s 31 percent home price drop tops nation

Bad news about Nevada home prices and foreclosures continued to roll in Wednesday and Thursday.

On Wednesday, a federal agency that tracks home prices said Nevada led the nation in price declines between March 2008 and March 2009, with Nevada prices falling 31.1 percent. For the first quarter of 2009 alone, Nevada prices fell 10.56 percent, the Federal Housing Finance Agency reported.

These numbers, analyzing only newly issued mortgages, compare to a national average decline in home prices of 7.14 percent from March 2008 through March 2009.

The same report, analyzing both new and refinanced mortgages, ranked Las Vegas No. 3 in the nation in the list of cities with the biggest declines in home prices. The Las Vegas area's prices fell 29.52 percent year over year in that analysis.

On a nationwide basis, the agency said its home price index based on newly issued mortgages only fell at a slower pace than in the fourth quarter of 2008, meaning some parts of the nation may be nearing the bottom of the home price decline debacle.

"Our latest data are consistent with growing evidence that housing market conditions may be stabilizing in some parts of the country, especially areas not covered by the other major repeat sales price index," FHFA Director James Lockhart said in a statement. "I am hopeful that this first quarter data combined with recent market stimulus programs, such as the first-time homebuyer tax credit and President Obama’s Making Home Affordable Program, may mean that home price depreciation may be easing."

But there's little sentiment that the Las Vegas-area housing market is ready to rebound, even with median home prices falling about 40 percent year over year through April, by one measure, to $141,720.

That's because the city's high unemployment rate -- 10.4 percent in April -- continues to depress economic activity and is leaving thousands of Las Vegans unable to qualify for mortgages.

In another report Thursday, the Mortgage Bankers Association said foreclosure actions -- with Nevada again leading the way -- were initiated on 1.37 percent of first mortgages nationwide during the first quarter of 2009 as job losses drove the U.S. foreclosure and mortgage delinquency rate to a record high.

The seasonally adjusted delinquency rate was 9.12 percent of all loans outstanding at the end of the first quarter, up from 6.99 percent at the end of the third quarter of 2008.

The delinquency rate includes loans that are at least one payment past due, but does not include loans in the process of foreclosure.

The combined percentage of loans in foreclosure and at least one payment past due, meaning the percentage of mortgage holders not current on their mortgages, was 12.07 percent on a non-seasonally adjusted basis at the end of the 2009 first quarter, the highest ever recorded in the MBA delinquency survey.

"The increase in the foreclosure number is sobering but not unexpected. The rate of foreclosure starts remained essentially flat for the last three quarters of 2008 and we suspected that the numbers were artificially low due to various state and local moratoria, the Fannie Mae and Freddie Mac halt on foreclosures, and various company-level moratoria," Jay Brinkmann, MBA’s chief economist, said in a statement. "Now that the guidelines of the administration’s loan modification programs are known, combined with the large number of vacant homes with past due mortgages, the pace of foreclosures has stepped up considerably."

Brinkman offered this commentary on the situation:

"In looking at these numbers, it is important to focus on what has changed as well what continue to be the key drivers of foreclosures. What has changed is the shifting of the problem somewhat away from the subprime and option ARM/Alt-A loans to the prime fixed-rate loans. The foreclosure rate on prime fixed-rate loans has doubled in the last year, and, for the first time since the rapid growth of subprime lending, prime fixed-rate loans now represent the largest share of new foreclosures. In addition, almost half of the overall increase in foreclosure starts we saw in the first quarter was due to the increase in prime fixed-rate loans. More than anything else, this points to the impact of the recession and drops in employment on mortgage defaults.

"What has not changed, however, is the oversized impact of California, Florida, Arizona and Nevada in driving up the national numbers. Those states continue to account for about 46 percent of the foreclosure starts in the country, and represented 56 percent of the increase in foreclosure starts, including half of the increase in prime fixed-rate foreclosure starts.

"It is difficult to overstate the severe impact home price declines have had on mortgage performance in those four states. 10.6 percent of the mortgages in Florida are now somewhere in the process of foreclosure. In Nevada it is 7.8 percent, Arizona 5.6 percent and California 5.2 percent.

"In the first three months of this year, foreclosure actions were started on 3.4 percent of the mortgages in Nevada, 2.8 percent of the mortgages in Florida, 2.5 percent of the mortgages in Arizona and 2.2 percent of the loans in California,'' he said.

"While the national foreclosure start rate was 1.37 percent in the first quarter, in California, Florida, Nevada and Arizona it was 2.45 percent. Absent those four states, the national rate would have been 1.01 percent.

"Looking forward, it does not appear the level of mortgage defaults will begin to fall until after the employment situation begins to improve. MBA’s forecast, a view now shared by the Federal Reserve and others, is that the unemployment rate will not hit its peak until mid-2010. Since changes in mortgage performance lag changes in the level of employment, it is unlikely we will see much of an improvement until after that."

The reports issued Wednesday and Thursday follow the issuance Tuesday of a survey finding Las Vegas-area home prices declined in March at a greater rate than in February.

Standard & Poor’s issued its monthly S&P/Case-Shiller Home Price Indices showing prices in Las Vegas fell 3.8 percent from February to March. That compares to a 3.6 percent decline from January to February -- but was an improvement from the December to January decline of 4.4 percent.

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