Foreclosures on land pushing prices back to 2003 levels

By Buck Wargo

Friday, May 21, 2010 | 3 a.m.

Banks aren’t shying away from taking back land from owners defaulting on their payments and that in turn is driving Southern Nevada land prices to their lowest level in seven years.

That’s reflected in a first-quarter report by Las Vegas research firm Applied Analysis that showed 74.4 percent of the land transactions resulted from bank foreclosures — a trend that was strong throughout 2009. In the fourth quarter, 65.6 percent of transactions were banks foreclosures.

“When you look back two years ago, these type of distressed properties, lender-involved transactions were nonexistent,” Applied Analysis Principal Brian Gordon said.

That drove down the land price to $182,441 per acre in the first quarter, the lowest since $172,500 per acre in the first quarter of 2003, Gordon said. Since the peak of the market in 2007’s fourth quarter of $939,400 per acre for land not on the Strip, prices have fallen 80.6 percent, Gordon said.

“I think we will continue to see downward pressure on prices for a while,” Gordon said. “The demand for raw land is somewhat weak. There is excess inventory of office, industrial and residential; and development activity has come to a near standstill in many of those sectors, so that they don’t need raw land.”

Some improved residential lots have essentially been selling for the cost of only the infrastructure improvements, land analysts said.

Land transactions remained limited with 526.6 acres changing hands in the first quarter, about five acres less than 2009’s fourth quarter. In the first quarter of 2003 when land prices traded this low, more than 3,100 acres were involved.

None of the transactions in the first quarter involved land on the Strip even though one deal was announced in February when developer Brett Torino and two partners acquired 2.15 acres at Harmon Avenue and Las Vegas Boulevard for $25 million. The deal didn’t close until April 2 and will be included in second-quarter numbers.

During the past year, many landowners have simply turned properties back to banks. In 2009, more than 5 percent of the transactions were classified as deeds in lieu of foreclosure, according to Applied Analysis.

“The reality is the landowners are finding themselves underwater and servicing their debt, and it has become a challenge,” Gordon said. “Many have opted to let the properties go back to the bank, not unlike what we have seen in the housing market.”

Foreclosures increase in Nevada

The number of homes delinquent in mortgage payments rose again in the Las Vegas Valley, and banks foreclosed on a greater number of homes statewide in April than March, according to three real estate research firms.

RealtyTrac reported that Nevada retained its No. 1 ranking in the nation in terms of percentage of foreclosure filings for the 40th consecutive month.

The state, which had one filing for every 69 households in April, saw filings increase 10 percent last month when the rest of the nation had a 12 percent decrease, RealtyTrac said.

Foreclosure filings were basically even when compared with April 2009, but the rest of the country had a 27 percent decline, the firm said.

Another research firm, CoreLogic reported that the most recent 90-day delinquency rate, in March, stood at 22.2 percent in the Las Vegas area, up from 21.4 percent in February. The rate has risen every month for more than a year. In March 2009, 14 percent of homeowners were delinquent 90 days or more, CoreLogic said.

The reason behind the foreclosure increase in Nevada was banks repossessing 4,096 homes in April, a 57 percent increase from March.

A continuing trend wouldn’t necessarily be a troubling sign for the state’s housing market, which has been at risk because of a high unemployment rate, one analyst said. The inventory of homes for sale has dwindled in recent months.

“If they start foreclosing on a number of houses, that’s what everybody has been waiting for,” said Dennis Smith, president of Home Builders Research. “It will make the Realtors happy because they will have inventory to sell.”

Although foreclosures have caused prices to fall over the past three years, Smith said based on the inventory available and the foreclosures, there doesn’t appear to be enough foreclosures to lower prices. At the most, they might keep prices at their current levels, he said.

Banks have been working with homeowners in greater numbers to facilitate short sales by allowing them to sell homes for less than they owe on the mortgage.

CoreLogic reported that Las Vegas continues to lead the nation with mortgages that are underwater. In the first quarter, the Las Vegas Valley had 74.7 percent of its homes underwater and 2.9 percent near negative equity — about the same as the fourth quarter of 2009.

In other news

• The UNLV Center for Business and Economic Research will host its 2010 Midyear Economic Outlook from 8 a.m. to 11:45 a.m. June 15 at the Palazzo. For more information, call 895-3191.

• The Nevada State Contractors Board and Southern Nevada Air Conditioning Refrigeration Service Contractors Association announced three households were chosen for the fifth annual Mission Cool Off program. The households received a free air conditioner.

• Ritz Camera & Image reopened a Henderson store at the Galleria at Sunset mall. A store closed in Henderson in July after the previous owner filed for Chapter 11 bankruptcy and closed several stores. Ritz Camera & Image purchased the assets of Ritz Camera Centers in July, including 300 stores.

• Santa Monica Seafood announced it has completed construction of its distribution hub in Las Vegas at 3475 W. Post Road in the Diamond Southwest Industrial Complex. It measures 3,800 square feet.

• Quality Receivable Management, a debt collection company, announced its formation and opening of a call center at 2100 Horizon Ridge Parkway in Henderson in the Pageantry Horizon Park. The company said it is just starting to hire call center staff and plans to have 100 employees by the end of 2011.

• Clark County’s web-based mapping application, OpenWeb Info Mapper, has been redesigned to add more features. The new interface is akin to Google Earth and Bing maps to improve the 12-year-old program, county officials said. It is used by title, engineering companies, utilities and real estate professionals.