Home Buying in Las Vegas>Question Details

Bret, Home Buyer in Sam Hughes, Tucson, AZ

Do you think the foreclosure/shortsale inventory will increase to meet the frantic demand? When? What keeps the backlog off the market?

Asked by Bret, Sam Hughes, Tucson, AZ Wed Jun 27, 2012

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The over-simplified answer to your questions is a) Not for a while (most likely over a year or more) and b) AB284, which changed the foreclosure process as we know it is the reason for the drastic drop in REO inventory.

Now, that being said we may see a small spike in inventory in the short sale market very soon due to the potential Foreclosure Tax Relief Act that is set to end this year (2012). There are a number of underwater homeowners that are highly concerned about the sizable tax liability they may face if they miss that tax credit. Being that short sales often take a number of months to complete, we'll likely see a small surge of those homeowners who have waited until the last minute to do their short sale.

Other than short sales you'll see a handful of flippers & traditional home sellers hit the market to take advantage of the price increases. However, this option may not be an option for all home buyers because we've seen countless counter-offers lately that have asked for the buyers to pay the difference if the appraisal falls short of the offer amount (low appraisals are extremely common in our current market). If the buyer isn't willing to pay the difference the seller will likely move on to another buyer who will pay or wait for a cash buyer where an appraisal doesn't apply.

The reality is if you want to buy a home in the next couple of years the current market doesn't appear to be changing any time soon. The good news is that the prices are so low most home buyers are paying less than they would to rent a similar home in our market. The interest rates are at historically low levels as well (you can lock in a 30yr mortgage under 4%), and in time you'll see appreciation (real appreciation, non-artificial). So I still believe it's an excellent time to get in the market if you're a long-term buyer but you'll have to adjust your mindset to the current market conditions as things will probably remain this way for a while.

BTW: Excellent question, and one most of us in the real estate industry have been discussing thoroughly over the past six months, and probably for the next six months as well.

Michael Parks
Broker (CDPE, CSP)

3 votes Thank Flag Link Thu Jun 28, 2012
Those unbelievable "low" interest rates will be history right after the Nov 2012 election. Then, the crowd that's always a day late and a dollar short, the could have, should have, would have group
will be coming out of the wood work to drive the demand even higher and prices at the lower level will increase.

Those Facebook IPO knuckleheads will take a second look at real estate, and as the cocktail conversation talks about the prices increasing and the "cash-flow" investors are getting, more interest investing in Las Vegas will happen.

There is never a shortage of inventory, it's a shortage of what price people will pay. But as prices start going up 10%+ per year vs. 2% T Bills, real estate will be booming

David Cooper Investor 702-499-7037
2 votes Thank Flag Link Fri Jun 29, 2012
No, I don't think that inventory will dramatically increase to meet the demand. At last count there was about 5K available properties and approximately 30K buyer's in the market. The primary influx of inventory you are seeing now is flip homes (some under 90 days). Low inventory is driving up property values in almost every area, especially for homes that have been well maintained or rehabbed and is not a short sale. My brokerage specializes in flips and we receive multiple offers on every one of our homes.

As Michael stated the passing of Law AB284 changed the foreclosure process making it much more difficult for banks to foreclose quickly as before.

Rakeisha Smitherman-Muiruri
Motion Properties
1 vote Thank Flag Link Thu Jul 12, 2012
Unless AB 284 gets repealed, prices rise (they are slightly) or interest rates go sky high, the inventory situation in Las Vegas will not get better.

I have had several instances where our brokerage seller clients have told me that judicial foreclosures are getting started on their homes. The judicial foreclosure process will take about 1-2 years vs the 5-7 months of the non-judicial process.

The last 6 months were interesting in our market. I have seen some areas appreciate upwards to about 20% but most areas are appreciating only in the 5% range. The next 6 months will prove to be even more interesting.

I am thinking if we continue seeing appreciation, we are going to be seeing large number of short sale escrow fall outs due to high BPOs since the time is never seems to be of the essence for a short sale to be worked on.
1 vote Thank Flag Link Thu Jun 28, 2012
Well the thing about the "shadow inventory" is that it was and still is in the shadows. No one really knows how much there is. Every day, I am seeing listings withdrawn from market due to "owner got a loan modification and no longer needs to sell" Those used to be pending sales or inventory, not just shadow inventory.

Now the buyers who waited six months only to find out they were just pawns used as a negotiating tool against the bank have been turned back out on the street. Either they will be so disgusted that they will just rent. (until they get disgusted with renting again) or they will crowd into the market with all the other would be buyers chasing a shrinking number of distressed properties.

Soon we will have a distressed property bubble. This occurs, historically, when most of the properties are traditional sellers and distressed properties are the rarities. Being rare, paradoxically, will make them more desirable than they are. Idiot buyers will flock to buy foreclosed properties at 110% of value for no other reason than the fact they are foreclosed properties! I am not kidding. This was documented in the 1990's that HUD owned homes (which were all foreclosed upon before being transferred to HUD) - the HUD owned homes sold for an AVERAGE of 110% over appraised value.
You could look it up. There were congressional hearings. It was a minor scandal. But since it was mainly poor people that got screwed and the government made money on the scam, it did not cause much outcry or get much notice.

That was in the mid 1990s. History repeats itself, not coherently, but it does mumble repetitively.

And so do I.
1 vote Thank Flag Link Wed Jun 27, 2012
Jim Walker, Real Estate Pro in Carmichael, CA
A change in the law that went into effect last fall essentially putting the brakes on the foreclosure process in Nevada is largely responsible for the current lack of inventory.

We had roughly 2500 homes per month starting the foreclosure process before the law went into effect. ...about 100 homes per month after. That's a huge number of homes that aren't making it to the market that otherwise would be.

Short sales are still coming out, but with all the news about new modification programs and less chances or at least a slower foreclosure process, people (sellers) are less likely to hurry up and short sell if there's a chance of working out a modification.

I'm not sure demand has increased much if at all...but the (perceived) supply has decreased dramatically and things have become, as you said, "frantic".

...by the way, we're currently at about 3700 single family homes available, however I think it's interesting that we have 10,000 short sale listings "in contract". It's not unusual for a buyer to tie up several short sales and cancel escrow when 1 gets "approved"...something to think about when we're talking about inventory...
1 vote Thank Flag Link Wed Jun 27, 2012
The foreclosures are probably not going to come back. There was a law passed last October and it forbid the banks from foreclosing on properties if they did not have the original paperwork. Since no one had the original paperwork, there are few foreclosures. As a collorary to that, the short sales have declined as well as there was suddenly no urgency for people to get rid of their home since the banks weren't going to foreclose on it. Inventory is very short and prices are rising.
1 vote Thank Flag Link Wed Jun 27, 2012
I do not think we are going to see the inventory increase any time soon. I was at a meeting with some of the attorneys and brokers in Las Vegas on Tuesday. They are saying the shadow inventory is a myth.
The numbers showed we have 14 days of inventory in Las Vegas. I have seen the demand but I do not know where any additional inventory is going to come from. Are the banks holding out to drive up prices? If they are we should get that answer soon. I would think that they would release properties onto the market with the amount of available properties this low. It is amazing how the market can shift from one extreme to another.
Thank You
Suzie Marquardt
1 vote Thank Flag Link Wed Jun 27, 2012
Those below reality interest rates will be a thing of the past after the Nov election. That will creat another vicious cycle in housing prices, far more serious than the "shadow" invrentory

David Cooper Investor/Agent 702-499-7037
check out my Facebook page for latest real estate news
0 votes Thank Flag Link Thu Jul 12, 2012
I agree with you 100%, thanks for a true Professiona, Opinion, not a Sales Pitch.

Shadow Inventory of almost 15k houses still on lenders books.
0 votes Thank Flag Link Thu Jul 12, 2012
MY opinion: inventory levels will change in the next 6-9 months when lenders start pursuing JUDICIAL FORECLOSURES as oppossed to NON-JUDICIAL foreclosures here in Nevada.

What created the backlog here in Nevada? Google AB284. In a word, THAT poorly designed bill was OUR problem. (I hope our State Assembly members are reading this!!)

Jeff Burnham
Encore Realty Group, Las Vegas
0 votes Thank Flag Link Sun Jul 8, 2012
As an agent, I am also curious of all the different theories and beliefs in this ever-changing market. It has been as though the number of Single Family Residence, that are actively listed and waiting for a buyer, has remained pretty steady over the past few months. Also the number of sales each month for the past few months have also remained steady. One thing is for sure, we have lots of buyers!! Are the banks holding on to much needed inventory? I do not have a crystal ball (wish I had one that worked!), but if they are, we will only know if they release them to the public, until then it's all speculation! I have also read that some banks are bundling homes and selling to private investors. So, many get frantic, but patience is key with anything and never keep your eye off the target! Raina Musser
0 votes Thank Flag Link Sun Jul 1, 2012
This answer would require 15 paragraphs to scratch the surface. The short of it is that Foreclosures will CERTAINLY come back but the process needs to be revised which could take a year or more to be fluid. Inventory to demand will remain low for awhile to come which we must hope does NOT drive prices too much higher too quickly because we are facing another bubble on a smaller scale if buyers arent informed a bit better. The benefit now is that 50% of these homes being bought are paid for in all CASH so the bubble is not as severe since people actually own these homes and are not instead borrowing 120% of values. Call or email me if you need anything. http://www.VegasRealtorJoe.com
0 votes Thank Flag Link Wed Jun 27, 2012
Bret, you just asked the 10,000 question. I don't have the energy and time to answer this in detail so please call any time after 8am and I'll give you my 2 cents worth. Great question.

Matthew D’Ercole
One Source Realty and Management
Cell - 702.501.0973
"A Nation of Sheep Breeds a Government of Wolves".
Know the Constitution & Bill of Rights.
Website - http://matthewsellslasvegas.las.mlxchange.com
0 votes Thank Flag Link Wed Jun 27, 2012
Great Question..... I like to hear the answers to this one.

Kathy Cutshaw
Keller Williams Arizona Living Realty
Kingman AZ Office
0 votes Thank Flag Link Wed Jun 27, 2012
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