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.
Broker (CDPE, CSP)
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
As Michael stated the passing of Law AB284 changed the foreclosure process making it much more difficult for banks to foreclose quickly as before.
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.
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.
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...
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.
David Cooper Investor/Agent 702-499-7037
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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!!)
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