Thursday, December 25, 2008

LV Housing Prices Fall, Foreclosures Climb

"Dec 10, 2008 4:29 PM EST"

Las Vegas Housing prices have fallen to a point where they are nearly 19-percent below market fundamentals, according to a new report. In addition, foreclosures are expected to be at a record high.

The promise of "Home Sweet Home" turned sour for more than 28,000 homeowners in Clark County in 2008. The foreclosures continue to drag down the home values in Nevada.

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"The banks have put them so ridiculously low, so it's bringing down all the neighborhoods," said broker Ronda Matthews-Wolfe, Jack Matthews & Co.

The foreclosure fallout means everyone's home is going down in value. A new report, Housing Prices in America, says the Las Vegas market is now undervalued by 18.8 percent.

"Why they really plummeted is because of the foreclosures, and the foreclosures have happened because people overpaid or got into these adjustables," Matthews-Wolfe said.

But there is a silver lining. More houses are selling. More than 2,100 homes were sold in November, although that is nearly 20-percent down from October, it is 125-percent higher than November 2007. Housing prices are also down 32-percent from a year ago.

"The price isn't all that bad either," said Bill Baldare, a home buyer. Many bank-owned homes are practical steals. Baldare is bidding on a foreclosed home listed at $32,000. The same home sold for $196,000 four years ago.

"Trying to buy a house now is way out of reach for a lot of people, including myself, but this seems to be what I've been looking for," Baldare said.

"I expect Nevada, California, Florida, and Arizona, which led this mess -- they are the ones with the most amount of subprime mortgages -- I see them to lead the market as far as recovery goes next year," said Alexis McGee, president of

Bloggers comments:

Hmmmm... House sold for $196,000 4 years ago. Bank has foreclosed on the unfortunate family which agreed to pay $196K and is offering the house for $32,000. Does anybody other than me see a questionable scenario here? If, just an "if" mind you, the bank had shown forbearance to the former mortgage slave, I mean borrower, by adjusting the principal to say $145,000 and/or lowering the interest rate to somewhere near current new mortgage rates, is there a good chance that the borrower might have been able and willing to continue paying for the house? How about if the bank had lowered the principal amount to $110K, or $100K does it seem likely that the original purchaser/mortgagee might have been able and willing to stay and pay?

Of course the bank did not do any of those things. What they did was to tell the delinquent borrower to pay up or else: "we will pitch you and your children, wife and hamsters out into the street you freaking deadbeat useless piece of offal spurned by scavengers and carrion eaters alike, you should kill yourself for being such a loser, have a nice day." So, the borrower, who probably had a very good reason (such as loss of job, medical emergency, or some such) for being a month behind in his mortgage became both hopeless and hostile toward the pitiless, mindless collectors who, almost daily, called (perhaps at his/her work)and demanded instant resolution (we'll take a check by phone) of a situation which he or she could not resolve that way.

Finally the day came when the borrower, knowing that there was no help anywhere, said something like "Why don't you just take the house?" Very soon thereafter the bank filed a foreclosure and simultaneously a move for eviction. The house became both empty and also an unpaying liability/or asset, depending upon whether you are an accountant or not, on the balance sheet.

Then another group of bankers came into the picture, those whose task it is to keep the bank liquid, who decided that since the market is depressed and money needs to be raised it would be a good idea to just dump the foreclosed properties for quick cash. Looking at the market conditions: 25,000 houses on the market - no population growth - few buyers, etc. they picked a figure out of thin air and published an asking price which they felt would get immediate action either for cash or from a borrower with a 700+ FICA ergo $32K. Result? Another family homeless and possibly breaking apart due to financial stress coupled with ruined credit and another bargain for someone who was lucky enough to have failed to qualify for a loan when the market was good. Also, a large, and unnecessary loss for the bank or investor who had held the original mortgage.

My feeling is that this scenario is caused by the ego of the collectors who have zero empathy for people in financial crises and who are only interested in the brownie buttons and/or commissions they derive from wringing the payment (as agreed) month after month from the agonizing borrower until finally the borrower succumbs to despair from the stress and gives up trying to meet the demands. The result is a loss to the bank which need not and should not have happened as well as a destructive loss to the borrower's family due to the loss of their home and credit. A little humanity and consideration of mutual interest in maintaining the borrower in the home inspite of slow payments or even a modification of the loan terms would be a better solution for everyone involved except the bargain hunter.

Just my thoughts... Feel free to explain - very carefully - where I'm wrong.

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