As our current housing inventory continues to shrink, we are beginning to see a number of interesting developments. There is an upward pressure on pricing; traditional sellers are coming back into the market; and lender controlled transactions are shrinking. This is a good sign for the health of the Las Vegas real estate market.
On a statewide basis, employment is starting to rise and more folks are finding work. Visitor counts are up and casino revenue is increasing. Are happy days here again?
Yes and no. There has been a great deal of talk regarding the “shadow inventory”; homes that are in the foreclosure funnel but have not yet hit the market. As some of you may know, the Nevada State Legislature passed a law (AB 284) requiring lenders to produce an affidavit proving ownership of the mortgage. Lenders are still trying to sort out how best to proceed and until they do, they will most likely only move forward with “clean mortgages”, ones that were not sliced and diced for the investment community.
In addition, even as the market begins its recovery, it could be decades for most home owners who are underwater to realize their “breakeven” point with what they owe and how much their home is worth. Many homeowners are taking a hard look at whether or not it even makes sense staying in their current homes. Unfortunately, most lenders have not been completely honest nor have they been very helpful towards homeowners trying to seek a fair and equitable solution to this housing crisis. More and more homeowners are looking at their options and deciding that holding on to their homes just doesn’t make good financial sense.
There are at least five courses of action a homeowner can take with the current housing situation:
- They could do nothing and continue to pay on a home worth less than half of their mortgage. Continue to pay off a loan on a house which the mortgage cost is more than twice what the price of other homes in the same subdivision are.
- They could apply for a loan modification but their credit would suffer as much damage as selling their home “short.” In addition, most lenders are not doing a “principal reduction.” They are simply lowering the rate of the loan or extending the term. The homeowner is still required to pay the entire balance.
- Attempt to refinance either with a traditional method or through a government program. Still, if the value of the home is less than 130%, most traditional lenders will not refinance. In addition, the homeowner is required to pay for all fees involved!
- They could simply walk-away from their home; give the keys to the lender and allow it to foreclose. There are numerous negative results from this, not the least of which is the monthly payment can actually increase, and most homeowners find this option unpalatable.
- Facilitate a “short sale” on their current house.
Most lenders have now come to the realization that a short sale, one where the selling price is less than the amount owed, can be in everyone’s best interest. With a short sale, the homeowner is still responsible for costs and maintenance of the home, generally, a short sale costs the lending institution less than a foreclosure, and the federal government has allowed for the forgiveness of taxes due on the unpaid balance of the mortgage until the end of this year.
If you, like many folks here in Vegas find yourself asking hard questions about your current homeownership situation, please call me, I can help.
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