Expert: Foreclosures to dominate real estate in 2009

By Buck Wargo

Friday, Feb. 20, 2009 | 2 a.m.

Foreclosure filings in Nevada dipped in January, but no one should take that as a sign the housing market is closing in on a recovery.

Nevada continues to hold the top spot in foreclosure filings as a national push is intensifying to do something about the problem.

RealtyTrac posted numbers that show foreclosure filings in Nevada decreased 4 percent in January compared with December, but the total is still 134 percent higher than January 2008.

In January 3,848 homes were foreclosed — 136 more than in December. The reason filings dipped is the 6,064 notices of default filed against homeowners was 402 fewer than in December.

One in 76 Nevada homes faced a foreclosure filing in January. California was a distant second with one in every 173 homes; Arizona was third with one in every 182 homes.

The major difference is that Fannie Mae and Freddie Mac, the government-controlled mortgage finance companies, suspended foreclosure sales through the end of January and have temporarily halted evictions.

Both JPMorgan Chase & Co. and Citigroup have announced they have halted foreclosures on homes occupied by owners until the Obama administration develops a plan for preventing foreclosures. The plan may include subsidizing troubled homeowners’ mortgage payments and setting standards for modifying loans.

But while the government is working out a plan to help those people, the concern for Las Vegas and other markets is that homeowners who can afford monthly payments will still walk away from their homes because the values have dropped so sharply in the past year.

Bob Hamrick, chairman of Coldwell Bank Premiere Realty, says he expects foreclosures to dominate the market in 2009 based on the notices of default reported. The good news is that although bank-owned inventory continues to increase, the rate of growth is slowing. It was high as 9 percent month-to-month in early 2008 and that slowed to 2 percent to 3 percent in the final months of 2008. But foreclosures are still a problem, he says.

“We anticipate that market will continue for the next one to two years,” Hamrick says. “It is going to continue to put downward pressure on pricing.”

Much of that downward pressure will be for higher-priced homes of $400,000 and above, which is likely to be the next wave of foreclosures because the lower-priced homes have already been hit, Hamrick says.

“At the current levels, I am convinced that there is little more that we can go to from a pricing standpoint (of lower-priced homes),” Hamrick says. “Some of those properties are priced lower than when I got into the business in 1980. Some of it to me is quite surprising. There is a debate whether some of the lenders are dumping properties below what they need to get them sold.”

That is creating some great values and buying opportunities, Hamrick says. Many investors are stepping in to buy them, not only for cash flow but with the expectation they have great equity gains, Hamrick says.

Hamrick’s further take on market

Because there were so many transactions during the peak of the housing market, 31 percent of the homes listed are short sales, Hamrick says. All together, 69 percent of listings are short sales or foreclosure sales, he says.

That is the reason why 65 percent of the properties on the market are vacant, Hamrick says. That’s 12 percent higher than mid-2008. With 8 percent of the homes rented out, that means only 27 percent of the homes on the market are lived in by owners

Although new foreclosures are slowing the real estate and economic recovery, sales are up substantially (his firm’s sales rose 58 percent in 2008), dropping inventory from 28,000 to 20,000, Hamrick says.

The reason is the affordability that prospective buyers are finding in the marketplace, Hamrick says. Someone buying a 1,535-square-foot home in 2006 — the median size of those bought — had a monthly payment of $1,606 if they put 10 percent down. Today, the monthly payment on a similar sized home, given price drops and better interest rates, is $852 a month.

“If anything, 2008 showed us that housing markets are working with prices moving toward their long-term trends,” Hamrick says.

The one market segment that didn’t see sales increase in 2008 was existing luxury single-family homes of more than $1 million, Hamrick says. They were down by nearly half from 414 to 212. Those priced from $1 million to $1.5 million fell from 246 sales in 2007 to 124 in 2008. Those priced from $1.5 million to $2 million fell from 84 to 34 sales. In the $2 million to $3 million category, sales fell from 45 to 33. The one category with an increase was homes priced from $3 million to $4 million. There were 16 sales in 2008, up from 15 in 2007. Five homes $4 million and above sold in 2008, down from 24 in 2007.

A home in Summerlin’s Ridges was the most expensive sold in the valley in 2008. The 13,943-square-foot home sold for $11.5 million in October.

In other news:

• Daniel Doherty of Colliers International was named 2008 people’s choice broker of the year and top producer in awards by the Society of Industrial and Office Realtors.

Brian Wargo covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at [email protected].