Thursday, December 8, 2011

NY Fed: House flippers contributed to bust and boom

Four years after the housing bust, researchers at theFederal Reserve Bank of New York are putting some of the blame on real estate speculators, saying they played a key role in blowing up the housing bubble that eventually popped, causing home prices to tumble nationwide.

In a report titled  "Flip This House: Investor Speculation and the Housing Bubble," four researchers claim borrowers who owned multiple homes for investment purposes played a key role in running up national home values right before the 2007 housing meltdown.

In fact, the report found a third of U.S. home purchase lending in 2006  was issued to borrowers who already owned property. In California, Florida, Arizona and Nevada, investors made up 45% of the 2006 transactions, suggesting the deep pain in these markets was rooted in excessive levels of real estate speculation.

"In 2006, Arizona, California, Florida, and Nevada investors owning three or more properties were responsible for nearly 20% of originations, almost triple their share in 2000," the study said.
The report describes these investors as over-leveraged borrowers, consuming large doses of non-prime debt with high interest rates and low-down payments to fuel their appetites for quick acquisitions that could be flipped for profit.

What these investors created was an insidious cycle, where their excessive buys pushed prices higher for all buyers. When the bust came, these overleveraged house flippers escaped by abandoning their second liens, while innocent homeowners ended up underwater on their mortgages.

The report – which was filed by Andrew Haughwout, Donghoon Lee, Joseph Tracy and Wilbert van der Klaauw with the New York Fed Bank – puts the blame mostly on speculators operating in the 2004-to-2006 time span.

The authors of the report claim many of the investors may have falsely stated an intention to live in the homes while applying for cheap credit.

Either way, the report's authors see a need for housing policy to address the issue of excessive leverage and speculation to curtail similar trends in the future.

"In the 2000s, securitized nonprime credit emerged to allow leverage to increase, with effects that extended far beyond this sector, including spillovers from defaulted mortgages to the value of other properties. Effective regulation of speculative borrowing, like what is being attempted in China today, may be needed to prevent this kind of crisis from recurring," the report concluded.

Monday, November 28, 2011

Bank official says lessons learned from robo-signing

It's not the new Nevada law that has scared banks from filing notices of default.
It's lessons learned from the robo-signing scandal that emerged late last year, a Bank of America spokeswoman said Tuesday.
"We want to do everything properly," Jumana Bauwens said from Bank of America's corporate office in Los Angeles. "Before proceeding with foreclosure activities, Bank of America is ensuring that our processes are designed to be carried out in accordance with the new legislation in Nevada."
The main component of Assembly Bill 284, the law that took effect in October, requires that lenders filing a notice of default submit an affidavit stating they have the authority to foreclose on the property, basically that they own the actual note and deed of trust.
That has become a major obstacle for some lenders, particularly those in "judicial foreclosure states" such as Florida, New York and New Jersey that require court approval to foreclose. Foreclosures in New York take an average 986 days, compared with 379 in Clark County.
The new law has already throttled foreclosure proceedings in Nevada. Lenders filed 897 notices of default in Clark County in October, compared with an average of 4,453 a month from January through September, Discovery Bay, Calif.-based foreclosure information company reported. The number fell to 259 through the first half of November.
AB 284 has affected all banks, Nevada Bankers Association President Bill Uffelman said. They are reviewing processes and procedures to make sure they comply with the law's requirements, he said.
"At least one community bank had to turn foreclosures over to outside counsel versus using in-house counsel, increasing their costs," Uffelman said. "Like all things that change, we will work through it."
ForeclosureRadar Chief Executive Officer Sean O'Toole said one section of the law appears to be specifically targeted toward Bank of America and its subsidiary, ReconTrust, which acts as the trustee in foreclosure proceedings.
The law says the beneficiary can't be the trustee, so Bank of America will have to find a new trustee in Nevada, O'Toole said.
Bank of America's Bauwens said ReconTrust served as trustee for most of the mortgages in hardest-hit states such as Nevada, Arizona and Florida. However, the bank uses other trustees and foreclosure activity should start moving forward in the coming months, she said.

The new law protects homeowners from improper foreclosures and protects the integrity of the homeownership system, Nevada Attorney General Catherine Cortez Masto said.
It was crafted largely in response to unscrupulous business practices such as robo-signing that produced false documents used to justify improper foreclosures, she said.
"The significant drop-off in filings of notices of default may be attributed to the fact that robo-signing is occurring and now those servicers cannot legally foreclose or that foreclosure servicers are taking the time to re-evaluate their procedures to ensure compliance with the new law," Masto said in an email.
"Either way, one month of data is too early to draw any strong conclusions," Masto said. "In addition, we understand that complying with any new law requires businesses to make changes in their prior business practices, which may not be accomplished overnight."
Masto said the dramatic decrease in foreclosure filings -- which has thrown local real estate agents into a panic over future inventory -- is not an "indictment" of the new law.
She's confident that legitimate businesses pursuing proper foreclosures will devote the effort necessary to comply with the law. They will incorporate those requirements into their business practices, just as they did when they had to adapt to the new foreclosure mediation program several years ago, Masto said.
Officials from Wells Fargo had no comments on the law.
Wells Fargo is challenging the constitutionality of the Nevada's foreclosure mediation program. The bank has appealed to the Nevada Supreme Court an order from a state District Court that rewrites several terms of a defaulting homeowner's mortgage. Attorneys argue that the program violates not only the state's basic charter, but also the takings, contract and due process clauses of the U.S. Constitution.
Mark Connot, real estate attorney with Fox Rothschild in Las Vegas, said the law is good in that it addresses the robo-signing issue. Beyond that, it remains to be seen whether there will be any significant and long-term impact on foreclosures, he said.
An important question revolves around the interpretation of the statute that requires an affidavit, based on personal knowledge and under penalty of perjury, that "the beneficiary under the deed of trust (bank or lending institution), the successor in interest of the beneficiary or the trustee is in actual or constructive possession of the note secured by the deed of trust."
The key phrase is "actual or constructive possession," Connot said.
Constructive possession is generally defined as the power to control and intent to control a particular item of property. An employee of the bank or lending institution will have to sign an affidavit that the lender is in constructive possession of the note.
"In essence, the person signing the affidavit would be stating that the bank or lending institution has both the power and the intent to control," Connot said. "The power to control is the element that will be litigated.
"Even if the note has been bought and sold several times," he said, "the present holder of the note probably has the power to control possession even if it does not have actual possession."
Contact reporter Hubble Smith at or 702-383-0491.

Thursday, November 17, 2011

Housing Picture Expected to Brighten in 2012

Housing Picture Expected to Brighten in 2012
Better times are ahead for the real estate market in the new year, according to several forecasts and recent surveys.
Fiserv, a financial information services firm, predicts that 95 percent of the 384 metro areas it tracks will see prices rise in 2012. 
Many surveys and economists are forecasting a very modest increase for the housing market in the new year, but after several years of dropping prices and rising foreclosures, even the slightest increase would signal a glimmer of hope for the market. In a survey by MacroMarkets of 100 economists and real estate professionals, respondents reported home values will likely rise slightly at 0.25 percent in the new year.

The real estate market still faces a large backlog of foreclosures that it must work through in many markets. As such, price gains through 2015 will likely just be around 1.1 percent, according to the survey. However, this is a reversal after a forecast of 2.8 percent decline in median home values for this year.
Foreclosures continue to weigh on many markets and are preventing home values from stabilizing, economists say. 
"The water is very deep in the living room, but it's no longer getting deeper and is starting to recede,” says Mark Fleming, CoreLogic's chief economist. 
Low interest rates on mortgages mixed with more affordable housing for families in the median income range are expected help the market in its rebound in 2012, economists say.  
Source: “A Smaller House Will Make a Big Difference,” Money Magazine (Nov. 14, 2011)

Nevada foreclosure starts drop sharply

Wednesday, November 9, 2011

Investors betting on recovery for Vegas housing market.

NEW YORK (CNNMoney) -- Las Vegas has suffered through the housing bust like few others places and still has further to fall. But these days many real estate investors and home buyers are betting that it's poised to stage a comeback.

Sin City's metro area led the nation in mortgage defaults for 22 straight months through August and home prices plunged a whopping 60% from their 2006 peak, according to RealtyTrac. And prices still have further to fall. Financial analytics company, Fiserv, projects home prices in Las Vegas could fall another 16% by next June.

More here:

Thursday, October 6, 2011

30-year mortgage rates fall below 4% for first time

Steve Jobs 1955-2011

Thank you for the vision, innovation, hard work and extreme focus which changed the way the world uses and thinks of technology, you will be missed.

Wednesday, September 28, 2011

Increased demand driving new development in Las Vegas’ core

A view of the Newport Lofts condo building in downtown Las Vegas on Thursday, Dec. 16, 2010.

A clip from Joe Schoenmann with the Las Vegas Sun:

Real estate specialist Jack LeVine has during the past four months seen an intense and growing interest in downtown real estate.

It reminds him of the mid-2000s boom, when on the first day a home was listed for sale, 10 potential buyers would offer bids.

Something similar has happened in recent months, he says.

Prices today are far below the $100-$200 per square foot they were during the boom, but offers are coming in at more than the asking price, according to LeVine.

“I have a stack of buyers who want to buy downtown,” he says, listing them by occupation — a federal public defender, electrical engineer, museum curator, federal prosecutor, schoolteacher and artist, exotic dancer, freelance writer, Las Vegas city employee, a Zappos employee.

“This is the creative class, that’s who’s contacting me,” he said. “These are Baby Boomers whose kids are grown so they want to move downtown; these are people who don’t want to live in the ’burbs anymore.”

The rising prices haven’t lifted sales-price statistics, LeVine said, because so many are being sold by banks, which are less interested in getting top dollar. If a bank can get cash today at a lower price instead of waiting for a higher price with a 15- or 30-year mortgage, banks are taking the cash
But the interest in downtown is being reflected in other ways, including projects experts believe will bring the amenities that have kept many from considering living in the area.

In April, Newport Lofts sold out. The 168-unit high-rise project at Hoover Avenue and Casino Center Boulevard was built in 2007

This month, the Las Vegas City Council approved plans for 240 apartments at Casino Center and Coolidge Avenue by New York developer Barnet Liberman.

Liberman hopes to start construction next summer on the project that will be paid for in part with funds from the U.S. Department of Housing and Urban Development’s transit-oriented development, or TOP, program. The project will feature affordable units with a 680-square-foot, one-bedroom apartment going for about $850 a month and a 920-square-foot, two-bedroom priced at $1,100 to $1,200 a month.

“That’s what you need for a city to grow is rental housing,” said Liberman, who has been involved in urban development for decades, including the first loft conversion in Manhattan in 1977.

“There shouldn’t be any barrier for lower-income people to be able to grow and prosper,” he said. “The only question for developers, guys like myself, is they’ve got to know that there’s a real solid, almost certainty that if they do A, B and C, then they get D. When you see that the city is behind you in terms of a common goal, it helps eliminate some of the risk.”

After his 240-unit building is finished, Liberman wants to begin construction on a 24-story, 1,150-unit apartment building on Charleston Boulevard at 4th Street. The City Council is expected to hear more about that during a meeting in November.

Other developers also believe affordable housing is crucial in the push for downtown’s redevelopment.

Richard Worthington, president and chief operating officer of the Molasky Group of Cos., envisions affordable housing downtown attracting the smaller shops needed for an area to thrive.

“This will just drive that kind of development, bring in the amenities needed downtown,” he said.

John Tippins, Northcap LLC owner and senior vice president at ST Residential, which owns and operates mid- and high-rise condos and multifamily properties, including the Ogden high-rise downtown (now 83 percent occupied), agreed with Worthington.

“You’ve got to have heads in beds,” Tippins said. “When people can actually live downtown, that’s the important thing to keep the momentum, which is snowballing right now.”

In some ways, the past and future of downtown’s turnaround is the same: The amenities are the thing.

Early last decade, when high-rise plans dotted maps of downtown on the city’s website (very few of those got built), doubts focused on the lack of grocery, hardware and other basic stores in the area. The suburbs are chockablock with theaters and hardware stores and supermarkets, so the living is easier.

The equation for downtown hasn’t changed much over the past six or seven years, says Robert Fielden, an urban planner and architect in Las Vegas for almost 50 years.

“There are bars and taverns, but most people don’t want to sit in a bar every night as entertainment,” Fielden says. “You need things for the average person to do. A library that is relatively close, neighborhood parks and green belts, theaters, dining that is affordable, the mom-and-pop kind of stores.”

Those simple amenities “are going to be so important because of the competition with everything out in the ’burbs.”

Still, real estate agents like LeVine are seeing growing demand for homes downtown. From his vantage point, “people are just waiting for homes to become available.”

Tuesday, August 2, 2011

SB 458

LOS ANGELES (July 15) – The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) applauds Gov. Jerry Brown on signing SB 458 (Corbett) into law.   SB 458 extends the protections of SB 931 (2010), to ensure that any lender that agrees to a short sale must accept the agreed upon short sale payment as payment in full of the outstanding balance of all loans.

Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short sale payment as full payment for the outstanding balance of the loan, but unfortunately, the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.

“The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference,” said C.A.R. President Beth L. Peerce.  “SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lienholders – those in first position and in junior positions – will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property.”

SB 458 contains an urgency clause making it effective upon signing.

-Now will this turn into a trend and make its way around nationally?  
-Will lenders restructure their lending guidelines because of this lack of recourse?  
-Will lenders be less willing to short-sale knowing they have no recourse of deficiency?

These are questions that will be answered as this new law plays out.

Tuesday, July 19, 2011

Your credit score (FICO)

I'm off to the office so I'll make this short and sweet with the help of MSN Money.

Craig Watts says it best when he says: "So, to get a good score, you mostly need a credit history with no reported late payments, as well as low reported balances currently on any credit cards." 

When buying a house, a high score is important in giving you many lending opportunities and the best interest rates. Before buying a home, remember to not incur new credit or borrow against your credit cards. Keeping the balance lower than 50% of your limit is a good idea. Once you meet with the lender and you receive a pre-qual or a loan approval, do not do anything with your credit, don't even buy a new cell phone plan as the inquiries put a dent in your score.  Ok gotta go!

Tuesday, July 12, 2011

Las Vegas is uniquely at a perfect time to invest!

Las Vegas; it's the go-to place for real estate investors who want to clean up on rental properties.  Here is a article from CNN Money explaining why now is a great time.


Average home price (2011): $130,100
Projected home price (2014): $120,000
Gross rent (2011): $922
Projected gross rent (2014): $966

Las Vegas has the highest foreclosure rate in the nation -- and many of those former homeowners now rent!

"Much of the large workforce in the casino industry consists of renters; the home ownership rate is a low 55%," said Winzer.

While the rental market in Sin City remains robust, rents have been squeezed, falling about 10% since 2007.  Part of the problem is unemployment, which reached 12.4% in May, one of the highest rates of any U.S. metro area.

Winzer expects the rate to fall gradually and that should mean rents will start climbing again. All told, he forecasts Las Vegas residential investment properties will yield returns that are 4.7% above the national average.

There you have it!  There are more renters in the market and the prices of homes are low.  Investors in Las Vegas who rent out the properties they buy now will have a 4.7% HIGHER return than the 5.3% national average.

Wednesday, July 6, 2011

Is it the right time to buy?

In my opinion....YES!

Las Vegas has been hit hard by the recent events in our economy.  We are a city of nearly 2 million people with currently a low cost of living.  Homes are selling for 30-65% LESS than just a few years ago!  From what I can tell is we are buying homes in 2011 at 2001 prices but there is a difference.  Interest rates.

Interest rates are extremely low when compared to 10 years ago.  January of '01 our prime interest rates were around 9% while today we sit around 3.25%!  If I did my homework correctly, the last time prime was this low was 1955.  So what interest rate can you expect to pay on a mortgage?  4.75% or so.  What this means is money is very cheap to borrow right now, take advantage of it.

Monday, July 4, 2011

Energy Efficiency

My first post relates to a community I went to yesterday.  Driving through the Summerlin area, I pulled in Pulte Homes Villa Trieste.  These homes are located in a great area just off the 215 beltway and minutes from great shopping and restaurants.  As you already know, the prices are fantastic as homes in Vegas are 30%-50% of what they were a few years ago.

Here is what was unique about this community and why it is important.  Villa Trieste is trying out a solar energy system that allows the home owners to produce their own electricity through the use of solar panels built into the roof tops.  Any energy that the home owner does not use is then sent back to Nevada Energy and the home owner is then credited for that energy on their account.  To add to this, Pulte Villa Trieste is LEED (Leadership in Energy and Efficiency Design) certified.  Being at the platinum level this means the homes have 57% energy savings, 35% water savings and they divert 75% of waste from landfills.

I see Pulte as a very forward thinking company and this is in a good way.