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| Las Vegas leads nation in underwater homes and foreclosures Posted: 19 Nov 2010 02:30 AM PST Las Vegas continues to lead the way with the highest rate of foreclosures and underwater homes. Irvine Home Address ... 7 BITTERWOOD Irvine, CA 92604
Las Vegas remains nation's capital for underwater homes and foreclosures by JON PRIOR -- Thursday, November 11th, 2010, 2:52 pm
There is really only one reason prices are so low in Las Vegas: the bubble there was almost entirely subprime, and lenders foreclosed. The entire amend-extend-pretend policy at the banks was a direct reaction to the Las Vegas housing market. Las Vegas is a textbook study in housing bubbles. When the foreclosures mounted, the must-sell inventory pushed prices lower and sparked a vicious circle of accelerated default that caused prices to overshoot fundamental valuations to the downside just as bubble bloggers and others predicted. Prices are being held down by the weight of inventory, and prices will continue to suffer until the inventory is liquidated. It is the nightmare scenario the Federal Reserve and the banking cartel is hoping isn't repeated in Orange County. For me the appeal is twofold: (1) There will be no shortage of property flips over the next several years, and (2) valuations are so low that cashflow investing makes sense. All my education and experience in real estate tells me this is the right place at the right time. I blog about it here because I believe in it. I go out there and put my time, effort, and money where my mouth is. Las Vegas will recover emotionally Over the last couple of months I have been making weekly trips to Las Vegas. On occasion, I make my way to the craps tables to be part of the action. I am not much of a gambler. I can't get too excited about risking money when I don't have an edge, but playing $3 or $5 craps is entertaining, and watching the people at the tables is a unique study in human behavior. When a game of craps starts, everyone is excited and hopeful. People place their bets and go about trying to make money from random chance. Will fate smile upon them? As the dice roll, if the table is hot and people are winning, many gamblers will press up their bets to see if their numbers come up and they can make a fortune. So it is with real estate. During the housing bubble, every home owner was suddenly given a gift of equity from the market gods. Many chose to parlay that equity and buy several investment houses. As prices continued to rise and speculators pressed their bets, everyone was the real estate craps table was having a great time. Then a 7 is rolled. There is a pregnant moment when the dice are rolling. Will your number come up, or will a 7 wipe you out? When the inevitable 7 is finally rolled, there is a collective deflating sigh released by everyone at the table. All the money still on the table is lost. Las Vegas residents have either seen or participated in moments like this as long as they have lived there. The losing hand is part of everyone's gambling experience. Through desensitization, Las Vegas residents have become very resilient about losing. Most pick themselves up and move on. So will it be with the housing bust. Las Vegas residents will get over the emotional scars quickly. By and large, they won't be stressing about their deflating home values like many in California will. In Nevada, they don't have a history of rapidly rising home values and a culture of dependency on mortgage equity withdrawal. They all enjoyed it while it lasted during the bubble, but most will go back about their business. Like remembering that pressed-up $30 odds bet they lost on the 6, Las Vegas residents will remember what their homes sold for in 2006, but they will accept it is no longer worth that and move on. Contrast with Californians who will hang on to their kool aid beliefs until prices come back -- no matter how long that takes. Perhaps you disagree with my broad generalizations, and there are obviously exceptions, but I believe residents of Las Vegas will recover emotionally even though many have been wiped out financially. They have seen it too many times before. The emotional recovery from financial loss is part of their culture. Playing the Don'tAs a contrarian investor, I look for opportunities in place like Las Vegas where others see only troubles and disaster. Out of crisis comes danger and opportunity. In contrarian investing, you profit while the herd is losing -- like playing the Don't Pass at a craps table. In craps, you can play either side of the bet. If you play the Don't, it is just like being the casino. You win when others at the table lose and visa versa. It's fascinating being at a table playing the don't. When everyone else is winning and cheering, you curse to yourself as your point bets get hit one by one and you lose money. When everyone loses and feels the collective defeat, you feel great relief as you finally get paid for your bets still on the table. Playing the Don't often requires keeping a low profile. Cheering about your winnings as others just lost everything doesn't make many friends at the table. Distressed asset investing in Las Vegas foreclosures is much like playing the Don't. Each property I acquire is a loss for someone else. As each loan owner gives up in Las Vegas, there is an investor or some other family looking to find opportunity in the collective loss of the housing market crash. Bank Error in Their Favor The bank began foreclosure proceedings on this property in early 2009. The borrower had not made payments since 2008. The original Notice of Trustee Sale was filed on 6/9/2009. These notices give the trustee one year to call a sale. The bank didn't want to foreclose so this property became part of shadow inventory. On 7/27/2010, they had to file another notice of default and start the process all over again. The processed quickly (91st day) on 10/28/2010 to make up for the expiration error. This kind of procedural mistake is more common when the system is being overwhelmed. The banks are rewarded by their own procedural inefficiency. If the banks foreclosed on every delinquent borrower quickly, they would soon own 10% to 30% of the housing stock in the United States as REO. With a 10% delinquency rate and substantial strategic default -- true strategic default not accelerated default -- the banks would be a massive property REIT. Since the banks have delayed foreclosure, they have kept much of the illusory debt alive on their balance sheets (40% underwater mortgages have a high book value and a low recovery value). They have been rewarded with time by their own bureaucratic ineptness. Time the Federal Reserve hopes the banks can use to earn enough to pay off the losses. It may work. It may not. Probably not. Foreclosure Record Foreclosure Record Foreclosure Record Foreclosure Record The previous owners had a dream of a perfect Irvine remodeled tract home, and they borrowed a $1,000,000 to make their dream come true. It's a bit to close to the noise and air polluted Irvine Center Drive to command a huge neighborhood premium. Basically, they paid peak price for the house, then they remodeled and over-improved it. Since this now a short sale, the market has concluded these owners did not add value to match what they spent.
Can you see why houses were so popular. Imagine today that you could find a lender who would...
The couple that created this masterpiece (sarcasm to taste) was offered and given everything stated above. Who would turn that deal down? If you had known then what you do now, would you do anything differently? Irvine Home Address ... 7 BITTERWOOD Irvine, CA 92604 Property Now a Short sale! Spectacular Custom Home in the Heart of Woodbrisge. Four Spacious Bedrooms, and Four Full Baths, PLUS Home Office,(Could be 5th Bedroom) Laundry/Craft Room,and Media/Bonus Room with drop down screen. The Master Bedroom has a Luxurious Master Bath with a Giant Soaking Tub and Separate Shower, all in travertine and granite materials. The Gourmet Kitchen has Quality Cabinetry,Chef's Sink, Walk-in pantry,Butler's Pantry,state of the art appliances,Built-in Refrigerator, and eating area which is adjacent to the Family Room with B.I.Cabinetry and Media Niche. Huge Dining Room for larger families and a Dramatic Stairway off the Decorator-Perfect Living Room with a Classic Fireplace. Flooring is a beautiful dark wood with partial carpeting.A comfortable front porch and Winding Walkway leads visitors to the Front Door of the larger front yard. Located on a cul de sac street and close to Park, Schools,Pools,Shopping etc. All offers will be submitted to lender equally. All offers will be submitted to lender equally? Why does this agent have to make a point of saying that. Is it because listing agents screen offers to their benefit? |
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