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It looks like the Federal Housing Finance Agency - or FHFA - is getting ready to introduce new regulations later this year that would prevent Fannie Mae, Freddie Mac and the Federal Home Loan Banks - FHLBanks - from investing in mortgage loans tagged with these now notorious private transfer fees. This would then effectively bring major government-controlled home loan players in agreement about them, because FHA already is, according to HUD's regulations, banned from insuring mortgages on homes with private transfer fees. They are considered "legal restrictions on conveyance" in FHA talk.

These private transfer fees are brought to life by covenants attached to a deed that result in a payment to a third party every time a home is sold. The fee generally is 1% of the sales price and paid by the buyer, who may or may not know about it until he's sitting all excited at the closing table. Finding out about it typically elevates his blood pressure even further. Home builders are the ones who usually - but not always - would do this type of thing, giving them an additional, effortless revenue source for 99 years, the standard duration of the arrangement.

FHFA finds several problems with them. They hike home ownership costs up front, make property transfers more complicated and sometimes legally uncertain because regular title searches may not reveal their existence, particularly after multiple ownership changes. They can cause trouble elsewhere, too. Secondary mortgage market investors, lenders and title firms are vulnerable to possible hidden liens and title flaws.

The increased cost factor to home buyers and legal issues for mortgage industry participants are by themselves enough to cause concern. The other big issue is that the home builder who sets up the private fee structure does not provide any service or product to enable him to honestly earn the continuous stream of income. When it's finished with a subdivision, it's gone but would still collect for a long time money for free. Frankly, this seems to take us back to the creative instruments Wall Street not so long ago came up with that ultimately led to the current mortgage and real estate meltdown.

FHFA is on the right track to decisively curtail this from spreading any further. At the moment government entities control over 90% of the mortgage market, so its upcoming regulation will effectively put a stop to private transfer fees, for the good of consumers and the home loan and housing industries.

We’ve all heard the news reports about the potential for a double-dip in housing, and perhaps, the overall economy. Unemployment seems out of control; debt levels are becoming unmanageable; and many are wondering what the future holds for the housing market. Where home prices going and what is the potential for prices to recover to the levels of 2005/2006?

There are lots of opinions, but here are some points to consider:

● The recent meeting to discuss the future of housing, including the GSEs Fannie and Freddie, while generating lots of news, was not expected to produce anything of significance that would improve the situation in the short term. The billions of taxpayer liability associated with Fannie and Freddie—extreme “worst-case” estimates range as high as $1 trillion—cannot be erased. And if the structure of these entities is significantly changed to remove risk to taxpayers, interest rates will increase and home sales will suffer.

● According to many experts, structurally high unemployment will be with us for years. And, those without jobs or who are underemployed lack the financial ability to purchase homes. New home sales follow the employment rate, and with the permanent loss of millions of manufacturing and other jobs, millions of potential buyers have been removed from the housing market.

● Monetary policy seems confused at best. With disagreement from both inside the Fed as well as among some inside the administration, there seems little doubt that the “green shoots” once reported, have faded and died. Printing money on a massive scale ultimately leads to inflation; and borrowing and spending has left us deeply in debt, so deeply in fact, that in less than eight years interest on the national debt will equal $1 trillion, the largest single budget item—and a good portion of those dollars will be paid to bondholders in China.

● In the first quarter of 2009, almost half a million small businesses (less than 100 employees) closed their doors, costing about 1 million jobs. In a struggling economy, such job losses will continue, removing a significant segment of new home buyers from the marketplace.

● The latest foreclosure numbers show that they are spreading into the heartland. While much of Middle America and the northwest had avoided the worst of the problem, default notices have recently increased significantly, with more than a third of the states experiencing a doubling of foreclosures.

Those who are unwilling to face the reality that the U.S. is in serious economic trouble and that our “leaders” seem unable or unwilling to take the steps necessary to bring about a recovery, may ignore the facts, but that doesn’t change them. And while economic conditions vary dramatically from one part of the country to another, the economy in general is very ill, and the experimental “medicines” that have been administered have brought only temporary relief. A long-term cure must be proposed, yet many economists and political observers see that as unlikely.

Proponents of an additional and perhaps larger stimulus have pointed out that current winding down in the economy is due to the effects of the first stimulus wearing off. What they seem to ignore is the very real fact that a temporary stimulus provides only temporary relief. The original stimulus, just like Cash for Clunkers and the Homebuyer Tax Credit, did little or nothing to create sustainable economic improvement. Such artificial measures do little other than to provide politicians with quick, feel-good results intended to demonstrate their commitment to solving the problem; and feel good solutions never last. It’s time to wean our “leaders” and our citizens from the belief that success must be measured in short term results.

So, where are home prices going? Is recovery just around the corner? No. Many years will pass before homeowners feel that the housing market has recovered; and the ensuing period will be fraught with uncertainty and additional foreclosures. The expectation that home values will quickly return the their recent highs or that prices must continually increase will be replaced by the reality that prices, in general, will follow the rate of inflation. To do otherwise would mean that homes would soon be beyond the reach of the average buyer. That’s the reality, and that’s where home prices are going.

The Housing Guru: the expert source for all your housing questions

**ACTIVE Las Vegas Real Estate Inventory Rises for the Third Straight Month!**

Active Las Vegas Residental Resale MLS Inventory has risen for the third straight month.  This is mainly due to first time buyers exhausting the market due to their tax credit expiring - this is not due to the shadow inventory fairy bringing us more inventory!

Read more about Las Vegas Real Estate Inventory Analysis here and consumers may comment on this post.

Las Vegas Area Real Estate Market Watch was created for informational purposes only. 

This is for all the buyers wondering "where is the inventory"?  The inventory is here, this graph shows that buyer interest is extremely high and gobbling up all that new inventory coming online!

This is also for people saying "shadow inventory exists"!  Well I believe it exists but it also exists in short sales which has tripled to quadrupled it's formerly stagnant close ratio since late spring.

These are Listing/Under Contract & Pending/Sold Trends from December 2007-July 2010.

Contracted closings are stalled because of the large amount of short sales that are contracted.  Inventory rise is directly related to the tax credit expiring.

When major upheaval pummels a real estate market, it as a rule leads to home value depreciation. That's the easy part. The hard part is to try to put an actual number on the price reversal. A team led by the Massachusetts Institute of Technology, or more commonly MIT, recently conducted some deep research to determine how much a home's value deteriorates because of a foreclosure. The current housing and mortgage meltdown obviously got them thinking and they decided to dig up some realistic answers.

The group looked at 1.8 million real estate sales in Massachusetts spanning from 1987 all the way to 2009, which then includes data from the present housing collapse. After spending considerable time shifting through the massive amount of information in front of them they at last were comfortable in concluding that - on average - a foreclosure slices 27% off a home's value. That is a high number, and subject to some serious debate.

The same MIT team also studied other forced sales and their effect on real estate values. When the homeowner goes into bankruptcy, the property's value drops 3%. And when a homeowner death brings about a sale, the price sinks on average 5-7%. Clearly, a mortgage foreclosure has a much more profound impact on the underlying value than the other two.

The main reason to the wide separation between the different forced sales is the condition of the home. Homeowners sliding inevitably toward foreclosure will spend the money they still have on everyday necessities and not on property upkeep. That's stage one. Stage two is when mortgage lenders foreclose and then generally neglect their REOs - real estate owned - allowing properties to fall into further disrepair. There clearly are two forces here steadily gnawing on the property's value. In the other two instances neither one is prominently present.

As the MIT research proves, it would be to the mortgage providers' benefit to maintain their REOs to attract top dollar when selling. 27% shortfall should make them think again about proper maintenance. But that often is not the case in this current real estate downturn.

The constant stream of news stories about foreclosures, increased housing inventory, and the virtual collapse of home builders’ confidence may foretell a disturbing trend; and the negativity associated with housing could impact the market for years. Once seen as a solid investment, residential real estate has lost its allure for those who saw it as an effortless means of enhancing retirement savings. However, with an economy still struggling to come out of the worst recession in three quarters of a century, many have changed their opinion.

Having lost much of its perceived investment potential, housing must now rely to its emotional appeal—a place to create memories grounded in the concepts of home, stability, family, security, and sanctuary. Not to be scoffed at, many find such values to be worth far more than financial considerations.

However, we all have differing needs and perceptions; and the perception de jour seems to be that housing is a bad investment. And when analyzed purely for investment potential, housing often comes up short. While some tout the true values of home ownership, large numbers remain skeptical, remaining on the sidelines, anticipating that magical moment when stabilization returns to the housing market.

With long-term unemployment at record levels, consumer confidence shaken, and an awareness of the significant declines in home prices, residential real estate could be in a long-term struggle as the negativity associated with housing could impact the market for years.

The Housing Guru: The expert source for all your housing questions

 Summerlin July 2010 Real Estate Resale Market Report:

• Listings (8/15/2010): 803
• Under Contract (8/15/2010):  609
  
• Sold July 2010:  181

Since Last Month's Report:

• Listings UP +83
  
• Pendings DOWN -45
  
• Sold Units UP +6
  

Last Month's Summerlin Report

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Summerlin Homes for Sale

As the housing market continues to struggle, with taxpayers carrying much of the burden for defaulting mortgages, many are asking: Is there a future for Fannie and Freddie? And eighteen months after their takeover by the government, Treasury has yet to propose an answer.

When the housing market crashed, it took down the GSEs, Fannie Mae and Freddie Mac, the mortgage giants that, at the time backed about a quarter of U.S. mortgages. Now, however, after less than five years, and because of the contraction of the private mortgage market, their portfolio has grown by almost 150 percent encompassing about two-thirds of all mortgages. And since the government virtually owns Fannie and Freddie, the U.S. taxpayer is on the hook for losses.

Just last year the regulatory limit on losses of both Fannie and Freddie was increased to $200 billion each. Later, the government agreed to provide unlimited financial support, a commitment that some have projected, could put taxpayers at risk for losses of almost $1 trillion.

A conference to be held on Tuesday of this week will discuss the options and future direction of the GSEs in an attempt to stabilize both housing and the two mortgage giants. Most agree, however, that a transition must be gradual in order to avoid further shocks to housing; but there seems to be little agreement upon a strategy or the extent of the changes.

One option would create a co-op between several of the largest lenders with each owning a portion of the new entity; and the government would be required to furnish insurance on the mortgages. Such an arrangement appeals to some, as it would remove much of the risk to taxpayers and would encourage the participating lenders to monitor the quality of mortgages being supplied by the others.

Others have suggested that Fannie and Freddie be broken into several smaller, competing operations. A few have even recommended a permanent nationalization of the GSEs. Then, of course, the big banks have their own ideas.

Is there a future for Fannie and Freddie? While the outcome of the conference and ultimate legislation may be uncertain, we can be sure of one thing; the banking and housing lobbies will have a powerful influence. And lawmakers, forever a slave to lobbyists’ wishes, will see that the special interests, not consumers, are protected. That’s the way politicians seem to work, and their record in protecting Main Street during this crisis has been nothing short of abysmal.

The Housing Guru: The expert source for all your housing questions

Rhodes Ranch Area Resale Market Report (homes for sale, pending and sold):

• Active Listings (7/15/2010):275
• Under Contract (7/15/2010): 379
• Sold June 2010:106
• Low:  $57,000 (Apache Hills Condo)
• Median:  $138,000 (Wineridge)
• High:  $432,000 (Rhodes Ranch)

Rhodes Ranch Area Rental Market Report (homes for rent, contingent, leased)

• Active Listings (7/15/2010):  74
  
• Under Contract (7/15/2010): 26
  
• Leased June 2010:  61
  
• Low:  $595/month (Vistana)
• Median:  $1200/month (Richmond at Rhodes Ranch)
• High:  $2650/month (Rhodes Ranch)

How to read my market reports (definitions and terms!)

Last Month's Market Report

Includes: Apache Hills, Apache Springs (The Falls), Astoria Homes at Rhodes Ranch
(Independence), Canyon Trail, Huntington, Liberty @ Warm Springs, Maplewood, Rhodes
Ranch, Richmond@ Rhodes Ranch, Sierra Madre, Venezia, Vistana.

For More information & most current market report on the Rhodes Ranch Area:  http://www.livingatrhodesranch.com/

The Lakes June 2010 Real Estate Resale Market Report:

• Listings (7/15/2010):  69
• Under Contract (7/10/2010):  75
• Sold June 2010:  21

Since Last Month's Report:  Listings UP +6, Pendings DOWN -9, Sold Units DOWN -2

Why Las Vegas Pendings Aren't Selling

View Last Month's The Lakes Market Report Right Here!

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