BluefoxToday blog : November 2009

The unprecedented real estate bubble the nation just experienced was partly created by the credit rating shops that were tasked to value mortgage-backed securities, or MBS. The three large agencies doing that are Fitch Ratings, Moody's Investors Service and Standard & Poor's. The ratings the three arrived at were then attached to MBS issued by Wall Street firms and subsequently offered to investors who were seeking to invest money based on their own risk preferences. Obviously what the large investors world over were seeing made them confident that MBS were sound and worth acquiring, so they bought boatloads of them, stoking the fire under the housing bubble even more.

Las Vegas mortgage recipients, like those in the other seriously mauled areas of Arizona, California and Florida, were caught up in this frenzy and are now paying dearly for it.

Ever since the home loan and real estate market implosion there has been talk about how these ratings actually were sugar-coated and inaccurate, giving investors false impressions on their true value. Naturally the three agencies under scrutiny are adamantly defending their business practices.

Ohio attorney general has now filed a lawsuit against these three agencies on behalf of five Ohio public employee pension and retirement funds, claiming that the MBS ratings were inflated, often giving triple-A scores to mortgage-backed securities that in fact were rather risky. Moreover, the issuers of these bonds themselves, the lovable Wall Street crowd, were paying hefty fees for the ratings, creating an apparent conflict of interest issue. Conceivably the more fees a Wall Street issuer paid, the better an MBS rating would be.

The lawsuit seems to have decent merit now that the housing market has largely tanked and those MBS have lost most of their value, showing that in fact they were not quite triple-A vehicles but rather the high-risk variety. The Ohio attorney general has already filed seven other lawsuits against financial and investment companies since the economy turned sour and has collected thus far $2 billion in damages. This then isn't his first rodeo, so evidently he's onto something everybody should be paying attention to.

It just makes people wonder why Washington mortgage industry regulators are still sitting on the sidelines. This appears to be what they should be keeping an eye on and taking corrective action when needed. Does Wall Street have too much influence there? Well, at least some of the states have taken the initiative seeking to make the marketplace more responsible for its greedy and deceptive actions.

Desert Shores September 2009 Real Estate Resale Market Report (Homes For Sale/Under Contract/Sold):

• Listings (11/15/2009):  56
• Under Contract (11/15/2009):  106
• Sold October 2009:  29
• Month's Inventory:  1.9

Since Last Month:  Listings are DOWN -15, Pendings are DOWN -9, Sold Units are UP +15

Last Month's Report

Click here for Most Recent Desert Shores Market Report

Click here for More Information on Desert Shores Lake Living.

When the Southern Nevada - including Southern Highlands, Summerlin, Henderson, North Las Vegas, Anthem, Mountains Edge and Green Valley - housing market tripped into a free fall it was a foregone conclusion on many lips that scam artists would soon surface to try take advantage of the situation. And have they ever. What the local media has reported on the magnitude of the issue is undoubtedly only a tip of the iceberg. This, of course, isn't only a Las Vegas problem either, it covers the whole nation.

The scam artists generally employ a few basic practices that have all too often worked on unsuspecting homeowners facing mortgage payment challenges. One of them is the promise that the shady operator guarantees to put a halt to a foreclosure or to modify a home loan. Another is where he requests a large advance fee. They also like to ask for the borrower to stop paying the mortgage lender and send the payments to them instead. All of these are red flag events for homeowners thinking about foreclosure rescue or home loan modification.    

In addition, some operators will brag about their excellent track record and pledge to make refunds in case they fail to deliver the goods. And then there are those who say they are affiliated with the government or the mortgage company in question, when they are not. It's important to check on the legitimacy of any foreclosure rescue shop or home loan modifier before engaging them.

Because mortgage-related scams just continue gaining speed the FTC, or Federal Trade Commission, has launched a new program to attempt to slow things down. It's called Operation Stolen Hope. It was recently announced in a press conference held in Las Vegas, one of the cities most affected by the housing collapse where many hustlers have set up shop to ply their slimy trade. FTC is actually joining forces with at least 25 state attorneys general to thwart these deceptive, fraudulent and unfair business practices the scammers like to pull off. 

Operation Stolen Hope must be the result of ever increasing amount of mortgage borrower complaints. What FTC has done so far obviously hasn't been enough. Sometimes people wonder why regulators have to receive thousands of complaints before they start taking their mandate seriously. Why not do their job right from the get-go so there won't be that many disgruntled mortgage borrowers to make those breathless phone calls? Anyway, if FTC has the resources, organization and will it can make a big difference on the struggling homeowners' behalf.

Many of those considering buying a home struggle with the question: Why should I use a Realtor®? While some assume they can save thousands by eliminating an agent's commission, others feel that the services of a real estate professional are no longer relevant in today’s tech savvy society. I strongly disagree.

I’m not an agent, have never held a real estate license, and have no vested interest in promoting the real estate profession. What I do is offer the advice of four decades of experience in real estate transactions. During my career I have bought and sold hundreds of properties, and in all but two instances I used the services of a Realtor®. The first, my first home, I purchased directly from my father; and the other, I purchased many years later from my employer. In both cases I was familiar with the homes, the seller, and felt comfortable that the transaction would be fair and honest. And, in both cases, I used a real estate attorney to check the title and to write the purchase agreement.

For those looking to purchase a home in today’s chaotic real estate market, it’s especially important to have the guidance of a professional. In virtually every case a real estate agent will help you work through the complicated process of locating a home, evaluating the price, alerting you to potential hazards, preparing an offer to purchase, providing guidance with financing, and scheduling the closing. Studies have shown that the majority of home buyers still find the services of a real estate agent invaluable during the home purchase process.

Not everyone agrees. Each time I’ve blogged about the importance of using the services of a Realtor® in the home buying or selling process, I’ve received comments from those who are certain they can go it alone. Most have either had bad experiences with a Realtor® or have heard stories about the unethical practices of some agents.

But it’s the same in all professions; there will always be some who are unprofessional or downright dishonest. You wouldn’t stop seeking advice from medical practitioners just because a few have been accused of malpractice. The complex issues of today’s housing market demand that buyers have the best advice and guidance available, the services offered by a dedicated real estate professional. But finding that perfect “teammate,” one who will guide you to success requires a diligent effort. Most agents are knowledgeable, hard-working, and honest—click HERE for tips to ensure you select one from this group—and earn the commissions they’re paid.

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

The Las Vegas Valley (includes Henderson & North Las Vegas) has seen some major market stabilization in the last year!  Absorption for October 2009 is a seller's market @ 2.1 months of inventory (dropfrom last month, seeing some micros inch up with inventory!)  Some micro-markets (ie,Foreclosures Bank Owned, REO) are extreme seller's markets where there is no mercy to the buyers, multiple offers are the norm!

We are FINALLY seeing an increase with inventory and a decrease with escrows (we should have seen that late spring/early summer!)  Good news for buyers?  Still remains to be seen.  We need to get over 10000 active units on the market before it can be stabilized from a seller's market 

Las Vegas Area Market Activity (Includes North Las Vegas, Henderson and Las Vegas)

• Listings (11/15/2009):  10393
• Under Contract (11/15/2009):  14609
• Sold October 2009:  4328
• Month's Inventory:  2.4

Short Sales:

• 43% of Listings
• 16% of Sales

REO (Foreclosures, Bank Owned:)

• 22% of Listings
• 66% of Sales

The above breakdown shows how very few short sales are being closed and how little inventory is in the REO market currently. 

In One Month:  Listings are UP +22 units, pendings are DOWN -425 units, closings are UP +160 units.  Close ratios are going lower because much of the pending inventory is short sales which requires LONGER close times. Pending inventories usually level late spring ~ FIRST TIME BUYERS WANT THEIR TAX CREDITS (must be in contract by Nov 1 and close by Dec 1) and INVESTORS ARE SEEING OPPORTUNITY!

 DOWN PAYMENT ASSISTANCE HAS NOT ENDED FOR FIRST TIME BUYERS, HOWEVER!!

Last Month's Pending Report

The Most Current REO (Foreclosure) Report

The Most Current Short Sale Report

The Most Current Las Vegas Area Pendings Report

Very strong checklist from John the Housing Guru for anyone planning on buying a foreclosure here in Las Vegas NV. Take a look.

The Mortgage Market Watch for the Week of November 23, 2009

Events Affecting the Mortgage Market This Week:

There will be $118 billion in Treasury auctions this week - 2-Year Notes on Monday, 5-year Notes on Tuesday, and 7-Year Notes on Wednesday. If these auctions are met with strong demand, we should see mortgage interest rates continue to stay down. However, if these auctions are met with lackluster demand, we may see an increase in mortgage interest rates this week.

The financial markets will be closed on Thursday in observance of Thanksgiving Day. There markets will not close early Wednesday. But, they will close early Friday. Friday will be a very light day in the mortgage market as many market participants will be home. We will likely see little change to mortgage interest rates that day.

Economic Reports to be Released This Week:

There are seven economic reports scheduled for release this holiday-shortened week. All of the economic report will be posted over the first three days of the week, so expect some volatility in mortgage interest rates.

Monday, November 23rd:

• Existing Home Sales Report for October - this report provides us with a measurement of housing sector strength and mortgage credit demand. The report is expected to show an increase in existing home sales, indicating that the housing sector may be strengthening. However, this report usually has little or no impact on the mortgage market or mortgage interest rates.

Tuesday, November 24th:

• Consumer Confidence Index (CCI) for November - released by the Conference Board, this report provides us with a measurement of consumer willingness to spend. Analysts are expecting to see little change from last month's reading, meaning consumer were just as concerned about their own financial situations as they were last month. If consumer confidence is rising, analysts believe that consumers are more apt to make larger purchases, essentially fueling economic growth. This raises inflation concerns and usually pushes mortgage interest rates higher.

Wednesday, November 25th:

• Durable Goods Orders fro October - this data helps us measure manufacturing strength by tracking orders for big-ticket items, but is known to be quite volatile from month-to-month. It is expected to show a 0.5% increase in new orders. A smaller than expected rise would be considered good news for the mortgage market and mortgage interest rates.
  
  
• Personal Income and Outlays Report for October - this data is thought to measure consumers' ability to spend and their current spending habits. This is important because consumer spending makes up two-thirds of the U.S. economy. It is expected to show 0.2% increase in income and a 0.5% increase in consumer spending. Smaller than expected readings would be good news for the mortgage market and help keep mortgage interest rates down.
  
  
• Revised University of Michigan Index of Consumer Sentiment reading for November - analysts are expecting to see an upward revision to the preliminary reading of 66.0. However, this data will usually has little to no impact on the mortgage market and mortgage interest rates.
  
  
• New Home Sales Report for October - the report is expected to show an increase in new home sales, indicating that the housing sector may be strengthening. However, this data will usually has little to no impact on the mortgage market and mortgage interest rates.
  
  
• Jobless Claims - New claims for unemployment are tabulated each week to show the number of individuals who filed for unemployment insurance for the first time. Analysts are predicting that 495,000 new claims for unemployment will have been filed last week. With a decreasing trend in the filing of new claims for unemployment, this suggests that the labor market is improving. However, this data is usually not considered to be very important to the mortgage market.
  
  
• Fed's MBS Purchase Program - The results of his week's purchases of mortgage backed securities by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $1.006 trillion in mortgage backed securities this year. The Feds plan on purchasing up to $1.25 trillion in mortgage backed securities through March 31st.

Thursday, November 26th:

• There are no economic reports scheduled for release today.

Friday, November 27th:

• There are no economic reports scheduled for release today.

How do Economic Data Releases Affect Mortgage Interest Rates?

One of the most important things for you to know when deciding when to lock in the interest rate on your mortgage is knowing what economic data is going to be released - and when - and how it may impact the mortgage market and mortgage interest rates.

While an in depth review of an economic event can help you make an informed decision, understanding the nuances of a release can't help you if you don't know when it's happening. Economic data releases are important because they provide a snapshot of what's happening in the economy. They also provide a foreshadowing of any upcoming market volatility. It's just as important to know when these data releases are happening as knowing what effect these releases can have on the mortgage market.

The chart below shows the price trend of the FNMA 30-Year 4.5% coupon over the past 30 days:

Recent Activity in Mortgage Backed Securities:

Remember - as the prices of mortgage backed securities goes up, the yields come down - and mortgage interest rates come down with it. Conversely, as the prices of mortgage backed securities goes down, the yields go up - and so do mortgage interest rates.

Mortgage Interest Rate Outlook:

Moderate Volatility. Overall, I believe that it is going to be an active week for the mortgage market. I expect to see volatility in mortgage interest rates the first three days of the week.

There's not much room for MBS prices to move higher or for mortgage interest rates to move lower at the moment. If you're happy with the rate being offered to you and don't want to risk mortgage interest rates moving higher, you should apply and lock in today. While there's still some room for MBS prices to tick higher, it's better to have locked when you should have floated than it is to float when you should have locked.

If you have not yet locked in your mortgage interest rate, please proceed with caution and maintain contact with your mortgage professional. Also, give very serious consideration to applying now and locking in before mortgage interest rates get worse.

Las Vegas Area November 15, 2009 Active Listings by Type

• REO:  2243 (22%)
• Short Sale:  4475 (43%)
• All Other:  3675 (35%)

October 2009 Sales by Type:

• REO:  2869 (66%)
• Short Sale:  688 (16%)
• Other:  7071 (18%)

This is just a guide for consumers to see what types of properties are closing vs what is listed.  Currently we have the most closes in the REO sector and the least inventory in the REO sector and it is an extreme seller's market.

Click here to see last month's Listing and Sales Type Report

Click here to view the most recent stats (scroll to bottom)

Southern Nevada - with communities of Mountains Edge, Summerlin, Henderson, Southern Highlands, North Las Vegas, Anthem and Green Valley - condominium segment bubbled up a little later than the single-family side, but its slide became equally devastating once it hit the slope down. Mortgage financing dried suddenly up, oversupply was horrendous and the mauled global economy forced many would-be buyers to the sidelines. The usual menu that real estate disasters are made of.

Now, though, things are cautiously looking up for the Las Vegas high-rise condo market. Sales in the third quarter climbed a decent 7%, as was reported by SalesTraq, a Las Vegas research boutique. Looking at it another way means that now 45% of all luxury condominiums in town are effectively sold, up from 38% at the end of the second quarter. True, the increase is well received and offers optimism down the road, yet it still leaves a monstrous block of vacant units out there, 55% in all. Undoubtedly that is a lot of inventory seeking qualified and willing buyers.

Las Vegas mortgage lenders continue to be very selective toward high-rise condominium projects on and off the Strip. Among the key issues they are wary about are unacceptable owner-investor ratios, unstable values and all sorts of legal problems.

The condo-hotel concept that also made a grand entrance to the Southern Nevada real estate market this decade and subsequently collapsed has no mortgage takers at all at the moment. It really is more like an investment vehicle that got off to a great start when the global economy was humming along and the Las Vegas market full of promise. And then the rosy environment changed in rapid order and wrecked everything. It's predictable that it will recover last from all the housing sectors in Southern Nevada.

Anyway, at least the regular Las Vegas condo market is now tentatively tiptoeing out of the doghouse.  Improved availablity of mortgage financing would make the road forward more sustainable.

Is the housing market improving? According to Elizabeth Warren, chair of The Congressional Oversight Panel, it’s not. While the market has shown signs of improvement in some areas, the overall picture is still quite grim. According to Warren, as many as 10 to 12 million homes could be lost to foreclosure, the consequences of which could be “disastrous.”

Continued foreclosures will cause a ripple effect throughout the economy, as homes in those areas hardest hit see values slide even further. In a recent report, Warren described the government’s foreclosure modification efforts as “inadequate,” but it appears that nothing will be done to improve a system hell-bent on propping up bank profits on mounds of foreclosure victims.

While I like the spunk with which Warren attacks what she perceives as flaws in the program, it appears her words are just that, impotent criticisms without the power to effect change, falling on the unprincipled ears of politicians more interested in saving their political skins than creating beneficial change.

The Congressional Oversight Panel or COP was established to oversee the original TARP program which ultimately abandoned the purchase of “troubled assets” and became a simple bailout of big banks. And the not so aptly named COP board seems as effective as a policeman with a booming voice, but no gun.

I suspect that Warren is correct about the potential for additional waves of foreclosures, but doubt that her words will slow the tide. Like footprints on a deserted beach, they’ll soon be forgotten.

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