Foreclosures are up everywhere, thanks in part to the subprime mortgage meltdown. It's expected that there'll be 1.2 million foreclosures nationwide in 2007, up 60% over 2006. This is a huge increase year-to-year, but more than that, it's one million two hundred thousand families having their houses repossessed by lenders. That's a lot of people -- the equivalent of three out of four Las Vegans -- losing their homes.
And Nevada, Las Vegas in particular, accounts for a growing percentage of that figure. Foreclosures have skyrocketed in southern Nevada over the past couple of years. For example, in July 2005, there were a few hundred foreclosures in Las Vegas. In July 2006, that number had risen to nearly 2,000. And in July 2007 there were nearly 5,000, 10 times the national rate.
Roughly 30,000 houses are for sale in the greater Las Vegas metro area -- and worse, nearly 50% of them are vacant. (For the current Top Ten best real estate deals in Las Vegas, click here.)
The reason for these tough numbers? In a word, gambling. Las Vegas (and Nevada in general) had more "investor loans" -- made to people who had no intention of living in houses they bought -- than anywhere else in the country. These were speculators banking on taking advantage of the run-up in housing prices several years ago by buying low and flipping high. When the market tanked, a lot of investors were caught short, with tens of thousands of houses on the market and few buyers in sight. Nearly 33% of Nevada investor loans were at least 90 days past due as of June 30, compared to 13% nationwide.
In fact, according to RealtyTrac, a California firm that monitors foreclosures across the country, September 2007 was the ninth month in a row that Nevada reported the nation's highest foreclosure rate: one filing per 185 households, nearly triple the number of filings in September 2006. And the Las Vegas firm SalesTraq reported that between January and September 2007, 5,603 southern Nevada homes had been repossessed by banks, a 472% gain over all of 2006, when 1,829 homes were repossessed.
Worse yet, as of Sept. 30, one in 61 homes in Nevada was facing foreclosure.
In September in Nevada there were 3,724 notices of default issued to homeowners who were delinquent in their payments, according to RealtyTrac, with 927 foreclosed properties.
Meanwhile, the price of Las Vegas houses has been falling since reaching a peak in June 2006. The median price for a new house fell nearly 10% in October (to $299,575) and sales dropped 50% (to 1,302) compared to October 2006. The price of lived-in houses fell 11.4% to $257,000 and sales were down nearly 45% (to 1,549). Those numbers are actually up a little from June 2007, when only 2,000 total real estate transactions in Las Vegas closed.
The minor bright spot was in inventory, which went down for the first time since June 2006, to 27,050.
Still, inventory counts remain at record highs, driving prices down down down. And with credit tightening up, fewer and fewer buyers can qualify for loans. In addition, all the foreclosures depress prices even further, as lenders are willing to discount those properties to get them off their books.
Finally, analysts are predicting that the worst is yet to come. The Las Vegas real estate market peaked in 2005 and many borrowers (35% of loans statewide) took out adjustable-rate mortgages in which interest rates reset after three years. This means that in 2008, one third of all recent mortgages will rise, some 50% or more. Factor in that in Nevada, 46% of households allocate more than 30% of their income to housing and about 20% of the loans are subprime (borrowers have a less-than-perfect credit history), and it appears that the Silver State will retain the dubious distinction of having the nation's highest foreclosure rates for the foreseeable future.
