It’s a new beginning in America’s home-buying market. More and more buyers are saying no to expensive and convoluted bank loans and paying cash instead for bargain properties.

The Wall Street Journal reports scores of bargain-basement deals being closed by cash-bidding buyers who feel the bottom has been reached in the market.

Where are they getting the cash from?  They are selling other investments like paintings, cars and jewelry.

For example, In Atlanta, 62-year-old piano teacher Virginia Hall-Busch paid cash for a 93-year-old three-bedroom, one-bath bungalow in scenic Stone Mountain, GA.

The property initially listed for $159,000, then dropped to $129,000 and then to $79,900. The piano teacher didn’t think her bid of $52,500 would be taken seriously. It was. She is the new owner.

In Miami Beach, Richard Stoker, a 73-year-old retired sales executive, paid cash for two condominiums and soon plans to close on a third. He is paying $1.8 million, $1.2 million and $1 million for properties that were initially listed for double those amounts.

The Stokers have a home in Potomac, Md., but spend most of the year in Florida. Stoker doesn’t plan to rent out any of his new properties. He tells the WSJ he and his wife will live in one with two dogs, his son might live in another and the third will house an older dog and guests.

Cash buyers represented more than half of all transactions in the Miami-Fort Lauderdale area last year, according to an analysis from real-estate portal Zillow.com.

In the fourth quarter of 2006, they represented just 13% of deals. Meanwhile, downtown Miami prices rose 15% in 2010 from a year earlier, according to the Miami Downtown Development Authority.

The percentage of buyers in Phoenix paying cash hit 42% in 2010–more than triple the rate in 2008, according to Raymond James’s equity research division.

Nationally, 28% of sales were all-cash transactions last year, according to the National Association of Realtors. The rate was 14% in October 2008, when the trade group began tracking the measure.

The Federal Reserve reports that Americans increased their use of credit cards in December 2010 for the first time since August 2008.

Henry Schlangen

“Some of the cash purchases reflect a tight lending environment, where even people with good credit and ample down payments are sometimes turned away for conventional borrowing,” reports the WSJ.

“The rates are great but the underwriting is brutal,” said Henry Schlangen, an agent with real-estate firm Pacific Union International who buys and sells for clients, mainly in Napa Valley, CA.

Schlangen tells the WSJ, “They (lenders) hang these people upside down and shake them till they see what falls out of their pockets. So people are buying with cash and maybe they’ll ‘Refi’ later.”

Schlangen, who deals in higher-end properties such as vineyard estates, estimated that 95% of his deals last year were all-cash, up from about half in previous years.

“The deals that are consummating, these are buyers who feel they got a great deal,” he said. He notes the number of buyers from China are increasing.

Mohammed Siddiq

Cash buyers can often command 5% to 10% more off the asking price than a potential buyer using a mortgage, Mohammed Siddiq, a real-estate professional in Fort Lauderdale, FL, tells the WSJ.

Sellers prefer cash deals since they close more quickly and avoid risks such as a buyer’s job loss or a bank’s changing its mind, he says.

Nationally, it isn’t clear whether prices have bottomed.

The Case-Shiller index of housing prices in 20 cities showed a steep decline in prices until 2009, when they appeared to bottom and began to trend upward.

But in the second half of last year, prices began falling again. A Zillow index, meanwhile, never noted the uptick, reports the WSJ.

source article Real Estate Channel

I read on MSN that the NAR apparently overstated home sales by as much as 20% as far back as 2007. The author opines, without any apparent reason, that “No one seems to be implying that numbers were massaged, cooked or manipulated.”

I would think there is every reason to believe the numbers were massaged, cooked or manipulated since that would be in the NAR’s interests and consistent with its numerous misleading practices.

If the numbers were manipulated by the NAR, I would think that would make the NAR a target for legal action by anyone and everyone who purchased real estate while the numbers were being manipulated and subsequently saw the market price of their property drop (that would be the vast majority who purchased since 2007). Obviously inflated figures would have inspired false buyer confidence.

Shouldn’t the justice department investigate? Wouldn’t this constitute a RICO violation? A subpoena of email and other correspondence at the NAR would likely allow an easy determination of innocence or guilt. I am tempted to say I would be shocked if there is no investigation, but sadly I am no longer affected that way by the government’s stupidity, incompetence and audacious complicity with power elites.

I guess it would be up to those who bought houses and suffered to initiate legal action. I think they should all sue the NAR. Fortunately for me I am not one of them as I have followed and heeded the information on Patrick.net for several years.

Source Article Patrick.net

I just got off the telephone with economist, Forbes magazine columnist and newsletter editor Gary Shilling. As you probably know by now, Gary has been spot-on in his predictions on the economy, global markets and housing.

I asked him what was  new and he told me that he had revised his forecast for housing. Here are some of his comments :

“If I am right and we see another 20% decline in housing prices, then we figure that the number of mortgages underwater will go from 23% to 40%. That is a huge amount and at some point the dam breaks,” says Shilling.

That’s bad news for the economy and bad news for homeowners and real estate brokers. It’s also bad news for banks and the stock market.

Shilling went on to say that if there is a bright spot in all this gloom it probably will benefit the profligate spending homeowners, who were lured by men like Angelo Mozilo into homes and mortgages they couldn’t afford.

“Home ownership still has a lot of political clout in this country,”  said Shilling. ” By hook or by crook, the politicians will come up with some kind of bailout for a lot of people underwater on their mortgages.”

In other words it doesn’t help anyone to have millions of homeowners foreclosed on and thrown into the street. Gary estimates that houses that are foreclosed on and vacant lose an average of $1,000 per month in value as long as they remain unsold.  He adds that all the scrutiny that banks are under fire over concerning foreclosure procedures is creating the perfect environment for a massive bail-out of deadbeat homeowners.

Special Offer: Gary Shilling was mocked for predicting a housing crash back in 2006, but he and his subscribers cleaned up. Click here for instant access to Shilling’s current investment strategy in his Insight newsletter.

Gary thinks we need a Resolution Trust Corp (RTC) type solution for the housing market. You may remember that the RTC was set up by the Office of Thrift Supervision in the 1980s to deal with hundreds of insolvent thrifts who, like homeowners, got in way over their heads. Some of them invested in Mike Milken junk bonds, others invested in real estate and other highly leveraged loans.

The RTC entered into a number of   equity partnerships  to help liquidate real estate and other assets it had inherited from insolvent thrift institutions. Gary says the key to the RTC’s success was that it acted relatively quickly and that is what is needed forthe housing market inorder to liftthe giant overhang caused by our zombie homeowner situation.

I reminded Gary that many investors Amoxil Online got rich from buying assets of troubled savings and loans, including billionaire Leon Black.  We  shall see who steps up this time.  Any guesses?

source article

New Study – Three years into the foreclosure crisis, with just over a third of distressed homeowners working with their servicer’s loss mitigation departments, the State Working Group says it anticipates hundreds of thousands of foreclosures will occur later this year unless improvements are made in foreclosure prevention efforts.

 According to a new report from state attorneys general and bank supervisors from across the country, more than 60 percent of homeowners with seriously delinquent loans are still not involved in any form of loss mitigation with their servicer.

 The consortium of state regulators and chief attorneys also found that recent modifications that significantly reduce the principal balance of the loan have a lower rate of redefault compared to loan modifications overall, suggesting that servicers should strategically increase their use of principal reduction modifications to maximize prospects for success.

  Student Housing:

Focusing on financials:

 Currently Student Housing Developers see 65 percent loan to value as the norm in the student-housing market, and that most investors are looking for a 9 percent yield, although 8.5 percent is probably more reasonable.

 As for the structure of the new development deals, the personal guarantees have gone up,  he said. Seemingly the biggest hang-up with any of the groups, whether it’s a high net worth individual or a fund, is that the banks want real liquid order antibiotics online assets put against the loan.

 

A more recent investment trend in the student-housing market is: more people gravitating away from funds toward direct investing. People want more control, they want more influence. They want to move away from investing in closed-in vehicles where they lose all control of the money.

 Finance Execs Expect More Distressed Opportunities in 2011

What’s the word on the street? More distressed acquisition opportunities will come to the multifamily market next year, while the dearth of Class A assets trading hands will likely continue.

 

Forecasting Deals
While the wave of distressed auctions that many expected hasn’t yet materialized, investors are increasingly optimistic that next year will be different. Nearly 62 percent of those surveyed expect more distressed acquisition opportunities to be unearthed in 2011.

Table 1. Asset types expected to be available in 2011.
Distressed properties	61.9%
Class B	39.2%
Value-add	34.5%
Class C	33.3%
Niche (student, seniors, etc.)	24.4%
Class A	22%
None of the above	4.7%

Many feel that it’s just a matter of time before all of those short-term, interest-only CMBS loans made at the peak of the market finally come due. And balance-sheet lenders can only extend-and-amend for so long—as banks slowly return to health, they’ll be able to take greater losses as they clear their balance sheets of distressed notes.

 

Throughout 2010, Class A assets in strong locations inspired bidding wars so heated that most players walked away shaking their heads at the size of the winning bid. That feeding fenzy will likely continue: More than three-quarters of respondents (78 percent) believe there will be fewer stabilized Class A assets hitting the market next year.

Market Upsides Distressed Markets with the Most Upside.
South Florida	27%
Southern California	25%
Phoenix	11%
Atlanta	10%
Las Vegas	10%

Cost-Cutting Continues
Renegotiating vendor contracts and fighting tax judgments continue to be among the most popular cost-cutting strategies employed by firms. More multifamily firms also plan to pass utility costs on to residents and use software to automate business processes than they did last year.

  Linda Shea/ Managing Partner

CFO Capital Partners

“We Bring Experience to the Meeting”

 437 FoxTract Road, Bridgeport, NY 13030

O: 315.633.9653 * EFax: 775.248.6603

Linda@CFOCapitalPartners.com

Several major commercial real estate groups are fighting a proposed federal tax provision that they say would have a devastating effect on real estate investment partnerships.

Commercial real estate groups contend that the Tax Extenders Act of 2009 (HR 4213) would more than double the taxes on carried interest received by general partners in real estate partnerships because the carried interest would no longer be taxed as capital gains at 15%, but as ordinary income with rates as high as 35%.

“That’s a huge increase at a time when the industry is on the precipice, so to speak,” says Thomas Bisacquino, president of the NAIOP, the Commercial Real Estate Development Association. “There really isn’t any real estate-related group that supports it. We’re trying to stimulate the industry. We feel it would create a huge impediment.”

The House of Representatives passed the “tax extenders” bill on Dec. 10. It would prolong a number of tax breaks currently scheduled to expire at the end of the year. Although the bill contains elements that benefit commercial real estate, such as an extension of tax credits for owners who conserve energy through retrofits or remediate brownfields, the prospective change in policy toward real estate investment partnerships has many investors seeing red.

NAIOP antibiotics online has issued a “call to action” to its approximately 16,500 members urging them to contact senators to defeat the proposal. If enacted, it could bring about the largest modification to the taxation of real estate in more than 20 years, since the Tax Reform Act of 1986, NAIOP said in its alert.

The group added that the proposed tax change would have an effect far beyond the Wall Street hedge funds whose practices originally gave rise to the proposal.

The Institute of Real Estate Management (IREM), an association of property managers, has sent a joint letter with the National Association of Realtors and the CCIM Institute, urging all 100 U.S. senators not to change the current capital gains treatment of carried interest for real estate partnerships.

Other organizations are expressing similar concerns. “Changing the current capital gains treatment of carried interests would undermine job creation and have a negative impact on commercial real estate values, which would devastate local property tax revenues and put pension fund investments at risk,” says IREM’s senior legislative liaison Vijay Yadlapati. “Just as importantly, such a policy would slow the national economic recovery.”

This week, in IREM’s latest legislative report, the group says the loss of capital gains treatment for real estate investment partnerships would turn long established taxation rules upside down and have a far-reaching effect. “Real estate partnerships, from the smallest venture to the largest investment fund, have a carried interest component. Approximately $1 trillion of commercial and residential properties are held by partnerships.”

The tax measure would put additional pressure on the commercial real estate industry at a time when it already faces heavy burdens, IREM notes, including a rapid rise in delinquencies and foreclosures and restricted access to credit.

Because of the health care debate, the Senate is unlikely to introduce its own version of the tax extenders bill until early in 2010. But the commercial real estate groups fear that the Senate could quietly add the tax measure affecting partnerships to any unrelated bill now under consideration.

The Senate Finance Committee intends to take action on its own “tax extenders” bill shortly after lawmakers return from the holiday recess in mid-January, says Yadlapati. However, it’s not known whether the carried interest provision will be included in that bill.

Source Article National Real Estate Investor

Part of the renewed dedication should be set towards inspecting how we arrived at this place and how to improve the past performance.  If you are receiving this newsletter it is because you have investment properties and you have Web Laundry Services.  You have made the right chose so far and you have capitalized on the opportunities presented to you, congratulations.  This next business cycle for investment properties and real estate in general will make or break a lot of people who seemed bullet proof at first glance.  Make sure you are on the Buy Cipro Online without prescription right side of the line when the dust settles and it is with that hope this article is written.

Evaluation of your investments would fall in line with all these tasks as would evaluation of your performance with managing your asset.  Take another look at your Profit and Loss statements and your rent roll with your vacancy rates.  How much time have you spent or your management company spent on your building and the true return for your asset.  Drive the neighborhood where your investment is and take a look at the surrounding buildings?  Are they run down, is your building run down?  Are there a lot of for rent signs or none at all?  Due your due diligence call some of the for rent signs and do your own rent survey to find out if you are in line with rents/amenities or if you have missed the mark.  Evaluation of business relationships for unity of purpose and for their dedication to your goals should also be included in your analysis.

Today, more than ever, there are a multitude of tools and services available at your finger tips to assist you with your work.  It is quite easy to find everything on line from rent comps to current lending rates to the local apartment owners’ association to vendors who specialize in a multitude of helpful services.  Look at the economic forecast, both locally and nationally, what is the unemployment rate in your area and can your investment be effected dramatically by this rate?  Is it an influencing factor for your tenant base?  The world is still pretty big but the internet has leveled the playing field for some and exploited for others the opportunities available. 

In summary, capitalize on your strengths and down play your weaknesses or minimize them all together if not now when?  There will be scores of opportunities in the next 3 to 5 years please don’t get left behind or eliminated.  Remember cash is king when it comes to the best opportunities or with REO properties.  Best of luck and happy investing.-Sean

SCOTTSDALE, Ariz. — Four years after the collapse of the U.S. housing bubble, flipping homes is back in fashion.

Jon Mirmelli, a Phoenix real-estate investor, learned late in the morning of Sept. 28 that a never-occupied custom house on the northern fringes of this Phoenix suburb was going up for auction around noon the same day. The six-bedroom home, built on a three-acre desert plot, has a kitchen with two dishwashers, four ovens, “antibacterial” copper sinks, and a master “spa” bathroom with space for a flat-screen TV visible from the tub.

The minimum bid, as set by a unit of Citigroup Inc., which had a $1.3 million mortgage on the home, was $379,900. After several minutes of bidding among investors and their representatives, some wearing shorts and flip-flops, Mr. Mirmelli won the home for $486,300. A week later, he agreed to sell it for $690,000 to a woman who moved in this month.

During the housing boom, millions of Americans tried to make money by buying and then quickly reselling new houses and condominiums. That kind of flipping stopped several years ago as home sales stalled amid a surge in foreclosures and curtailed lending.

Now, a different breed of flipper is proliferating: one who seeks bargains at foreclosure auctions. Unlike the boom-time flippers, the latest generation needs cold cash, lots of local-market knowledge and strong nerves.

Investors compete mostly with other full-time professionals who monitor foreclosure auctions at county courthouses across the country. The bidders often haven’t had a chance to inspect the property or determine whether it’s occupied by tenants, who may be hard to evict.

Sometimes “you have half an hour to make a half-million-dollar decision,” says Damon Lines, an executive at PostedProperties.com, a Phoenix firm that provides information to foreclosure investors and bids on their behalf. “That’s something most people can’t or aren’t willing to do.”

In the states where home prices have fallen the most, many local online medicine without prescription real-estate markets are dominated by foreclosed property, dragging down the value of neighboring homes. Barclays Capital estimates that banks and mortgage investors have 639,000 foreclosed homes for sale across the U.S., largely concentrated in Florida, California, Arizona and Nevada. That’s equivalent to more than 10% of expected U.S. home sales this year.

Flippers swoop in at public auctions of foreclosed homes, known as trustee or sheriff sales. In many states, the lender sets the minimum bid, and takes possession of the property only if no one bids more. In the past, the minimum generally was about equal to the mortgage balance due. But in today’s market, in which many home values have dropped far below the loan balance, lenders wouldn’t attract investors if they set the minimum at that level.

So lenders, or the loan-servicing firms that represent banks and investors, are increasingly likely to set the minimum much lower. Their goal is to tempt others to buy the house and spare banks the headaches and costs that come with taking possession.

Sean O’Toole, chief executive officer of ForeclosureRadar.com, a research firm, estimates that in November about 21% of homes sold in trustee sales in California went to investors rather than to a foreclosing lender, up from 6% a year earlier. The trend is similar in some other areas with high foreclosure rates, including Phoenix and Miami.

The advantage of such an outcome for the bank is that it gets money for the property right away, even if it isn’t enough to cover the loan balance due. The bank doesn’t need to make repairs to the home, cover the taxes and insurance, or pay real-estate-agent commissions.

The risk for banks is that if they set the minimum bid too low, the home might end up selling for much less than they could reap if they took ownership of it and sold it themselves. But with some 7.5 million U.S. households behind on their mortgage payments or in foreclosure, many lenders are overwhelmed. They’re negotiating with distressed borrowers and figuring out how to sell the growing supply of foreclosed homes.

“The banks are so screwed up,” says Mr. Mirmelli, the Phoenix investor, that they don’t always have a clear idea of the value of the property they are foreclosing on.

To help them set the minimum bid, banks often consult with local real-estate agents and use software that estimates housing values. American Home Mortgage Servicing Inc., which collects payments and handles foreclosures on behalf of banks and loan investors, uses a formula designed to “achieve a fair value for the property and induce third-party bidders,” says Christine Sullivan, a spokeswoman for the Coppell, Texas-based firm.

American Home starts with a broker’s estimate and subtracts the expected costs of taking ownership of the house and selling it. The minimum bid is above the net proceeds American Homes believes it could get by acquiring and selling the property itself, she says.

Outside the Maricopa County court building in downtown Phoenix, trustees, companies that are hired to handle foreclosure auctions, offer as many as 600 or 700 houses every weekday. A typical auction lasts only a few minutes. On a recent afternoon, a few dozen bidders and onlookers were clustered around a trustee employee seated on a lawn chair conducting auctions. He kept track of the bids on a laptop computer perched on one knee.

Many of the bidders are regulars at the sale, bidding for themselves or on behalf of investor clients. “We’re all kind of like a little dysfunctional family,” says Steve Mutsaers, a representative of PostedProperties, who was wearing black sunglasses, a white polo shirt and gray plaid shorts. During the summer, Mr. Mutsaers says, he wears a sombrero to cope with temperatures well above 100 degrees.

People who attend trustee sales here and in other foreclosure hot spots around the nation say the auctions have recently been attracting more bidders. “Properties are getting bid up,” says Hal Feinberg, a Phoenix property investor. “You can still get good deals, but you’ve got to be more patient than you were a year ago.” He and other investors in the Phoenix area say they have been flipping a lot of the homes they buy to Canadians taking advantage of a weak U.S. dollar.

Buying at these auctions is perilous. There are no public viewings, so bidders often can’t know how much damage may have been done inside a house by occupants facing foreclosure. “We’ve seen everything,” says Doug Hopkins, chief executive of PostedProperties. “We’ve seen people pour concrete down the toilets.” Unless they’ve done their homework, bidders also don’t always know whether they’re buying a home subject to a lien from another lender, which can happen in cases where the borrower took out more than one home loan.

View Full Image

Joshua Lott for The Wall Street JournalInvestors in Phoenix gather at one of the 700 auctions that take place here each weekday.

Because of such complexities, many of the bidders are people with experience in the property business. Jon Goodman, a real-estate lawyer in Boulder, Colo., for example, has bought 19 properties so far this year with other investors and sold 11 of them.

In February, the group won an auction for a home in Commerce City, Colo., near Denver, by bidding $142,000. Only afterwards did they discover that the previous owners had stripped the house of a toilet, much of the carpeting and a kitchen range. They replaced the missing items and made other minor improvements, eventually selling the house in May for $209,000. (The loan balance on the house had been $265,663.)

Mr. Goodman says their expenses came to about $24,000, including about $8,000 for real-estate commissions. That left a pretax profit of about $43,000.

The foreclosure auction was handled by American Home Mortgage Servicing. Ms. Sullivan, the spokeswoman for American Home, says the firm believes it didn’t underprice the home and it received “a fair, market-value price for the property.”

In Miami, a group of investors led by Oded M. Kaiser recently bought a condo at auction for $170,000. Two weeks later, they flipped it for $330,000. The loan balance was about $466,000. A spokeswoman for Litton Loan Servicing, which handled the sale on behalf of mortgage investors, declined to comment.

Not all flippers come out on top. Mr. Goodman says one of his legal clients, bidding on his own, unwittingly bought a house that was still subject to a first-lien mortgage. To gain control of the property, the client had to pay off the first mortgage. As a result, says Mr. Goodman, the client, who declined to be named, is likely to have at least a small loss on the deal.

Last summer, Phoenix investor Greg Thielen bought a home at an auction and later found that the former owner had stripped out air-conditioning units, granite countertops and kitchen cabinets, and uprooted palm trees from the lawn. Repair costs came to about $30,000, leaving Mr. Thielen with a small loss on the purchase. “It’s not as easy as people think,” says Mr. Thielen.

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James R. Hagerty/The Wall Street JournalInvestor Jon Mirmelli in the kitchen of the Scottsdale home he flipped.

The Scottsdale property bought by Mr. Mirmelli was supposed to be the dream home for Brad and Michelle McCaughey and their three children. Mr. McCaughey, who grew up in Ann Arbor, Mich., was a minor-league hockey player and coach after graduating from the University of Michigan. About nine years ago, having moved to Phoenix, he says he discovered “a passion for real estate.” He became a real-estate agent and began investing with his father and brothers-in-law in rental properties. Soon they had a dozen homes.

In 2005, Mr. McCaughey and his wife paid about $500,000 for three acres of desert land and began building a home. By the time the house was nearing completion in 2008, the family rental-property business was in trouble because financing and other costs were exceeding their income.

The McCaugheys started selling their rental properties and put their own house on the market. They hoped to avert a foreclosure by getting Citigroup to accept a short sale, in which a home is sold for less than the loan balance due. Before they could find a buyer, though, Citigroup foreclosed on the home, and it went up for auction at the Maricopa County Courthouse this past September.

Citigroup initially set the minimum bid at auction at $1.3 million, far more than the market value, given comparable sales in the neighborhood. Then, on the morning of the sale, Citigroup lowered that minimum to $379,900. PostedProperties, which monitors Web sites for such price changes, sent out an email on the opportunity to Mr. Mirmelli.

Mr. Mirmelli has his iPhone set up so he can call up the address of a home due to be auctioned, see a map of the neighborhood with a tap of his finger and then see panoramic photos of the street with another tap. While he researched the home, one of his partners drove out to see the exterior and make sure there were no occupants. A PostedProperties employee bid on their behalf and won the house for $486,300, a sum that then went through the trustee to Citigroup.

After expenses of about $54,000, including real-estate commissions and minor repairs, Mr. Mirmelli and his partners expect a profit of about $150,000 on the flip. “It turned out to be a very good return,” he says.

A spokesman for Citigroup declined to comment on the transaction.

The McCaugheys, who formerly owned the house, are now renting a smaller home. Mr. McCaughey now works for a telecommunications service and is thinking about going back into hockey-related work.

Over a bowl of soup at a Paradise Bakery & Café in Glendale, a suburb of Phoenix, Mr. McCaughey says he sees a lot of real-estate bargains now and may jump back into the market at some point. As for the losses he’s taken on his former holdings, he says: “It is what it is. You deal with it.”

Source article www.wsjonline.com

Source Article Bloomberg.

Dec. 1 (Bloomberg) — Las Vegas home prices fell 34 percent in October from a year-earlier as foreclosed properties accounted for two-thirds of sales, reducing the value of single- family houses and condominiums, MDA DataQuick said today.

The median price paid for all new and re-sold houses and condos in the Las Vegas metropolitan area fell to $130,000 in October from $196,000 a year earlier, the San Diego-based real estate research company said today in a statement. The price has been at or close to $130,000 since July and hasn’t fallen below that level since April 1999, when it was $129,000.

Homes that had been foreclosed on in the previous 12 months rose to 67 percent of resales in October, from 65 percent a year earlier, MDA DataQuick said. It was the highest foreclosure rate that month among metropolitan areas with populations of 200,000 or more, according to RealtyTrac Inc.

A total of 5,068 new and resale houses and condominiums were sold in the Las Vegas-Paradise metropolitan, an increase of 1.1 percent from September and 22 percent from a year earlier, MDA DataQuick said. Of those, 485 were newly built, down 34 percent from a year earlier.

“Builders can’t compete with discounted foreclosure resales,” MDA DataQuick said.

The research company is a unit of Richmond, British Columbia-based MacDonald, offshore pharmacies Dettwiler & Associates Ltd. It compiles surveys using county records and supplies real estate information to customers including public agencies, lenders and title companies.

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgage than their homes are worth.

Data Highlights

Nearly 10.7 million, or 23 percent, of all residential properties with mortgages were in negative equity as of September, 2009. An additional 2.3 million mortgages were approaching negative equity, meaning they had less than five percent equity. Together negative equity and near negative equity mortgages account for nearly 28 percent of all residential properties with a mortgage nationwide.

The distribution of negative equity is heavily concentrated in five states: Nevada (65 percent), which had the highest percentage negative equity, followed by Arizona (48 percent), Florida (45 percent), Michigan (37 percent) and California (35 percent). Among the top five states, the average negative equity share was 40 percent, compared to 14 percent for the remaining states. In numerical terms, California (2.4 million) and Florida (2.0 million) had the largest number of negative equity mortgages accounting for 4.4 million or 42 percent of all negative equity loans

Click on image for larger graph in new window.

This graph shows the negative equity and near negative equity by state.

Although the five states mentioned above have the largest percentgage of homeowners underwater, a number of other states have 20% or more homeowners with mortgages with little or negative equity.

Note: Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming are NA in the graph above.

The second graph shows homeowners with severe negative equity for five states.

These homeowners are far more likely to default.

The rise in negative equity is closely tied to increases in pre-foreclosure activity. At one end of the spectrum, borrowers with equity tend to have very low default rates. At the other end, investors tend to default on their mortgages once in negative equity more ruthlessly: their default rate is typically two to three percent higher than owner-occupied homes with similar degrees of negative equity. For the highest level of negative equity, investors and owners behave very similarly and default at similar rates (Figure 4). Strategic default on the part of the owner occupier becomes more likely at such high levels of negative equity.

Here is figure 4 from the report.

The default rate increases sharply for homeowners with more than 20% negative equity.

This graph fits with figure 2 above and suggests a large number of future defaults in Nevada, Arizona, Florida and California.

Note below that negative equity is still a problem for buyers in 2009!

• The bulk of ‘upside down’ borrowers, as a group, share certain characteristics. They:

Financed their properties between 2005 and 2008, with 2006 being the peak year where 40 percent of borrowers were in negative equity (Figure 5). Negative equity continues to be a problem even for 2009 originations as evidenced by a negative equity share of 11 percent and another 5 percent near negative equity.

Purchased newly built homes that are concentrated in a small number of states. For homes built between 2006 and 2008, the negative equity share is over 40 percent.

Relied on adjustable rate mortgages (ARMs)

Bought less expensive properties. The average value for all properties with a mortgage is $270,200, but properties in negative equity have an average value of $210,300 or 22 percent less (Figure 8). The average prescription online mortgage debt for properties in negative in equity was $280,000 and borrowers that were in a negative equity position were upside down by an average of nearly $70,000. The aggregate property value for loans in a negative equity position was $2.2 trillion, which represents the total property value at risk of default, against which there was a total of $2.9 trillion of mortgage debt outstanding.

Most homeowners with negative equity will probably not default, but this does show that there could be several hundred billion more in losses coming from residential mortgages.

(Calculated Risk) The MBA reports: Mortgage Applications Decrease

The Market Composite Index, a measure of mortgage loan application volume, decreased 12.3 percent on a seasonally adjusted basis from one week earlier. …

The Refinance Index decreased online drugs 16.2 percent from the previous week and the seasonally adjusted Purchase Index decreased 5.2 percent from one week earlier.
…
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent, with points increasing to 1.25 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The purchase index is off almost 17% over the last 3 weeks, and the refinance index is off about 30%.

It appears the post home buyer tax credit slump has started, although apparently the tax credit will be extended and the eligibility expanded – so the slump might be delayed …

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

The Purchase index declined to 254.9, and the 4-week moving average declined to 280.

Note: The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007, even though activity was actually declining. 

The MBA reports: Mortgage Applications Decrease

The Market Composite Index, a measure of mortgage loan application volume, decreased 12.3 percent on a seasonally adjusted basis from one week earlier. …

The Refinance Index decreased 16.2 percent from the previous week and the seasonally adjusted Purchase Index decreased 5.2 percent from one week earlier.
…
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent, with points increasing to 1.25 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The purchase index is off almost 17% over the last 3 weeks, and the refinance index is off about 30%.

It appears the post home buyer tax credit slump has started, although apparently the tax credit will be extended and the eligibility expanded – so the slump might be delayed …

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

The Purchase index declined to 254.9, and the 4-week moving average declined to 280.

Note: The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007, even though activity was actually declining.