October 19th Market Watch Reported another week of available home inventories has declined in Las Vegas, Nevada. Southern Nevada specifically, Las Vegas, Nevada has once again been drastically impacted by market decisions of financial institutions on releasing available home from the banks existing inventories.
In December 2008 Las Vegas, Nevada saw the peak of existing available homes with over 23,000 in standing inventory. It has now been reduced to 11,369 of available homes, with over 60% of the available homes are distressed properties. Distressed properties are defined as either short sales or Bank owned properties. Below is a graph showing year to date the declining available homes in Las Vegas, Nevada from October 2008 to October 2009. This week the available homes increased by a meager 16 units over last weeks report. This is only the fourth week out of 42 consecutive weeks that inventories increased over the previous week.
There are 11,459 properties that are contingent upon some type of transaction either by a short sale or are already a bank owned property. The percentage of distressed properties is over 71% waiting for bank approval for a short sale. While 21% represents already bank owned properties. This leaves only 8% of the contingent contracts not having a bank involved with the sellers side transaction making any decisions.
It is interesting to note that Las Vegas, Nevada has one of the highest numbers of foreclosure in the United States, yet inventories of available homes have not increased. So where are the properties? It is affected by banks attempt to try to prop up the value of bank owned properties by releasing lower number of available homes while demand exceeds supply. By not offering more of the available homes and flooding the market the banks believe that the prices will start to stabilize and the banks can recover more of their losses.
So far this strategy has not resulted as planned by the banks, as appraisals have consistently come in at a lower then contract price for the last few months. Banks are seeing multiple offers on the existing available homes and are now requiring buyers to agree to purchase the property at the contract price even if the appraisal does not come back at the contract price. With most of the purchases that are first time buyers, they are financing with either a FHA, or VA loan, while the buyer has limited funds for down and closing costs this is not a option for most buyers can accept.
The banks have government approval now, to not report on their books any of their bad assets if they simple state they are not going to release the available property for a long period of time. This accounting approval is called the Mark to Market rule, which simple states the banks will be allowed to sell assets in a orderly manner then in a distressed sale and will effect the banks bottom line in a more orderly fashion. This will give the banks time to rebuild reserves and liquidate their assets in a more stable environment in theory in stop reporting large losses. We will have to wait and see if this policy will help the banks or only delay the inevitable. One thing is for sure that this policy will restrict the available homes in Las Vegas, Nevada in the near future.
John Le Francois FHA Specialist #40102
Direct Access Lending Broker #405
650 White Drive Suite 200
Las Vegas, Nevada