Lenders’ short sales may rise

The inventory of bank-owned homes in Las Vegas is shrinking and the market will lean more toward short sales in 2012, Prudential Americana Group owner and broker Mark Stark said.

Lenders have to reconcile with political pressures in a national election year, a new Nevada law clamping down on fraudulent foreclosure filings and a stagnant economy, all of which will affect the local housing market, Stark said.

It shouldn't significantly deter the upward swing from 2011, he said.

"I see much of the same in 2012, which is a really good thing," Stark said. "One thing we have going for us is affordability."

The numbers show stabilization in Southern Nevada's housing market. Existing-home sales are up, driven primarily by investors buying at bargain prices. There could be a slight price influx, but nothing significant, Stark said.

The Greater Las Vegas Association of Realtors reported 89,266 transaction "sides," or agent representations for both the buyer and seller, through November. That's 44,633 home sales.

Prudential Americana, which acquired Century 21 MoneyWorld in Las Vegas and Prudential Arizona Properties in 2011, captured a 9.6 percent market share of those closings with 8,620 sides, Stark said.

"I see no reason why those numbers won't continue to increase, with the economy moving in a positive direction and if we don't have any unforeseen challenges," Stark said. "I'm not looking to kill a bear. Growth will be internal. If you depend on the market to grow, you've got a problem. You can't live like that. You should be able to move the company forward even if the market stays flat."

Realtors are closely monitoring notices of default, the first step in foreclosures, after Assembly Bill 284 became law on Oct. 1. The law aims to hold lenders accountable for providing required documents to foreclose. It has slowed notices of default filings in Southern Nevada.

There has been a notable shift away from real estate-owned, or bank-owned, closings in favor of short sales and traditional sales, which is consistent with the contraction of REO listings, Stark said.

Las Vegas-based SalesTraq is showing a bank-owned inventory of 6,405 homes in November, down about 50 percent from 12,581 in the same month a year ago. Homes for sale on the Multiple Listing Service without a contingent offer decreased to 11,086 in November from 15,855 a year ago, with 47 percent of them listed as short sales.

Rick Brenkus of Keller-Williams Realty sees some positives for the Las Vegas housing market in 2012, but also some concerns. Chief among them is the reduction in REO inventory because of AB 284.

"That's creating a little slowdown but I think the banks will work through their shadow inventory first. They'll find a way through this process," Brenkus said.

On the positive side, mortgage interest rates are at a 50-year low, and short-sale candidates will take advantage of the Debt Relief Act that expires at the end of 2012, he said. The act eliminates second-mortgage debt on short sales, or homes sold for less than the mortgage owed.

"That may equalize the inventory with less REOs and more short sales," Brenkus said.

Brenkus and his team completed about 300 sales transactions in 2011, consistent with 2010 numbers. He expects to see an uptick in short sales this year as banks have streamlined approvals. Whereas short sales took eight months to a year to get approved a couple years ago when they were new to the market, some are completed within a week now, Brenkus said.

Median home prices will probably stay where they've been the last six months, between $120,000 and $125,000, he said.

With all of the outside market influences, 2012 will be the toughest year yet for Las Vegas, said Steve Hawks of Platinum Real Estate Professionals. The revamped Home Affordable Refinance Program, foreclosure rental programs and AB 284 will all greatly reduce inventory, he said.

"We definitely will start the year out very low on available inventory and that trend will continue past the election," Hawks said. "As of today, there have not been any major banks to file notice of defaults. If that continues much longer, it will cause an artificial shortage of inventory."

Homeowners who aren't faced with the threat of foreclosure, or notice of default, will hold off putting their homes up for sale, he said.

There will be a "bump and dump" cycle in 2012, much like the tax credit cycle, as banks figure out how to deal with new law, either by judicial or nonjudicial foreclosure. This artificial spike will give flippers an unprecedented opportunity to lock in profits, the real estate expert said.

Short-sale volume will be similar to 2011, about 900 to 1,500 a month, Hawks said. The percentage may be higher because fewer bank-owned homes and trustee sales are put on the market.

Short sales didn't increase in other states where similar laws were passed. Foreclosures still outnumber short sales in Florida and New Jersey, where it takes more than 900 days for banks to foreclose.

"To increase short sales, states need to look to the federal level," Hawks said. "The government's own watchdog has admitted that all these HARP and HAMP programs have delayed the housing recovery and 2012 will be another delay."

Anthony Martin of LV Default, a company that buys investment homes at trustee auctions, said the temporary drop in notices of default probably won't affect the pipeline dramatically. It's only expected to create a 10 percent to 20 percent drop in trustee sales starting in February , he said.

"Many banks canceled sales and never brought them back again as an NTS (notice of trustee sale)," Martin said. "They are what I call 'vapor foreclosures' because they are floating out there in limbo, waiting for the bank to make a decision as to what to do with them. Many of those homes -- tens of thousands of them -- may be coming back around during this thin calendar period. After all, the banks have to generate money somehow to keep making those new loans."

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.