Housing woes


Foreclosure starts are falling faster than home prices ever did in this years-long economic correction -- and that's not necessarily a good thing.

There were 923 notice of default filings in Clark County last month, down from 1,049 in November, but a fraction of the 5,277 from December 2010.

An 82 percent drop in year-over-year foreclosure filings would seem to be cause for celebration. Are people finding jobs? Have struggling homeowners struck deals with their banks in massive numbers to reduce their mortgage payments to amounts they can afford? Does this mean home values might start to appreciate again?

Unfortunately, the answers to those questions are no, no and no. Foreclosure starts have plummeted because a new Nevada law that requires lenders to prove they have the authority to foreclose took effect in October. Throw in the state's foreclosure mediation process and it now takes an average of 330 days to foreclose a property, up from 260 days in December 2010.

"Nevada's new foreclosure rules appear on track to bring a near-complete halt to foreclosures in that state," said Sean O'Toole, chief executive officer of ForeclosureRadar.com. "The only foreclosures you now have are homeowner association liens. There may be a few others, but as we look through December, the vast majority are foreclosures by HOAs, not lenders."

The state's pre-foreclosure inventory now stands at 21,340 homes, to say nothing of the thousands of other properties in line to receive a notice of default in the months ahead.

Southern Nevada's housing market won't start to recover until the foreclosure inventory is cleared and default rates return to historically normal levels. The massive churning of underwater properties must run its course for values to climb.

But if, as Mr. O'Toole reports, banks have all but stopped foreclosing on houses, the status quo of depressed property values will linger for years.

More proof of the glut of empty properties: Southern Nevada Water Authority chief Pat Mulroy reported this month that 10 percent of the valley's water meters are inactive. Ten percent. That's shocking. But not surprising.

At some point, if the foreclosure process continues to drag, the Legislature might need to revisit the issue to make it easier for lenders to more quickly foreclose on borrowers who don't pay their mortgages. The recovery of the housing market depends on it.

 

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