Things aren’t so bad in local housing market

To the editor:

Every day there is another article about how bad the housing market is in Las Vegas and the nation as a whole. I don't confess to being an expert on the U.S. economy, but I have a contrarian's opinion.

I do know that when the talking heads refer to the bad market, most are referring to how much money people have lost in the value of their homes. But I believe that the housing market in Las Vegas is heating up, and that there are significant reasons to be optimistic about the future of real estate.

The Las Vegas housing market has and continues to change -- and 2012 will be no exception. Foreclosures are going to drop. They have to. The Legislature passed Assembly Bill 284, which changes what the banks must do to file a notice of default and foreclose on properties. In the three months leading up to the implementation of AB284, there were a total of 5,827 default filings in Clark County. In the three months following the implementation there were only 1,196. The effective date of the legislation was October 2011. Foreclosures are and have been a huge source of the valley's resale inventory. The default filing rate has dropped to 21 percent of what it was just prior to Oct. 1. This is going to reduce the future inventory of what is available.

Short sales are the other major factor. The greater issue is and will continue to be the number of short sales actually closing in our market. There are estimates that I have found showing that around 25 percent to 30 percent of short sales actually close. This is most specifically impacted by the fact that on many loans, there is mortgage insurance. What we are seeing happen is that banks are not accepting the short sale, because if they foreclose on the property, the mortgage insurance pays them back for their loss. Banks do not get to recover their loss if they agree to the short sale.

Additionally, there is concern that fewer people will be motivated to list their properties for short sale because of the significant increase in time it will take for the banks to process the foreclosure. Some foreclosures take as long as 900 to 1,200 days to be processed.

The number of buyers entering the market is going to go up. Unemployment is down slightly in Nevada. Also, more people who previously completed a short sale on their home or went through bankruptcy are going to be ready to buy again soon.

So here are the nuts and bolts of what is going on: There will be fewer homes on the market due to the lack of homes being foreclosed on and fewer short sale listings. This creates a shortage of inventory. Economics 101 says where there is a constant or an increase in demand for a product and less of that product is available, prices go up. When prices go up in our market, homebuilders are more likely to build new homes.

Just look at the trends in the price per share of publicly traded home builders for optimism. This is due to the fact that more new homes will be built to satisfy demand. When home builders build, there will be more good news because there will be even more people returning to work and able to again afford a home.

So explain to me when we have a shortage of supply and more able buyers and prices as low as they are, how is the housing market going to continue to drop? What is your next step? I have lots of ideas. I spend my time finding innovative ways to help those who are interested in buying and investing. We are already beginning to see the recovery.

Dave Crete

Las Vegas