As a real estate agent in the worst market in the country, Las Vegas, our situation is most unusual.
By Daniel at 22 December, 2009, 2:54 pm
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In the past 6 months, 66% of our closings were repo’s and 14% Short Sales. The most amazing stat is we typically average around 5% of sales as cash sales and this year this has jumped up to 32%. Investors are buying up a lot of properties, flooding the rental market, and driving rents lower.
The lower rents are tempting to those underwater on their mortgages, as why pay a $2,000 mortgage that you are 55% underwater on, when you can rent the same house across the street for $1,100? They stop making the payment, live for free for 10 months during the foreclosure process, then rent for half as much. This downward spiral isn’t easing up.
The most concerning stat is that 40% of sales are FHA./VA. So in a city where it is not uncommon for homeowners to be 55-65% upside down on their mortgage, the new sales that aren’t investors/speculators are buyers with only 3.5% down. After closing costs to sell, these buyers have no skin in the game. If values drop any more, they can walk away leaving nothing on the table.
My prediction is that the next “Black Swan” will be the rescue of the govt housing units of Fannie/Freddie and FHA that will further push the deficit up even further. The numbers are likely to be staggering. The bailout of these giants will make AIG looks like a drop in the bucket and that taxpayer money will be gone forever. That will come in the first quarter.
Uncle Benny being the only buyer of mortgages and has already said they will stop doing so soon, who will buy these? If there are no buyers for mortgage securities, mortgage rates will have to rise significantly, and that will slow home buying down to a trickle.
- VegasBill
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knock them down!
Bulldoze houses that are derelict. It looks to be working in areas with negative population and social problems (Michigan, N. Minnesota).