Wednesday, July 10, 2013

Timiraos: Foreclosure Squeeze Crimps Las Vegas Real-Estate Market

by Calculated Risk on 7/10/2013 11:03:00 AM

From Nick Timiraos at the WSJ: Foreclosure Squeeze Crimps Las Vegas Real-Estate Market

The number of available homes has plunged here after a sweeping state law subjected lenders to stiff new foreclosure rules and penalties. With banks exercising caution, many homeowners—including those seriously delinquent on their loans—have been allowed to remain in place. As a result, there is little on the market at a time when first-time buyers and real-estate speculators are anxious to tap both cheap prices and low-interest mortgages.
...
The perverse outcome: Inventory shortages have spurred new developments despite a glut of properties stuck in foreclosure limbo.
...
The inventory shortages, meanwhile, have been a boon for some—especially builders. "A.B. 284 has been great for us. It darn near eliminated the constant inflow of foreclosures on the resale market," says Robert Beville, president of Harmony Homes, a local home builder.
...
Studies by researchers at the Federal Reserve Bank of Boston show that "delaying the foreclosure process does not in the end lead to fewer foreclosures," said Paul Willen, a senior economist at the Boston Fed. "If they're delaying a foreclosure that is going to happen eventually, what we're really concerned about is that they're reducing the quality of life for the neighborhood."
emphasis added
The Nevada law was passed with good intentions - and the banks were definitely bad actors - but the result is Las Vegas will have a high level of foreclosures for years (and poorly maintained homes).