A pilot program launched Friday in Nevada aims to help struggling homeowners reduce loan amounts and refinance if they are current on their mortgage payments but owe more than their homes are worth.
There are thousands of such Homeowners in Las Vegas, Henderson and Clark County.
Under the program announced by Governor Brian Sandoval, the state will use Federal housing money to provide as much as $50,000 to qualified homeowners who then refinance at lower interest rates under the Federal Home Affordable Refinance Program.
"Principal reduction combined with mortgage refinancing will mean hundreds of dollars returning to the pockets of homeowners. This effort represents our continued focus on combating the worst housing crisis seen in a generation and in the state hit hardest by it."
Previous discussions in Nevada fell flat because they required a dollar for dollar match by lenders. So state officials proposed using some of the $194 million Nevada received two years ago as part of the Federal Hardest Hit Fund -- money to help states hit hardest by the Great Recession -- to write down loan balances.
About $75 million was set aside for principal reduction but the state could seek permission to use more of the funds down the road. The number of people eligible will be far in excess of what we will be able to fund."
The program is being launched in Clark County where it is estimated that there are 67 percent of homeowners who owe more than their homes are worth.
The program is limited to owner-occupied homes with mortgages that originated before May 31, 2009 and are backed by Freddie Mac or Fannie Mae.
A homeowner's mortgage balance must be at least 115 percent of the value of the home and cannot exceed $729,750. Additionally, family income cannot exceed exceed 150% of median income for the area. In Clark County, that income threshold is $99,000 for a family of four.
Homeowners who meet these criteria will receive an information packet and application from the state.
In Las Vegas and Henderson, short sales are catching up with foreclosures. Nearly 30 percent of existing home sales in April were short sales compared with 25% in March reported the Vegas Association of Realtors.
Meanwhile, bank-owned home sales declined 36.9% in April, down from 40.7% in March.
The trend indicates a greater likelihood that home prices will continue to soften, as short sales and foreclosures typically sell at sharp discounts.
It also suggests a shift in the way lenders handle mortgages that have gone unpaid. Lenders may be favoring short sales rather than waiting for troubled loans to go through the foreclosure process.
"A short sales is a safer alternative to avoid any potential problems that they may face because of the way they've processed foreclosures."
Last year, mortgage lenders grappled with allegations that they have been processing foreclosures without verifying documents.
Las Vegas based SalesTraq showed 258 Bank repossessions in April, the lowest number since the firm began tracking data.
For the past 12 months, bank repos declined 27.4% to 13,444 month. Fewer than 1,000 notices of default are being filed each month, compared with 3,000 to 4,000 a month prior to the robo-signing low in October.
"The biggest winner from this law are the banks as they have an excuse for not showing real losses on their balance sheets."
A separate report from CoreLogic showed 66,000 completed foreclosures nationally in April, about the same as March, and down from 78,000 a year ago.
Nevada has the fourth highest foreclosure inventory as a percentage of all mortgaged homes, compared with New York at 5 percent.
Prices, however, were unchanged in Las Vegas. The increase is the latest evidence of a slow recovery taking place in the housing market.
The Standard & Poor's/Case-Shiller home price index shows that prices rose in 12 of the 20 cities tracked.
Three of the weakest markets showed signs of improvement. Prices rose in Tampa and Miami. The biggest month to month increases occurred in Phoenix, Seattle and Dallas.
Prices dropped the most in Detroit, Chicago and Atlanta. Still, even though 12 of the 20 cities showed gains, the weaker cities weighed on the overall price index in March. The index edged down to it's lowest level since the housing bubble burst.
Las Vegas based SalesTraq which reports housing data based on escrow closings showed the median existing home price of $107,000 in April, up from $105,000 in March, and the third straight monthly increase.
The price is up 0.5 percent from a year ago. The mix of distressed properties including foreclosures and shortsales is likely driving the pricing dynamic, but increased price stability appears to be prevailing according to Sales Traq.
"Current conditions are translating into increased price stability in selected areas and increased interest in the new construction sector, yet the majority of borrowers remain underwater and a significant number face foreclosure."
Roughly, 70 percent of Nevada mortgage holders are underwater, owing more than their home is worth according to CoreLogic. Home prices in Las Vegas and Henderson are down 60% from their peak in 2006.
"How many homes will eventually be sold or held in REO (real estate owned)? That number may be more than 2 million nationally. Nevada and Florida have the highest concentration of severely underwater homes, so the numbers will be higher in Nevada, Florida and Michigan."
In April, sales of both previously occupied homes and new homes rose near two year highs. Sales Traq reported 596 new home building permits pulled in Las Vegas in April, a 90% increase from a year ago.
New home sales jumped nearly 40% in April, while existing home sales declined 6.2% to 4,713.
Median prices have risen and are expected to inch up over the next few months.
347 sales in April are a 34.7 percent increase from the same month a year ago, according to Home Builders Research.
Builders are seeing more traffic through new home sub-divisions as resale inventory has tightened, a result of Nevada's robo-signing law that has slowed foreclosure activity.
For the year to date, new home closings have increased 20 percent to 1,220.
"Builders are living for the moment says Dennis Smith, President, and taking advantage of the situation." Builders have been able to raise median prices 6 percent from a year ago to $200,350 in April and are expected to inch up in the near future.
Anticipating forward demand, builders pulled 619 new home permits in April, bringing the year to date total to 1.582, a 40 percent increase from a year ago.
It will probably be another month before new home closings will catch up to permits. By June, new home closings should reach 500 a month.
Home Builders Research counted 4,306 resale transactions in April, up from 3,849 in April 2011. It brings the total for the year to 17,000, an 18 percent increase from a year ago.
The median resale price rose 3 percent from a year ago, to $115,000 and it's up 4 percent from the previous month.
More than 200 new homes have been sold in the master planned Summerlin community, nearly exceeding last year's total in just 4 months.
SalesTraq, another Las Vegas research firm, showed 351 new home sales in April at a median sales price of $201,651, up 6.1 percent from a year ago.
Smith said the robo signing law has created artificial demand in Las Vegas. By some estimates there should be 50,000 to 100,000 homes pending foreclosure, part of the "shadow inventory" being held by banks.
Chief Economist predicts the U.S. domestic product growth of 2 to 2.5 percent for the year. Overall, he remains cautious about middle-class consumer spending, and expects the problems in the housing market to remain for some time.
"There is no easy way out for the housing market, especially in Las Vegas and Henderson, and it will take several years to work through these problems."
"He said Las Vegas and Henderson will prosper in time but housing due to the huge excess of inventory and so many people underwater on their homes will remain a problem."
John Silva of Wells Fargo was in Las Vegas Tuesday speaking at a Gaming Conference. Wells Fargo is the third largest bank in Southern Nevada with $7.37 billion in deposits.
"He said that Las Vegas is benefiting from a modest rebound in the national economy. The Case-Shiller index shows Las Vegas among the top five recovering cities."
"He said that as an economist was to tell people and his Board of Directors things they don't want to hear." The challenge is trying to keep the Board of Director's feet on the floor.
" We cannot repeat the experiences of 2004 to 2007 in terms of credit quality. We can't just pursue more and more loans and not worry about the long-term credit."
"Shareholders do not expect Wells Fargo to be Facebook or Google." This is a bank and a bank makes money by taking in deposits and lending money at a slightly higher difference and making sure people pay the money back."
Americans bought more previously owned homes in April, a hopeful sign that the housing market is gradually improving.
The National Association of Realtors said that home sales rose 3.4 percent last month to a seasonally adjusted annual rate of 4.62 million. Home sales have rebounded after falling in March and are near the pace of January and February which was the best winter in five years.
Still, annual sales fell well below the nearly six million equated with healthy markets.
A mild winter encouraged some people to buy homes earlier this year. "First time buyers, who are critical to a housing recovery, rose in April to 35 percent of sales. That's up from 32 percent in March."
"First time buyers are slowly making their way back, said Jennifer Leeof BMO Capital Markets. That is still well below the 40 to 45 percent range during healthy times, but is the the lowest in almost half a year."
Homes at risk of foreclosure accounted for 28 percent of sales, down from 37 percent of sales in April 2011. The median sales price in April rose to $177,400, up 10.1 percent from a year ago.
Sales rose in all regions though some markets within these regions such as Las Vegas and Henderson, saw a drop in sales. The Greater Las Vegas Association of Realtors reported 3,185 single family homes sales in April, down nearly ten percent from March, but up 3.3 percent in April 2011.
The median price in Las Vegas and Henderson rose 4 percent to $127,900 in April, the third consecutive monthly increase.
Looking at construction starts, existing home sales and foreclosure rates, housing is 37 percent of the way back from it's low point, up from 20 % in April 2011.
In addition, some of the largest banks have begun to undertake more short sales merely than foreclosing on struggling homeowners an approach that experts say will cut down on vacant homes and help to heal the housing market.
Many economists believe that 2012 could be the year that housing finally makes a positive contribution to overall economic growth. That hasn't happened since 2005, before the housing bust.
A couple of forward-looking indicators for the construction industry are showing rough times ahead, which means that Las Vegas and Henderson won't see any of the 60,000 lost construction jobs coming back soon.
The backlog of projects on the books for contractors nationwide declined 5.4 percent in the first quarter from 7.8 months to 7.4 months, the Construction Backlog indicator from the Associated Builders and Contractors shows.
The amount of construction work under contract to be completed in the future is slightly higher compared with first quarter 2011.
The lull in non-residential won't end in the near term said a spokesman. The nation's non-residential construction activity will remain soft during the summer, with flat to declining construction spending activity.
"I think the backlog has been decreasing for 8 months and this is a sign of economic weakness from last year. " It caused a postponement of a number of projects in planning. As a result contractors are working down their backlog faster than they are receiving new contractual volume."
"The nation is now 3 years into economic recovery and most people in the industry were hoping that non-residential construction would stabilize by now. "
"Recovery has been sporadic. I think we would agree that economic circumstances in Nevada is better and the state is adding jobs."
A builder's spokesman in Nevada said that there is some movement in Las Vegas and Henderson such as the Marriott's Grand Chateau's time share tower and expansion at St. Rose Dominican Hospital's Sierra campus.
Another leading construction indicator, the Architecture Billing Index, has fallen into negative territory after five months of positive readings.
Las Vegas is among the markets decimated by pricing declines.
"If there is a demand, it's just working off existing inventory. I think most of your work for the next few years is going to be upgrades."
Builders broke ground on more new homes than anticipated in April, indicating the residential real estateindustry is stabilizing.
Starts rose 2.6 percent to a 717,000 annual rate from March's revised 699,000 pace, which was stronger than previously reported, the Commerce Dept. reported Wednesday.
The median estimate of 80 economists surveyed by Bloomberg News had called for a rise to 685,000.
Employment gains, cheaper homes and record low interest rates are combining to lift demand and encourage builders to take on projects.
"We are at a point where we see more light and less tunnel", said a senior economist at Barclays Capital in New York. Residential construction is no longer a drag on the economy and will contribute to growth."
In Las Vegas, new home permits reached 972 through the first 3 months of the year, a 20.5% increase from first quarter 2011. Builders pulled 514 permits in March, double the number from January and February.
Housing analyst Dennis Smith has suggested in recent months that permit numbers would climb as sales activity picked up at new subdivisions.
"We expect the number of permits to continue to improve going into the summer, he said. As the improving pace of new home sales continues in the coming weeks, already low inventory levels will be depleted further."
He showed standing inventory of unsold new homes at slightly more than 200 in mid-April, compared with 450 at the end of last year.
Construction of single family homes climbed nationally 2.3 percent to a 3 month high of 492,000 from 481,000 the prior month. Work on multi-family homes such as Townhouses and apartments increased 3.2 percent to an annual rate of 225,000.
The National Association of Home Builders Wells Fargo index of builders confidence jumped to a 5 year high.
Foreclosure startscontinued to decline in Nevada and other Western states in April, offsetting small gains in new foreclosure filings from the previous month, ForeclosureRadar.com reported.
In Clark County, notices of default filings - the initial step in the foreclosure process - fell nearly 30 percent in April to 962, foreclosure sales declined 21.9 percent to 400, and time to foreclose increased 6.7% to 431 days.
In California, default filings are down 69.8% from the peak in March 2009 and down 15.8% from April 2011. Foreclosure sales also declined.
However, investors purchased a percentage of the limited inventory that was actually sold. Nevada investors purchased 50.7% of foreclosure sales, followed by Arizona with 44.6% California at 41.3%.
The low number of sales, combined with record purchases on the courthouse steps, left few to become bank or real estate owned. This further depletes the inventory as REO sales continue to outpace the addition of new inventory.
Despite investors purchasing a higher number of foreclosure sales, margins have rapidly declined in recent months. In both Arizona and Nevada, winning bids on average equal the current estimated value of these properties.
This leaves resale investors looking at record LOW profits after paying for evictions, repairs and closing costs.
A Realtor said that investors are "out in force" trying to cash in for top dollar while the market presents a short window of opportunity.
At the end of April, there were 4,407 homes available for sale without an offer, including just 605 REOs and 1,428 short sales.
Pre-foreclosure inventory, properties that have had a notice of default filed but have not yet been scheduled for Trustee sale - declined to 25,449 in April, down from 36,876 in the same month a year ago.
"Sadly, the indefinite future does look bleak. We are looking at a year before normality."
California has pending legislation similar to Nevada's Robo signing law, which require lenders to provide authority to foreclose before filing a notice of default.
If passed, it will likely slow foreclosure activity in California.
The bottom line is that today's buyer would save almost half a million dollars compared with a buyer of 5 years ago -- less up front because of the lower sales price and less in interest over the life of the loan.
"The interest rates are certainly are an encouraging factor for people to go out and purchase or refinance" according to the President of the Greater Las Vegas Association of Realtors Kolleen Kelley.
"A quarter of a point probably won't make a difference on a monthly payment, but if it's half a point, a point, two points, now is the time to do it."
According to the Freddie Mac Primary Mortgage Market survey, the rate slid from 3.84% to 3.83% last week, the lowest since long term mortgages began in the 1950s.
Over the past two decades, 30 year fixed home loans averaged 6.9 percent. Over the past decade, they averaged 5.93 percent. Slow U.S. job growth and financial uncertainty in Europe contributed to the most recent drop.
Thirty years ago, borrowers paid upwards of 20% for home loans. Things have changed drastically since then, but today's low mortgage rates and reduced prices come with a catch. Compared with the days that led to the collapse of the housing market, lending practices are far tighter.
"You have to truly qualify, so it' not like everyone can run out and get a mortgage like they did in the boom era."