Posted on 08/31/2007 2:59:32 PM PDT by bruinbirdman
State leads U.S. in investor-owned loan failures, study says
Nevada had one of the hottest housing markets for investors two years ago. Now it is the top state for investor-owned mortgage defaults, the Mortgage Bankers Association reported Thursday.
The Silver State leads the nation in the percentage of residential real estate mortgage defaults for investors, both in the prime and subprime mortgages categories, the association reported.
The association said 32 percent of prime mortgage defaults in Nevada were for non-owner occupied properties as of June 30. Arizona, with 26 percent, came in second.
Prime mortgages are loans to borrowers with good credit. When the borrower has substandard credit ratings, the trade group classifies the loans as subprime.
The percentage of defaults on investor properties for subprime loans registered at 24 percent in Nevada, followed by Arizona with 18 percent.
"Defaults are on rise in most parts of the country, but it should be recognized that it is not always the case of a homeowner losing his or her home," association chief economist Doug Duncan said in a statement. "But it is often the case of an investor gambling on a continued increase in home values and losing that gamble.
"California, Nevada, Arizona and Florida were among the states with the fastest home appreciation over the last five years. This rapid price appreciation attracted both speculators and home builders," leading to an oversupply of housing, Duncan said.
"When this oversupply became apparent and prices began to fall, many of these investors simply walked away from their mortgages," Duncan said.
Sean Corrigan, president of Aspen Mortgage, said he is not surprised about the study's findings, because many lenders in Las Vegas made loans to investors without documenting the borrowers' income and without requiring down payments.
The association figured that 29 percent of the prime home loans for buying residences in Nevada in 2005 went to investors -- the highest percentage in the nation. In the subprime market, 14 percent of subprime loans for buying homes were taken out by investors, second only to 15 percent in Florida.
The high-rise condo market accounts for a large portion of the fallout, Conway said. "The single-family market is more stable," said Delores Conway, director of the Casden Forecast at the University of Southern California's Lusk Center for Real Estate.
The annual appreciation of high-rise condos hit 40 percent in 2004, drawing investors like a magnet, according to Restrepo Consulting Group, Conway said. Appreciation declined to 25 percent in 2005 and to 5 percent in 2006.
By 2006, the appreciation increase was lower than the interest expense on the mortgage loans, she said, but it also became increasingly difficult to find buyers.
High-rise condo builders started delaying projects, but excess supply was already on the market, she said.
Brock Davis, president of the Southern Nevada Chapter of the Mortgage Bankers Association, said there was a "huge" influx of investors into the Las Vegas housing market, which amplified the local impact when trouble hit.
"Speculators will pull the plug quickly," Conway said..
However, she said some of the investors, she said, weren't speculating or planning to flip their purchase for a quick gain. Some investors bought properties for rental income and possibly for later use as a retirement home.
I wouldn't bail out any of them. Refinance? OK, if the lendor wants, but only primary residence homes and not mandated by some executive order. Gee, that would be business as usual.
There is no bubble.
The market is fine.
Keep buying. They ain’t makin’ any more land!!!!
—booms bust—
I wanna see a train wreck in Vegas housing. I want investors, contractors and developers to get third degree burns from having bet on the Vegas and Reno markets.
Then, maybe, their rapacious lust for our water in the northern part of the state will let up.
Sam Kinison’s take on this:
“I’m like anyone else on this planet — I’m very moved by world hunger. I see the same commercials, with those little kids, starving, and very depressed. I watch those kids and I go, ‘F**k, I know the FILM crew could give this kid a sandwich!’ There’s a director five feet away going, ‘DON’T FEED HIM YET! GET THAT SANDWICH OUTTA HERE! IT DOESN’T WORK UNLESS HE LOOKS HUNGRY!!!’ But I’m not trying to make fun of world hunger. Matter of fact, I think I have the answer. You want to stop world hunger? Stop sending these people food. Don’t send these people another bite, folks. You want to send them something, you want to help? Send them U-Hauls. Send them U-Hauls, some luggage, send them a guy out there who says, ‘Hey, we been driving out here every day with your food, for, like, the last thirty or forty years, and we were driving out here today across the desert, and it occurred to us that there wouldn’t BE world hunger, if you people would LIVE WHERE THE FOOD IS! YOU LIVE IN A DESERT! YOU LIVE IN A F*****G DESERT! NOTHING GROWS OUT HERE! NOTHING’S GONNA GROW OUT HERE! YOU SEE THIS? HUH? THIS IS SAND. KNOW WHAT IT’S GONNA BE A HUNDRED YEARS FROM NOW? IT’S GONNA BE SAND! YOU LIVE IN A F*****G DESERT! GET YOUR STUFF, GET YOUR S***, WE’LL MAKE ONE TRIP, WE’LL TAKE YOU TO WHERE THE FOOD IS! WE HAVE DESERTS IN AMERICA — WE JUST DON’T LIVE IN THEM, A*****ES!”
—From an appearance on Rodney Dangerfield’s “It’s Not Easy Being Me,” 1984.
Agreed. My little town of 15,000 will have to come up with $20+ million to help pay for a pipe deeper into Lake Mead. And we don't use our water allocation. And they will raise the water rates to pay for a water line to White Pine County?
yitbos
We were looking at realtor.com at Reno area homes...Almost everyone was empty...Really weird.
>> Keep buying. They aint makin any more land!!!!
Absolutely!
(at least, until someone buys the overpriced land I’m sitting on and can’t flip or refi...)
eh?
I am probably going to move soon and I fear trying to sell my Sparks home in this market. Fortunately, I can dump it if I have to and still make money. A lot of homes have been on the market for 10+months as they chase the prices downward. In our neighborhood prices are down 60K from what they were at the height of the boom.
The market won't be down forever, and I know for a fact there are a lot of investors, and others just looking to purchase homes..They're just waiting, watching for the prices to start leveling out, and they are going to jump.
When that starts happening, this will turn around in a big way, very quickly...IMO.
The market I'm selling in appears to have bottomed out and houses are starting to move again.
I think the market I'm moving into has stagnated quite a bit and the prices are starting to drop to it will all even out. The new houses are definitely being dumped.
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