Monday, November 29, 2004

Rapidly Cooling Las Vegas Housing Market May Spark Wave of Mortgage Defaults


Foreclosures.com:

SACRAMENTO, Calif.--(BUSINESS WIRE)--Nov. 29, 2004--California based Foreclosures.com, an investment advisory firm specializing in distressed property reported today that the rapidly cooling Las Vegas housing market could lead to a surge in foreclosure activity in 2005.

"Throughout much of 2004, the Las Vegas market was distorted by out of state speculators buying new homes to flip for fast profits," said Alexis McGee, president of Foreclosures.com. "Sales volume was inflated by houses selling two or three times in a matter of months."

Ms. McGee went on to say that when a major builder like Pulte Homes cuts prices by as much as 25%, that's a clear sign that the party's over. "When you see year over year price appreciation of over 52%, you know that rate is unsustainable. The price correction we're seeing now was inevitable," said Ms. McGee. "The hotter the market, the steeper the price correction will be in order to get back to normal. It looks like the speculators have left town, and the housing supply has jumped from one month's inventory to five." She added that even some builders might face foreclosure of unsold homes.

Ms. McGee said that when interest rates rise, downward pressure on prices will increase and many who bought at the top of the curve with adjustable rate mortgages will find themselves "upside down" in their property (owing more than the house is worth) and facing increasing payments.

"That's when you'll see defaults start to rise," she said. "Homeowners who find themselves in that position and then get in financial trouble will just leave the keys in the door and move out. They may offer to deed the property back to the lender in lieu of foreclosure or just let the bank foreclose."

She pointed out that foreclosure is a lagging indicator of financial problems, and that she didn't expect to see increasing foreclosure activity for several months. Nevertheless, she added, analysts at her firm had always seen a correlation between falling prices, rising interest rates and increasing default levels.

Foreclosures.com has been publishing pre and post-foreclosure property data and assisting investors since 1992. The company serves markets in Chicago IL, the state of New Jersey and the metro areas of Phoenix AZ, Las Vegas NV, New York, and eighteen California counties.

1 Comments:

At 9:55 PM, Anonymous Anonymous said...

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