You Will Never See the Whole Picture by Looking at One Piece of the Puzzle


Let’s start with the easy pieces, the edge pieces, the positive aspects of the current housing market.

Home sales are up in Mesquite, Nevada from 15 closings in January 2009 to 39 in January 2010, huge increase in closings. Price per square foot dropped from an average of $120 in January 2009 to $100 per square foot in January 2010. This was stimulated by Federal tax dollars in the form of tax buyer credits that would be your money!

Single family new home building permits are up in Mesquite from 1 in January 2009 to 22 in January 2010. That adds to the competitiveness of the market, the supply side.

Trying to keep it positive here, mortgage interest rates are still near historic lows.

The Home Builders Index of confidence rose 2 points to 17.  A score of 50 or more on the index indicates that more builders view conditions as favorable rather than unfavorable.

Access Research & Consulting Inc. estimates that the number of mortgage brokerage firms is down from a peak of 53,000 in 2004 to less than 15,000; this may be a good thing.

Now we can start into the middle of the picture, the harder pieces of the puzzle.

Realty Trac reported January 2010 foreclosures were above 300,000 for the eleventh straight month, and up 15% from January last year. US Home ownership is back down to levels not seen since 2000.

Private mortgage insurance companies are dropping like moths flying into the flames of a blazing fire. Short sales and foreclosures are literally wiping them out.

Mortgage underwriting standards are getting tighter everyday, shrinking the pool of eligible qualified potential home buyers. Even FHA has made it tougher to qualify for a mortgage. This piece is part of the demand side.

By most industry estimates, there are eight million delinquent mortgages in the US today and only a very small percent of the mortgage modifications are actually working. The re-default rate continues to climb. Only 66,000 are considered permanent of 900,000 of those who are enrolled in trial modification programs.

3.4 million Homes in the Treasury Department’s Making Home Ownership Affordable (HAMP) are currently 60 days or more delinquent.

There are a half trillion dollars of mortgages still out there that will reset or adjust over the next twenty four months. Many of these homeowners are not prepared for the higher cost of housing headed their way. There will be far too many more foreclosures.

The picture is coming together, but there are still some pieces missing.

The shadow inventory is out there in various forms, and the number of homes sitting vacant is at a historic high. Many are owned by institutions, others are owned by individuals, all are waiting for the market to improve. Then there are the sellers who would like to sell but can not or will not sell at current prices. At some point they will have to liquidate this inventory.

We should all hope Fannie Mae, Freddie Mac, and the others will slowly ease this inventory into the market. Some industry experts believe it could take as long as three years for the market to absorb this shadow inventory of homes.

If they dump a wave or waves of distressed property into the market, it will drive down prices further and create a huge opportunity for those in a position to capitalize on the low prices.

The Federal Reserve’s 1.25 trillion dollar fund set up to buy mortgage backed securities is nearly spent. Without the support of this emergency fund, the secondary mortgage money market is bound to drive rates higher for consumers.

The effect of higher interest rates is to make housing less affordable and reduce the buyer pool, again reducing the demand side.

What the real estate market needs is jobs and time. Jobs will help people stay in the homes they currently own. Jobs will slow foreclosures, help mortgage modifications work, and create new demand.

Time will heal credit, time will clear inventory, and in time the market will find balance again.

Now step back and look close, with all the pieces of the puzzle in place. Where do you think the market will go over the next six months, twelve months, and twenty four months?

Remember Mesquite, Nevada is a prime retirement community with a very bright future offering a low tax structure, excellent weather with nearly constant sunshine, premiere golf courses, excellent outdoor opportunities, gaming and all located within an hour’s drive of Las Vegas.

Chris W. Miller

Independence Realty

Mesquite NV 89027

435-862-5951

Land in Nevada

Nevada Water Rights

Mesquite Market

chris@mesquitemarket.com

Lincoln County Land Market

Nevada Ranch Properties

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