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The Mortgage Corner

The Calculated Risk Blog highlighted some interesting data on short-sales in Las Vegas. Short sales averaged about 7 percent to 8 percent of Las Vegas existing-home closings in early 2009, but averaged 22 percent of the market by the end of the year and in early January. This is while foreclosure rates are declining.  Is there a connection?

And pending home sales for contracts signed in December rose, while home prices continue to improve.

“We have seen a decrease in foreclosure activity in Las Vegas, which was puzzling to us,” said Daren Bloomquist, marketing manager for California-based RealtyTrac, which monitors foreclosures in Nevada. “Maybe Las Vegas has become somewhat of a test ground for streamlining short sales. It sounds like it could have an impact in Las Vegas.”

In fact, the Treasury Department is now offering incentives on short sales by providing a $2,500 subsidy, $1,000 to the servicer and $1,500 to the seller for moving expenses. In addition, investors can get $1,000 by allowing subordinate lenders to get $3,000 in proceeds from the sale. The program is effective April 5, but servicers can implement it earlier.

This is better than “walking away” for the lender - the losses are less than for a foreclosure. And this is better for the homeowner too because Treasury requires that “the borrower will be released from all liability for repayment of the first mortgage debt”, although the borrower will still take a credit hit.

The November Case-Shiller headline composite 20-city index showed a 0.2 percent decline in November, following a 0.1 percent dip in October.  But the headline numbers still are not seasonally adjusted. The report detail showed a 0.2 percent rise in November, following a 0.3 percent boost the month before. On a seasonally adjusted basis, this index has risen for six consecutive months.

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NAR chief economist Lawrence Yun said it’s important to recognize how the tax credit is skewing market data. “There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded,” he said. “These swings are masking the underlying trend, which is a broad improvement over year-ago levels. December activity was the fifth highest monthly tally in two years.”

The Pending Home Sales Index, a forward-looking indicator, showed activity picking up in 2010. It increased 1.0 percent to 96.6 from 95.6 in November. This should also continue to push up home prices as more repeat buyers enter the market for higher priced homes.

Home prices are already stabilizing or even firming. Existing home prices firmed in December with the median price up a sizable 4.9 percent to $178,300. The National Association of Realtors, which compiles the report, attributed the gain to a higher proportion of repeat buyers during the month.  That is, there were more buyers moving up in contrast to sales be dominated by first-time buyers recently enticed by special credits.

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Harlan Green © 2010