Esko Kiuru - Las Vegas NV Mortgage Consultant

Southern Nevada - accommodating communities like Anthem, Summerlin, Henderson, Mountains Edge, North Las Vegas, Southern Highlands and Pahrump - resale housing segment took a cautious step forward in September, after going the other way in August. A curious trend might be developing, actually so predicted by some industry experts, where the real estate market will find the bottom and then will bounce along there for some time. Despite very attractive mortgage money and truly appealing home prices that may be all it can do for now, as the economy remains weak and unemployment is pushing deeper into double digits.

For September there were 3,358 single-family residences sold, so reported by GLVAR, the Greater Las Vegas Association of Realtors. That amounts to a nice 4% improvement from August and a solid 20.7% jump from the same month last year. The buyer base is rather narrow, though. It's dominated pretty much by the first-time homeowner and the investor, both of whom aim at the lower end of the price scale.

Las Vegas single-family inventory dipped by less than 1%, a marginal change. It settled at 20,801 and continues to find the road ahead rocky while seeking to breach through the 20,000 mark.

The median price here in Southern Nevada took a turn up in September, going to $138,000, or 1.8% increase. That's perhaps the best news in the report. After losing ground little by little over the last few months it's now showing some backbone. Maybe, just maybe?

Las Vegas homeowners and real estate observers clearly can do nothing about it if riding along the bumpy bottom is the only choice they have. It, however, always beats sliding south on the slippery slope that has been the norm for too long. The wish on everyone's lips must be that the uncomfortable journey is reasonably short.

Photo by wjklos.

One of the key mortgage segments funding home purchases in the recent past has been warehouse lending. The concept can be defined as short-term lending by large commercial banks or other financial institutions for non-depository mortgage brokers and bankers. Using originated mortgages as collateral, the warehouse lender makes available interim financing until the loans are sold off on the secondary mortgage market.

The housing meltdown has been devastating to the home loan business. Every financial institution has suffered from its effects, some more some less. Warehouse lenders generally were the backbone for the smaller mortgage originators, but have lately been cutting off their lines of credit, putting restrictions on them or exiting the business altogether. This has inevitably forced smaller home loan firms to curtail their product offerings and giving consumers fewer options when looking for a mortgage.

Call Fannie Mae and Freddie Mac, the two mammoth operators on the secondary mortgage market, to the rescue. The Wall Street Journal is reporting that they soon will launch, it's still unannounced, a pilot program to address warehouse lending. Basically what they plan on doing is to some degree replace the traditional warehouse lenders to provide more liquidity to the still reeling marketplace. So they'll step into the vacuum left by the private investor.

The mortgage industry has seen dramatic consolidation in the last year or two. In 2007 the three largest private mortgage providers held about 35% of the market, while through the second quarter in 2009 that share had grown to about 50%, according the WSJ's estimate. That rapid growth has pretty much come at the expense of the independent home loan lender. The regulators in Washington see the dangers of this trend and are now working to reverse it.

This is good news for the smaller, independent mortgage firm. It may never get back all the market share it previously had, which was somewhere over 60%, but it can possibly recover some of it. Yet, the main beneficiary actually will be the consumer. The more there is competition, the more choices he has at the lowest possible price.

The real estate market blowup hasn't spared any segments from its fury here in Southern Nevada - including Henderson, Anthem, Mountains Edge, Southern Highlands, Summerlin and North Las Vegas. Condominiums have been spanked as harshly as the single-family houses. Luxury high-rise condos on the Strip and elsewhere in the vast valley, thought by some to be above the tussle, have absorbed the same unhealthy punishment. No project could hide from it.

CityCenter by MGM Mirage, the $8.5 billion upscale mission, also has a large condominium component in it, beside the usual chic casino, convention, hotel and retail offerings. It'll have about 2,400 units in all split between the Veer Towers, Vdara and The Residences at Mandarin Oriental. CityCenter itself will begin opening in stages in December and the condos are scheduled to start closing sales in January.

As the Las Vegas condo market tanked stunningly, CityCenter advance buyers grew quickly uneasy about their purchase agreements and began talking about legal action. Either they wanted their deposits back or then the prices would have to be sliced with a heavy cleaver to reflect the present value setting. With that in mind the project was weighing carefully its options and finally decided on price reductions.

The condominium prices will be adjusted down by 30%, says CityCenter now. It's official. No more rumors about it one way or another.

Is that enough? To most buyers it likely will be, although according to the Las Vegas price grid it may come short of the real market. Anyway, a condo originally costing, let's say, $1.3 mil will now go for $910,000. That will definitely help any size wallet. Those who are still unhappy probably will face a long legal battle that may not be worth it at the end.

Las Vegas mortgage lenders have still to be convinced that the values are there, otherwise underwriting will stall. Currently standard condo financing in Southern Nevada is very tight. To provide funding for their customers CityCenter may have worked out private arrangements with a select few mortgage banks that will solve the problem. Similar to what Palms Place managed to do when it got the financiers of the condo project to also supply the needed mortgage funds for buyers. As a side note, a share of the sales predictably will be cash.

The price adjustments CityCenter has decided to do is a long positive step in making the colossal development more viable in this testing economic environment.

The home loan industry has been steadily resisting giving homeowners any principal reduction breaks throughout this real estate inferno.The government has been all over it to do mortgage modifications at a reasonable clip in an effort to keep the foreclosure epidemic from getting out of control. The banks have been slow in helping out even with them. The ones they have channeled through have generally been rather tame, all too often leading the borrower to redefault within months.

Mortgage loan providers, banks and investors that is, have obviously decided to change course somewhat.In a fresh report from OCC, or the Office of the Comptroller of the Currency, a regulator of national banks, the numbers show that in the first quarter 3.1% of loan modifications included principal cutbacks. More importantly, in the second quarter it had jumped to 10%. The report offered little information on how much of a reduction was done on an average. Still, the implication is that more of the same should be coming.

The real estate market continues to struggle and mortgage foreclosures threaten to go on, or even grow, at an alarming pace.Banks must have realized that a meaningful rebound is still a distant dream, and even if it comes soon, it predictably will be a gradual one. Therefore, to cut their losses a principal reduction increasingly appears to be the thing to do. It doesn't have to be all the way down to current market. As long as it is large enough to keep the homeowner in his residence with an affordable mortgage payment, both sides are likely to end up winners.

Southern Nevada - Las Vegas, Henderson, Anthem, Summerlin, Green Valley, Southern Highlands and Mountains Edge among its communities - homeowners would be some of the major beneficiaries of this shift in thinking. Scores of them are underwater here and are straining to hang in there with high mortgage payments. Many have decided to walk away from it, just handing the keys back to the lender. This development, by the way, probably is also weighing in on the banks' decision making. Although there are no stats to back it up, it is easy to see that the hard-hit areas, like Arizona, California and Florida, Nevada's partners in crime, are getting more attention tied to this issue than others.

Many banks are now in a better financial position to loosen up their strategic thinking. The siege mentality seems to be lifting. Some have even been able to raise new capital to start tidying up their demolished balance sheets. This new direction, as long as it holds, will also assist in keeping Congress from enacting the cram-down legislation, rumored to be still alive and kicking.

Realistic thinking appears to be making a comeback to the mortgage marketplace.

Southern Nevada - including Henderson, Summerlin, Southern Highlands, Green Valley, Mountains Edge, Anthem and North Las Vegas - has graced the pages of many publications in recent years regarding the improbable real estate meltdown and subsequent mortgage foreclosure rampage here. It usually ended up topping many of the national statistics that measured how deeply these negative housing market conditions have affected the area. That has not been fun reading for the locals. Going from a boom town to a bust town so quickly can be rather deflating.

Las Vegas real estate news have got cautiously better, though, in recent months. And another good piece was just published in Forbes magazine. Altos Research provided Forbes the data that it used to study 20 large housing markets in a somewhat unusual way. It measured the changes in price reductions in homes listed for sale. In other words, if a given market sees a growing number of price cuts, then that area is still getting worse. And vice versa. A refreshing method indeed.

Southern Nevada occupies the number one spot in this ranking of 20 major markets. In January 2009 54% of homes for sale here had seen a price reduction, according to Forbes. Fast forward to September 11, a few weeks ago, and that had happened "only" in 30% of them. A genuine improvement that propelled Southern Nevada to the top of the heap. Obviously this positive change comes from the demand side. When more people are looking for homes to buy, price reductions start disappearing.

Of course, this is just an indication that the housing market in Las Vegas is heading in the right direction, is about to find the bottom. The city is still weighed down by some fundamental problems, like high unemployment and mortgage foreclosures, that will slow things down. But nevertheless, the good news are beginning to appear again and predictably give everybody in the valley a much sought-after lift.