Foreclosure Crisis Not so Bad as Reported?

I just read this great article by Scott Burns, and thought I would like to share it with my readers! Makes great sense amid all the media hullaballoo. And for those with savvy, right now is a terrific time to buy Las Vegas real estate!

Sure, there are pockets of pain around the US, but it's not as if most Americans are losing their homes. More than 99% of homes aren't in foreclosure.
By Scott Burns scott@scottburns.com

A recent list of year-end mortgage foreclosure rates in 100 top metropolitan areas drew a lot of attention. Released by RealtyTrac, a company that compiles data on home foreclosures, the list showed the number of foreclosure filings in each metro area, the percentage of homes being foreclosed and the percentage change from the previous year.

Though the report had some dismal news -- such as the nearly 4.9% foreclosure rate in the Stockton, Calif., area -- a close look at the data also provides some reassuring information. It tells me, for instance, that the foreclosure crisis is a regional problem, not a systemic one. It could become a systemic problem, of course, but we're a long way from that now.
This news will disappoint the gloom-and-doom crew and all those seeking the excitement of financial upheaval. But it may be time to temper our worry and take a closer look at some of the year-over-year foreclosure statistics:

Though the national rate of foreclosure increased by a whopping 79% between December 2006 and December 2007, the rate was still only 1.033%. Because about 30% of all homes are owned mortgage-free, this means that for all the noise about a crisis, only seven-tenths of 1% of all homes were in foreclosure.

In the top 100 housing markets, the average foreclosure rate was somewhat higher -- 1.38% -- and it was up 78% over the previous year. (Even in the Valley, where the Las Vegas foreclosures at at 4.23%, most of those are investment properties bought in the heat of the boom.) But if you rank-ordered the list of the top 100 areas, only 34 had foreclosure rates above the group average. Fifty-one areas had rates of 1% or less.
Foreclosure rates actually fell in 14 of the 100 areas. More important, many of the areas with the highest increases in foreclosure rates were rising off rates that were tiny. The Bethesda, Md., area, to offer the most extreme case, saw foreclosures rise 1,288% -- to a rate of 0.682%. In other words, foreclosures there were virtually nonexistent the year before. Today they are still well below the national average. The same can be said for the Albany, N.Y., area (up 638% to 0.25%), the Baltimore area (up 544% to 0.73%) and the Providence, R.I., area (up 354% to 0.41%).

Another pattern emerges if you cross the foreclosure rates with the Office of Federal Housing Enterprise Oversight (OFHEO) index of home prices. It shows that the top 10 foreclosure areas in America are areas of extreme price change -- changes far from the national average of 46.92% over the past five years.

Seven of the top 10 foreclosure areas had experienced major price spikes in the past five years. Three of the top 10 foreclosure areas had experienced price increases that were dramatically lower than the national average. That pattern continues when you examine the top 25 foreclosure areas.

The seven areas with the top price appreciation for the past five years averaged a stunning 91.6% increase, nearly double the national average. The national average, in turn, was about triple the inflation rate for the period. (Las Vegas homes increased 88.3% over the past five years.)

Small wonder the foreclosure rate is booming as well. Anyone who bought in the past few years with a 5% or 10% down payment has a good chance of being upside down as froth comes off the market. In those areas the problem is about irrational price spikes and the hazards they bring to homeownership.

Some would call this "a Cadillac problem" -- a great problem to have, like having more boats than you have water-skiers. Though 5% of the homeowners may be losing their homes, most of the other 95% probably feel significantly richer.

Las Vegas new homes builders are running out of inventory and lower priced housing is starting to get multiple offers again. 2008 is going to be a better year for the Las Vegas market, for sure!

Las Vegas Broker Defaults on 118 Properties

It never fails, there is always someone who figures out a brilliant scheme to beat the system. But instead of leaving while the going is good, they get too greedy and end up with their hand caught in the cookie jar.

Several years ago one such enterprising soul went around town and broke into over 40 HUD repos. These are Las Vegas foreclosures that are usually vacant, and it may take HUD a while to get around to processing them through the system. He then proceeded to replace the HUD sign with a "for rent" sign, rented out the properties and collected hefty security deposits as well as the first month's rent.

But not content to take the money and run, this guy stuck around for over six months amassing additional rent. Until one day HUD wised up and the Feds showed up to arrest him as he was making his monthly collections. A couple who later became one of our clients was a tenant of this fellow who they said could not have been nicer. The had chosen the home because it was near the Las Vegas schools they wanted their children to attend.

Now a Las Vegas real estate broker and her husband are facing federal charges they made millions of dollars orchestrating a mortgage fraud scheme during the crazy days of sub prime lending.

U.S. Attorney for Nevada Gregory Brower says Eve Mazzarella, 30, and her husband, Steven Grimm, 45, were indicted Wednesday on bank fraud, money laundering and aiding and abetting charges.

According to the report, Mazzarella and her husband have been charged in connection with a scheme in which they fraudulently obtained mortgages on hundreds of Las Vegas homes here in the Valley. The feds say the couple submitted or arranged to have straw buyers submit loan applications which they knew contained false information and kept most if not all of the money for themselves.

"These schemers have contributed significantly to the demise of the real estate market in Las Vegas," FBI Special Agent Steven Martinez said. "This type of fraud scheme impacts the real estate market generally. It's like credit card fraud. We all pay a little bit more in terms of our credit card bills because of fraud. The same thing is true with mortgage fraud. We're all victims

Grimm was arrested Thursday in Las Vegas and is due to appear Friday in U.S. District Court in Las Vegas. Brower says Mazzarella is being sought. If convicted, each could face decades in prison and millions of dollars in fines.

The government alleges Mazzarella and Grimm bought more than 200 properties at inflated values using limited liability companies and more than 400 straw buyers to make purchase offers.

The couple allegedly controlled transactions worth more than $100 million.

They allegedly defaulted on mortgage payments on many of the loans, causing at least 118 properties to be sold in foreclosure.

Palms Place Condos Ready to Close - Resale Units Now Available

During the month of March both the much anticipated Palms Place and Trump Tower will be closing on their condo hotel units. In Palms Place, which is a smaller boutique project catering to hot young celebrities, the demand for resale units is expected to be higher than the supply.

When the Palms Place originally offered their condo hotel suites for purchase to the public in 2004, they were snapped up by hotel regulars. Frustrated Palms patrons who were not among the lucky few to secure a unit drifted to the Hard Rock, the other hotel catering to the young and trendy, only to be later disappointed when that project was scrapped in a sale to the Morgan's Hotel Group.

Now the Palms Place tower is finished and has finally opened the doors to its first luxury condo residents, including rapper Eminem, wrestler Hulk Hogan, and singer Jessica Simpson. Palms Place is a 599 unit boutique project with a mix of fully furnished 600-square-foot studio units and 1,200-square-foot one-bedroom suites, while the more exclusive clients own penthouses on the top four floors. Palms Place is associated with the Palms Hotel and Casino which boasts the city's most popular nightclubs, arena and a PlayBoy Club.

Closings will be progressing during the month of March on the condo hotel suites, with only a small fraction expected to be put up for resale contrary to condo hotel projects like the MGM Residences where over 150 units are currently on the market.

But a few over-leveraged purchasers are expected to be offering their Palms Place units for sale as they come to closing. There are currently about half a dozen units that are available with prices starting in the high $500s. With the Las Vegas homes market finally picking up momentum again in spite of the national housing bust, none of these units are projected to last long as the word spreads. To get more information on available units or to be put on the priority interest list to receive notice of units as soon as they become listed, please contact our office at 702-985-7654 of fill out the form online at:

Palms Place Registration

In the meantime, down the street at Trump Tower the first closings will also be going on during March for those who are looking for immediate possession of a Las Vegas condo hotel in a quieter atmosphere in keeping with Trump name. The Trump International Hotel in Las Vegas will contain 880 studio units and 352 one-bedroom condominiums and 50 suites of one, two, or three bedrooms on the top five floors.

Other popular condo hotel projects that will not be finished until late 2009 are the MGM City Center and the Cosmopolitan Resort Hotel and Casino. Both projects are located right on the center Strip next door to the Bellagio Hotel and are currently selling preconstruction. To get floor plans or more information on any of these properties please visit our web site at:

Las Vegas High Rise Condos

Attention investors! If you have already purchased a condo hotel property or are considering buying one, we have access to 25% down condo hotel financing on full document loans or 45% on stated income loans. Please contact our office so that we can put you in touch with our Las Vegas mortgage lenders.