This week home mortgage borrowers got the latest word on how much they owe compared to the actual value of their real estate – and the numbers are only getting uglier.

First American CoreLogic, a company that gathers data on millions of mortgages that have been packaged into securities for investors, reports that nearly one in four home loans nationally is now larger than the actual value of the home that backs it. In other words, one-quarter of all home loans are underwater!

In just the last three months of 2009, plummeting home prices and accumulating debts pushed 620,000 more homeowners into negative territory.By far the worst off are borrowers in Nevada, 70 percent of whom now owe more than their homes are worth. Not far behind is Arizona, where more than half of borrowers are underwater, and Florida, where 48 percent are in for more than their homes’ value. New York is weathering the storm the best, with just 6.3 percent of borrowers owing more than their homes are worth. (New Yorkers who own should be thankful for their perpetual housing shortage, since it helps keep prices strong.)

For most homeowners, negative equity is just a temporary setback – like watching your stock portfolio dip below where it was when you bought it. Eventually, odds are the values will recover.

But the new numbers show that for an increasing number of homeowners, negative equity is becoming a way of life – and that means living on the edge of foreclosure. Negative equity sharply increases the odds that a homeowner will decide to “walk away” and stop making mortgage payments. And even if a homeowner is eager to avoid foreclosure, owing significantly more than a home is worth usually makes it impossible to refinance or sell the home. If that owner loses his or her job and can’t find another, or needs to get out of an adjustable rate mortgage, a future foreclosure is likely.

Plummeting home values aren’t the only reason homeowners are sinking more deeply into the hole. Borrowers hold hundreds of billions of dollars’ worth of Option ARMs, which allow borrowers to pay less each month than it would actually cost to pay off what they owe on the mortgage so what they owe actually grows. Most borrowers with Option ARM mortgages have only been making those minimum payments. Interest rates are low right now, so some are managing to make a dent in their loan balances anyway. But as rates rise, which they inevitably will, these borrowers are poised to fall farther and farther behind – and when they fall too far below the total amount of principal they owe, their monthly payments are programmed to jump sharply.

In the coming two years, according to Amherst Securities Group, borrowers will see these payment spikes on more than $150 billion worth of Option ARM mortgages. That means that they’ll be forced to start spending more each month, and start catching up with what they actually owe on the house. And if they can’t? That’s when the sheriff comes calling.

The good news: nearly half of all homeowners with a mortgage still have equity in their home. Which side of the picket fence are you on?

BREAKING NEWS:
Local news media recently reported that our own Mr. Las Vegas was like so many homeowners by being behind in his payments on his huge Vegas Estate know as Casa de Shenandoah. Newton’s 38-acre residence in Las Vegas at Pecos and Sunset roads is just down the road from where I call home.

Reports state that Mr. Newton is delinquent on a $3.35 million loan. The loan, which initially was for $3.75 million in 2006 but was modified in 2007 to $3.35 million and was secured by Newton’s residence and associated Las Vegas land, as well as an aircraft described as a Fokker F.28 MK 1000.

The loan was to be repaid by May 30, 2009, but the Newtons failed to pay back all that was due and the loan has been delinquent since then.

UPDATE:
This morning the Marshall’s office arrived at Casa de Shenandoah along with three moving vans. It seems that Wayne Newton is walking away (or being carried away) from this beloved home and our Vegas landmark which has also seen the value drop to $2 million.

Wayne Newton is currently under contract with The Tropicana Hotel. His show entitled, “Once Before I Go” is scheduled to end in April. Does this mean that Mr. Las Vegas will be unemployed AND homeless?
That is sooooo Las Vegas.
~Cynthia Weber

CBS Morning Show video of when they toured Wayne Newton’s Home:

Las Vegas has the highest foreclosure rate of any metro in the country, but lenders there have become more willing to accept short sales as an alternative toforeclosure. The Greater Las Vegas Association of Realtors (GLVAR) reports that 21.1 percent of all existing-home sales in the area last month were short sales.

The association’s short sale figures represent a 2 percent increase from the previous month. Rick Shelton, GLVAR president and a local Realtor, called the increase in short sales “one of the more promising trends” for the month, particularly because it was coupled with a decline in sales involving foreclosed homes.

Shelton said bank-owned homes accounted for a decreasing percentage of all local home sales, dropping from 60.1 percent in December to 57.4 percent of all sales in January.

Overall, GLVAR’s local housing statistics showed that 2010 started looking very much like the end of 2009, with local home prices staying about the same and home sales increasing from the previous year.
During January, GLVAR reported the median price of single-family homes sold in Southern Nevada was $134,925, down 0.8 percent from $136,000 in December. The median price for condos and townhomes increased 5.7 percent, from $65,300 in December to $69,000 in January.

According to the GLVAR, the total number of local homes, condominiums, and townhomes sold in January was 3,266, down from 4,196 total sales in December 2009, but up from 2,664 in January 2009. Shelton said this decline in total sales from December to January was expected since it occurs nearly every year in Southern Nevada during these months.

The percentage of local homes purchased with cash during January was 45.5 percent, up from 40.4 percent the previous month and the highest such percentage ever tracked by GLVAR.

While the indicators point to improvements in Las Vegas’ market conditions, it still carries the label of the country’s most foreclosure-ravaged city, and has for some time now. But with short sales gaining ground in the area as a viable alternative for both lenders and distressed homeowners, perhaps that stat too will soon improve.

The Five Star Institute (FSI) will be hosting a Short Sale Summit in Las Vegas on March 12 as part of its West Coast 2010 Spring Training. The day’s full agenda will be dedicated to the ins and outs of short sales, and upon successfully passing a course exam, attendees will receive The Five Star Short Sale Certification.

In addition to the full-day summit on short sales, FSI’s 2010 Spring Training will be held on March 10, 11, and 13, and covers such areas as building an REO business, mastering broker price opinions (BPOs), and working with the distressed borrower – all taught by instructors who are recognized leaders in their respective fields
By: Carrie Bay

By HUBBLE SMITH LAS VEGAS REVIEW-JOURNAL

New home sales in Las Vegas are projected to increase to about 5,400 in 2010 and the median price should be close to $220,000 by the end of the year, a slight bump from December’s median of $216,000, housing analyst Dennis Smith said Thursday.

The president of Las Vegas-based Home Builders Research reported his year-end data and 2010 projections in his first housing webinar, which replaces his annual housing outlook previously held at various locations around the city.

New home prices fell 13.2 percent in 2009 and are down from a high of $330,900 in 2006.

“I think we’re going to see a slight increase,” Smith said. “I’m not saying we’ll see a huge jump, but by the end of the year, I think we’ll be looking at closer to $220,000 than $210,000. The only thing that could change this is a flood of (foreclosure) inventory, the ’silent inventory’ everybody talks about.”

Las Vegas has the fifth-highest foreclosure rate in the nation with one out of 119 households in some stage of foreclosure filing, according to Irvine, Calif.-based RealtyTrac.com.

Smith is projecting about 45,000 resales this year, nearly identical to the 44,885 recorded resales he counted in 2009. The median price for resales will edge up 3.3 percent to $127,000 in 2010 and climb another 3.4 percent in 2011 to $134,000, based on a stable inventory of 8,500 homes on the market.