There are some warning signs that the Las Vegas-area housing market is slowing down, according to Alexis McGee, president of Foreclosures.com. Price appreciation is flattening and existing-home sales are dropping, which “could indicate that the price boom in Clark County, Nev., could be coming to an end,” McGee reported in an announcement today.

Foreclosures.com offers foreclosure data, analyzes housing trends and assists investors in six U.S. markets.

There were 5,728 new for-sale listings in August in Clark County, with the median list price of $349,000 – the same as in July, McGee reported.

“However,” she said, “the actual median sales price in August was $309,000. That was still a record, but the appreciation curve is essentially flat. The situation in Las Vegas is exacerbated by the high percentage of home purchases by speculators. Normally, foreclosure is a lagging indicator of financial distress in a household, but speculators often have negative cash flows in their properties. When price appreciation slows or stops they run for cover, and now may have more difficulty selling quickly to cut their losses.”

New-home prices had increased about 27 percent year over year, while resale year-over-year home-price appreciation was 13.1 percent, and the average time on market was now 48 days for new listings.

McGee also said that a steady decline in foreclosure activity in California had leveled out, and a combination of slowly rising interest rates and a shift to a buyer’s market would make it harder for distressed homeowners to refinance or sell their way out of trouble.

“Foreclosure activity in California is no longer declining,” she said. “And this activity is now actually below historic baselines in several markets. The default rate has nowhere to go but up.”

According to Trendgraphix Inc, the Sacramento metro area saw 2,318 price reductions in May of this year. In July, there were 4,100. August, at mid-month, was on track for 4,500. “That’s a cooling market,” McGee said. “We see a plateau forming with modest price corrections in overheated markets. Real income growth has to catch up and restore lost affordability.”

Also, she added, a period of increased defaults was on the horizon partly because of the use of exotic loan programs, such as interest-only loans and so-called option ARMS (also known as negative-amortization loans).

In New Jersey, there were 3,196 notices of default and notices of trustee sales, McGee reported, followed by 1,992 in July and 1,929 in August.

“The increased use of interest sensitive loans in the face of rising home prices would lead to an increase in mortgage defaults in the near and intermediate future,” she also noted. “The percentage of New Jersey homeowners paying 35 percent or more of their pretax income for housing expense increased to 29 percent of all loans in 2004. And in 2005 that number will probably increase further.”

Many New Jersey home buyers are using interest-only loans to qualify for more house than they could otherwise afford were headed for trouble, and McGee referred to these loans as “financial time bombs. When they convert to fully amortized adjustable-rate loans in two to five years, monthly payments can jump by 40 percent or more. Such a payment shock can lead to default.”

***

Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 140.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×