LAS VEGAS REVIEW-JOURNAL
The best gains are behind us.
That’s the word from a national real estate website that tracks the share of homeowners with mortgages who owe more than their house is worth.
The Las Vegas Valley has made huge strides in that negative-equity rate, slashing it in half in the last two years. Now, the city’s percentage of under-water homes is stabilizing at a high rate. So if you’re still under water, you’re probably going to stay there for the foreseeable future.
“It was a great run, but now that home values are starting to moderate, you won’t see those extreme cuts in negative equity again,” said Svenja Gudell, a senior economist with real estate website Zillow.
To see where we’re headed, start with how far we’ve come: Zillow reported Thursday that 35.1 percent of locals with mortgages owed more than their home’s value in the fourth quarter. That was down from 59.2 percent in the same quarter a year earlier, and roughly half of the 71 percent peak reached in the first quarter of 2012.
Gudell called the drop a “fantastic” reduction driven by big increases in median home values.
Not every part of town shared equally in the improvement.
The highest negative equity rate was in North Las Vegas, where 61.5 percent of homeowners with mortgates in ZIP code 89030 owed more than their home was worth. The second-highest share, at 58.4 percent, was downtown Las Vegas’ 89101 ZIP.
Other neighborhoods with rates above 40 percent included 89108, around Jones and Lake Mead boulevards; 89104, around Eastern Avenue between Charleston Boulevard and Sahara Avenue; 89107, which includes the Charleston Heights neighborhood near U.S. 95 and Decatur; and every ZIP code in northeast Las Vegas.
The lowest negative equity rates were mostly in Summerlin. Just 16.9 percent of mortgaged homes were under water in ZIP code 89134, and only 19.2 percent were upside down in ZIP code 89135.
Those patterns make sense, Gudell said. Home values were fastest to drop and slowest to recover in lower-priced submarkets, which would explain why the northeast struggles. The median single-family home price in the area ranged from $102,500 to $125,000, compared with a marketwide median of $185,000, according to numbers from the Greater Las Vegas Association of Realtors. The area that includes ZIP code 89107 has a median of $171,000.
The area that houses Summerlin has a median value of $244,000.
And North Las Vegas may be suffering from the fact that some of its new master plans, such as Aliante, were built and sold during peak pricing from 2005 to 2007.
Also, broad improvements hide more troubling statistics.
Consider that 52 percent of locals remain “effectively” under water, which means that even if they have equity, they don’t have enough to cover the cost of selling their home and buying a new one, the Zillow report said.
What’s more, 18.6 percent of locals owe more than double what their house is worth. That’s the second-highest rate in the among big U.S. cities, second only to Miami’s 20.1 percent, and well above a national rate of 12 percent. And the 90-day delinquency rate here is 12.9 percent, compared with 8 percent nationwide.
Las Vegas also had the highest overall negative-equity rate among big cities. Only Atlanta, at 35 percent, was close.
Nor can locals expect much more of a decline. Zillow forecasts local negative equity of 30.7 percent by the end of 2014, and it will be years before the rate even approaches single-digit percentages, experts said. That’s because price appreciation has all but stopped in recent months, with the median single-family price stalled at about $185,000 since fall. Prices are up about 26 percent in the last year, but are still 44.8 percent below their peak, Gudell said.
Prices should appreciate in coming months and years, Gudell added, but at a slow pace. So other factors will have to chip away at Southern Nevada’s high negative equity. Expect some strategic defaults, as homeowners walk away once they realize they’ll never be above water. There’ll also be continued foreclosures, as well as mortgage modifications.
Tim Kelly Kiernan, broker-owner of Kelly Realty Group at RE/MAX Extreme, said Southern Nevada’s negative equity rate might even tick back up if prices stay flat and housing supply increases.
“There are still reports of 20,000 to 50,000 people out there who are still delinquent, and who haven’t been foreclosed on,” Kiernan said. “It’s a tsunami waiting to happen. We’re going to have negative equity for years to come. We just need to get through this and take the hit, and let the market clear it out and take our lumps, which probably should have happened years ago.”
Contact reporter Jennifer Robison at email@example.com. Follow @J_Robison1 on Twitter.