Despite foreclosures, other U.S. areas feel more stress
Despite falling home prices and the third highest foreclosure rate in the nation, Las Vegas does not rank among the five most distressed housing markets, a mortgage risk analyst said Thursday.
"Most people, all they do is look at sales price. That doesn’t tell the whole story," said Mike Ela, president of San Juan Capistrano, Calif.-based HomeSmartReports.com.
The Web site reported that a measure of housing market stress jumped in August to its highest level in more than three years, suggesting that most real estate markets nationwide will experience more distress before they turn around.
Distress indicators rose in 199 of 378 markets from July to August, moving into many lower-cost rural neighborhoods in the South. Housing markets in Michigan and Ohio remain the most distressed, with Detroit and Lansing, Mich., occupying the top two spots.
Las Vegas was further down the risk chart at No. 97, three places behind Los Angeles. Phoenix was a little better off at No. 120 and San Diego was No. 80, Ela said.
He said risk in Las Vegas has been going up slightly and the market has taken a hit in median home values, but there’s evidence the decrease in values is slowing.
"There’s a rebalancing going on in many markets. Prices are edging down, lenders are more cautious and there’s a lot of uncertainty. Many markets could stabilize by the end of the year, depending on what happens with job growth and interest rates," Ela said.
When reviewing home loan applications, lenders not only look at the borrower’s finances and the property’s value, they evaluate risk and volatility in the property’s neighborhood.
Ela said he conducts a radiant search on individual properties to look at key elements such as foreclosure activity in the area, flipping, trends in fraud and default activity, appreciation and depreciation rates and property history.
"If we see a high rate of appreciation in the market and at the same time high foreclosure numbers, what’s wrong with that picture? Sometimes appreciation comes from flipping and not from increasing market value," he said.
The five cities with the least-distressed housing markets were concentrated on the East Coast, two each in New Hampshire and Massachusetts.
Contact reporter Hubble Smith at hsmith@reviewjournal.com or (702) 383-0491.