Las Vegas Foreclosure Law Crushing Middle Class Home Buyers
Tough new Las Vegas foreclosure laws designed to keep delinquent homeowners in their homes longer have created a yo-yo effect in the housing market where the number of previously owned homes for sale are down and new home building is soaring.
Experts say the law has driven up home prices, squeezed middle class buyers who cannot compete with all-cash buying real-estate investors, and could lead to another housing bubble.
“If you’re an honest working person, you pretty much don’t have a chance,” real-estate agent Bryan Lebo told the Wall Street Journal. The reason: average home buyers cannot compete with the deep pockets of real-estate investors who can pay in cash and can afford higher prices. Indeed, 60% of May home sales in Las Vegas were all cash transactions.
“The people hurt the most by this law are the middle class,” says Nevada real-estate agent Steve Hawks.
As the Journal’s Nick Timiraos notes, new home sales are soaring even as previously owned home listings are plunging.
“Las Vegas had just 4,300 previously owned homes listed for sale in April, down 70% from two years ago. New home sales, meanwhile, are up by 87% so far this year. Overall home prices have risen by 22% in the year ending in April—more than double the growth for the U.S. as a whole.”
The law, Assembly Bill 284, is known by some as the “A.B. 284 bubble.” Not everyone, however, thinks the law is all bad. One owner of a $495,000 home was allowed to stay in his home 54 months without making a single one of his $4,000 monthly mortgage payments. The owner originally bought the home with no money down.
Nevada’s foreclosure mess paints a cautionary tale for the rest of the nation. Indeed, 1.5 million properties in America are now in foreclosure or bank-owned. The number of homeowners who owe more on their homes than it is worth (“underwater”) is now one in five.