What do you suppose is the shadow inventory size in Las Vegas right now in 2012?


Q: What do you suppose is the shadow inventory size in Las Vegas right now in 2012?

 

Answer: Let’s start here: There are still over 150,000 mortgages underwater in Las Vegas but how many are in default and yet not on the market for sale? (ergo the definition of the term “shadow inventory.”)

Shadow Inventory Las Vegas_USA 2012

SHADOW INVENTORY IN LAS VEGAS
CAN BE DEFINED AS BOTH
VACANT AND NON-VACANT PROPERTIES THAT ARE IN DEFAULT,
BUT NOT YET ON THE MARKET FOR SALE.

Here’s how I see it:

Prior to October 1, 2011 when AB284 took efffect, Las Vegas was averaging about 3,500 Notices of Default (NODs) per month in 2011.

It can be argued that the “shadow inventory” has grown by roughly 3,000 houses per month since October 1, 2011. After October 1st, we’ve averaged about 200 or so Notices of Default per month. So, where did the 3,000+ NODs go? They didn’t disappear–they just haven’t been processed yet. It may take an additional two, three, or five years to process them, but eventually it will happen. Folks who are not making their mortgage payments may have just received a hall pass for an additional two years of free housing. And the banks may have found the perfect vehicle to stop home values from further decline hence protecting their toxic debt from more significant losses.

Las Vegas is still selling about 800 – 900 foreclosures a month, but that will soon drop. Most of those foreclosure filings are coming from HOA’s (yes! believe it) and credit unions.

For the last four years I have heard estimates of 25,000 – 50,000 units of shadow inventory in Las Vegas. Some analysts suggest it is toward the upper end of that estimate, but could drop quickly if Fannie, Freddie, and HUD start engaging in bulk reo sales.

Currently in Las Vegas, 4,000 units are being sold per month. *If* the shadow inventory is roughly 50,000, then we have about a one year supply of homes of shadow inventory as of now.

However…

A NOTE ABOUT THE VACANT PORTION OF THE SHADOW INVENTORY:  The Las Vegas Valley Water District has stated that of the more than 375,000 water hookups in their service territory, almost 20,000 are inactive. These 20,000 could be assumed to be the vacant part of the shadow inventory.

A NOTE ABOUT THE 20,000 INACTIVE:  There are obviously more gross units than 375,000–there are almost 2 million in the Las Vegas metropolitan area.  Development experts say there are approximately 700,000 gross units (which probably includes apartments).  The 20,000 number from the Las Vegas Valley Water District doesn’t include units in Henderson and North Las Vegas, which have their own water districts.  Development experts state the number of vacant homes in default nears 100,000 citing sources at Nevada Energy who estimate that number based on power meters that are installed but not drawing power. Sources also say Southwest Gas’s number of installed meters not drawing gas was similar to that of Nevada Energy.

Bottom line:

–About 150,000 mortgages underwater;
–About 100,000 units that are not using/not paying their power and/or gas and/or water; and
–About 4,000 units selling per month.

Understand more about shadow inventory in Las Vegas and the US.

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