Musical Houses…

Earlier this week, USA Today took a close look at Helens Pouroff Ave., in North Las Vegas. Like many streets that were developed during the most recent real estate boom, it’s struggling to keep its residents – and maintain its image – as it weathers the effects of the “Great Recession”.

The title of my blog is a reference to those residents of the street “left standing” – they stayed in their homes, continued to make payments and are now suffering for it.

It’s a problem that has persisted for several years now and seems to be getting worse – millions of people either needed to move from their home or chose to move. Regardless of the reason why, the neighbors they left behind are now feeling the pain.

Homes are in disrepair. Lot’s are uncared for and overgrown. A less desirable element that couldn’t afford to purchase on the street at its peak, can now rent for well less – from homeowners to desperate for an occupant, to even consider a background check.

It’s a vicious cycle that seems to be endless.

What confuses me is the logic on behalf of the lenders. While – hesitantly – they will consider a short sale, they certainly don’t seem enthused about it. In the 4 years that our firm has been assisting distressed homeowners with short sales, the process hasn’t really changed much – at least, not for the better – and lenders still seem to look for reasons not to accept the offer, when one would think the opposite would be the case.

I understand that to think they’d be “enthused” about a short sale is a little naïve, but after seeing what a couple foreclosed homes can do to an entire neighborhood, let alone a single street, it should be enough incentive for them to get (more) on board with the idea. A short sale saves them tens of thousands in legal fees, care/maintenance, taxes, HOA dues, etc. – on a home that they’re almost guaranteed to sell for less than any offer the current homeowner could bring them.

The thinking, so I’ve been told, is they’d rather foreclose, sit on the home and re-sell it when the market returns. The idea being that the market will be returning in the not-so-distant future and the lender would rather wait it out, than show the loss on their ledgers today.

However, how will values ever return if entire blocks of home are falling into the same rut as the street described in the story?

It’s yet another reason to consider principle reductions, encouraging people to stay in their homes – and not just distressed homeowners, but those who are willing to continue paying but are becoming distressed by the exodus around them…