Preventing the Next Housing Bust
Texas has very strict refinancing laws. And people there seem to be more God-fearing. Taken together, it was a lot harder to refinance houses during the boom. That meant there was less money available to bid up prices during the 2005- 2006 frenzy. So prices moved up slower and subsequently got back to normal faster after the free fall.
According to the Standard & Poor’s/Case-Schiller index, Dallas was the only city in all the cities it tracks whose real estate prices held up during 2011. Las Vegas, in my opinion the most speculative market during the boom, is still suffering. Surprise. Surprise.
Here are some real numbers. I sold a house in Dallas in 2005 that I bought in 1978. I netted $128,000 after owning the home 27 years. (It was recently remodeled and looked scrumptious.) A house in Las Vegas that I bought in 2001 for $163,000 was worth $323,000 in 2005. Today it is now worth $180,000.
During the boom, many people I knew in Las Vegas refinanced their homes when they were supposedly worth $323,000 and happily spent the $100,000 take out on boats, cars, cruises, new kitchens, you name it. Now I am short selling those homes.
If the Nevada refi laws had been tougher so not everyone who was breathing could refi, things would have been different. Once the bank turned them down, they would have had no choice but to continuing paying on their original note. Now, 11 years later, this note gives them some equity even after prices hit bottom. Better yet, they would still be able to own their home.
Having lived through two real estate busts in Texas (remember the savings and loan crisis and the RTC?), I knew better than to refinance anything. I still have my entire real estate portfolio…
From where I sit talking to sad homeowners, the subprime borrowers here were few and far between. Las Vegans got into trouble with refinancing. They were betting on the house odds, as it were.
My solution: Make our refi laws more like Texas. Because we know they work!
((hugs)), BETH Ellyn
Managing Broker, Nevada
702.324.6911 Cell and text