Two weeks ago , January 8 to be exact, Brent Jones of Brent Jones Services Inc. a leading Las Vegas appraisal service, informed us of a new lending issue for buyers and real estate agents to be aware of when a client is closing on a home loan. Since the Las Vegas real estate market has softened resulting from continued increase in residential home listings and a continued decrease in home prices, appraisers were identifying some areas of the Las Vegas valley as areas of declining value and oversupply. One check mark in this box on the appraisal can and has caused the buyer of that particular home to be required by the lender to increase the amount of their down payment by 5%. If the buyer does not have the additional 5% to put down on the purchase of the home the lender will not approve the loan.
You can read more about the details here Maximum Financing in Declining Markets .
Last Friday Countrywide Home Loans distributed this information to their offices officially making the entire Las Vegas Valley a soft market, “Government Sponsored Entities have recently released soft market policies to protect themselves from high loan to value lending in areas that have declining values and/or have values projected to decline. Countrywide’s previous policy has been to reduce max financing by 5% ONLY if the appraiser notes the property is in a declining market. This policy is being enhanced to proactively identify soft markets and reduce max financing accordingly“. The result is that people purchasing a home in Las Vegas at this time will need to put 5% more down on the same house to get qualified for the same loan program.
On the surface this may appear as another nail in the real estate market coffin but in reality it is a protective position being taken on the part of lending institutions. This position is being taken in an effort to not only protect the lending institutions but also the buying public and should further reduce the risk of foreclosures and short sales in the market. In my opinion this is a move that will eventually strengthen the market overall. There are also several changes that are likely to happen that should offset any reduced purchases due to this policy.
First this policy does not effect FHA and VA loans. Second the President has a bill ready to be signed that will increase the FHA loan limits from $304,000 to $417,000 while at the same time reducing the required down payment from 3% to 1.5% on FHA loans. Third, the Federal Open Market Committee today lowered its target for the federal funds rate 75 basis points to 3.5 percent — the steepest cut since 1984. Fourth, analysts expect the Fed to cut the federal funds rate again at its regularly scheduled meeting Jan. 29-30 by another 50 basis points, to 3 percent. Obviously the rate cuts are certainly good news for people who have mortgages, or are shopping for mortgages but also for those people with adjustable rate mortgages or home equity lines of credit that are indexed to the prime rate. Those people should see an adjustment in their interest rate on those loans right away (depending on the loan program). For those borrowers who are expecting to see interest rate resets on their current loans, those interest rate resets could be less than expected.
It is my opinion that the changes being made, although painful now, will help strengthen the overall real estate market in the long term. For more information specifically about the Las Vegas and Summerlin Real Estate Markets go to these sites.
Posted by Joe Laliberte 
Las Vegas & Summerlin Real Estate 