The latest residential foreclosures reports reveal one welcome statistic to inhabitants of Sin City: the City of the King is no longer king among foreclosures.

That’s right – Las Vegas, long the nation’s leader in metro areas when it comes to foreclosures and distressed properties, has fallen all the way to number five in the country for the month of October. For now at least, there are four metro areas that outrank the largest city in Nevada, the hardest-hit state in the country.

The leading city now? Stockton, California, with a foreclosure rate of one out of 143 homes. Las Vegas’ rate, by comparison is one out of 162 homes, with new default notices falling by a staggering 80%.

Before everyone starts popping champagne, though, we should look at the reason behind the decrease and see if it is due to systemic improvement, or some other reason.

A quick look through recent legal happenings in the state reveals that much of the drop in foreclosures in Nevada and Las Vegas can be attributed to legal changes to the way Nevada processes foreclosures, rather than any real improvement in unemployment or the Las Vegas economy. For example, Nevada recently passed a series of laws that toughened the way banks and mortgage servicers in the state processed home foreclosures.

As a result, the aforementioned 80% occurred – showing a pretty big correlation between the recent law and the decline in the city’s foreclosure rate.

That is the bad news – suggesting that the foreclosure woes of Las Vegas and Nevada are far from over, but are just now beginning. That is because foreclosure rates are set to skyrocket across the country as banks and mortgage loan servicers reach some form of agreement with regulators and governments across the country. As they do, markets will become inundated with foreclosed homes, providing prospective investors in Las Vegas plenty of opportunities to strike it rich in completely different ways.

This is becoming a common theme. Metro areas in particular are seeing foreclosure rates rise after 12 months of largely watching their rates decline month after month. Critics point to this revived drive in the market as a result of a failure to stimulate adequate demand in the market – and a failure to reduce overbuilt supply that continues to depress prices.

Eventually, these foreclosed homes will need to be sold. And in the coming months, it is likely that Las Vegas will reemerge as the nation’s leader in foreclosures, once again.

Subscribe via RSS or Email:

Follow us:

Written by Alex Rolim.