More than half of the short sales conducted in the US over the last two years were done in California, Florida, Texas, and Arizona, according to CoreLogic. Missing among the sand states is Nevada, a state that’s held the highest foreclosure rate in the country virtually since the foreclosure crisis began.

The problem is that prices have fallen so far in Nevada markets like Las Vegas that non-distressed home sellers have to price the property at the REO level. A pre-foreclosure or foreclosed home won’t be priced too far below those selling in traditional sales.

For the entire country, short sales have tripled since 2008, as lenders have found that doing them in lieu of foreclosure is more cost effective. According to CoreLogic, losses on prime loans that go into foreclosure are 10-to-12% higher on average than those sold in a short sale.

Freddie Mac recently reported that its short sale figures were up 600% from two years ago and said in its Q210 financial statement that it completed 22,117 short sale in the first half of 2010, up nearly 180% from 7,914 in the first half of 2009.

And the need for short sales is growing, too. According to CoreLogic, 25% of all US homeowners are in negative equity, or underwater, meaning the borrower owes more on the mortgage than the home is worth. In Nevada, that number is closer to 70%.

In addition, Fannie Mae reported that it acquired 261,534 REO properties in the first half of 2010. At that pace, Fannie REO acquisitions will increase 80% in 2010 compared to the 145,617 acquired in 2009. In Nevada, Fannie acquired 4,137 REO properties through the first half of 2010, about 68% of the 6,075 Nevada properties it acquired in all of 2009.

Despite this, fewer short sales are taking place in Nevada than in California, Florida, Texas, Arizona and Ohio.

Kenny Wagner, owner of the Foreclosure Mitigation Company in Las Vegas, said home prices there are falling faster than the time it takes to do a short sale. By the time an end-buyer lender — the ones financing the buyer in a short sale — conducts an appraisal of a property to approve the transaction, the value of the home has already dropped, voiding the whole transaction.

“That and buyers know they can get better deals at a foreclosure auction here,” Wagner said.

According to RealtyTrac, a house sold in a short sale fetches a price 10% below the rest of the market, while an REO sale fetches a 19% discount. In Arizona, the short sale discount is 18%, Florida’s is 20%, Texas’ is 25%, and California’s is 28%.

But both borrowers and lenders will continue to pursue short sales, especially with the government’s Home Affordable Foreclosure Alternatives (HAFA) program leading the way, according to CoreLogic.

“Short sales have been, and will continue to be, an inevitable and necessary part of the mortgage industry’s post-crisis stabilization process,” according to CoreLogic.

Short sales in San Joaquin County continue to dominate our market.  Please also visit ShortSaleInStockton.com for answers to any of your short sale questions.