A Nevada law passed in 2011 following revelations of foreclosure abuses the previous year requires lenders to prove they have the right to foreclose. Assembly Bill 284 threatens criminal penalties for non-compliance. In the months after it passed, foreclosures ground to a near halt, according to RealtyTrac. The ensuing price spike became known as the 284 bubble.

“Shortages push prices up, and once that happens everyone rushes into the market,” Blitzer said.

Changing Laws

In May Nevada legislators scrambled to reverse a key provision of the law. A new amendment makes it easier to seize houses by stipulating banks can use affidavits based on a review of their internal records. Still, lenders are moving slowly because they are wary of the shifting legal landscape, RealtyTrac’s Blomquist said.

“Banks don’t like uncertainty,” he said. “The changing laws have muddied the water for banks trying to pursue foreclosures.”

In Las Vegas more than half of properties with mortgages are underwater, or worth less than the loans against them, according to Zillow Inc., a real estate data firm. In Phoenix, the share is a third. Nationally, about a quarter of mortgages have negative equity.

To sell a home, owners have to be able to pay off the mortgage, whether from the proceeds of the home sale or with cash. Someone who got a $350,000 mortgage in Phoenix or Las Vegas in 2006 probably is now more than $150,000 underwater, despite the surge in prices.

Those stuck owners give builders the opportunity to gear up to meet demand -- at a cost. The average price of an acre of land is $400,000 this month, according to Dennis Smith, CEO of Home Builders Research in Las Vegas. The same parcel would have gone for $200,000 in December, he said.

Land Prices

“The builders said last year that there’s no way they would pay more than $200,000 an acre for land,” he said. “Now, they’re saying there’s no way they’ll pay more than $400,000.”