The Siren Song Begins Again
The Las Vegas Business Press reports from Nevada. “As vice president of sales for Pordes Residential, Jim Navarro is selling more than a condo community at Veer Towers. It’s a lifestyle community, a luxury high-rise residence in the middle of the Strip with 24-hour security, valet parking and concierge service. Pordes started the process of acquiring 427 units at Veer Towers about 14 months ago. Founder Mark Pordes saw what was happening with an absorption boom in Miami and knew Las Vegas was next. The first 100 units were released for sale in late January. About 330 of the units are being rented in one-year leases, and will be put on the market as they become available. So far, Pordes has taken reservations on 11 units.”
“Navarro said he’s had quite a bit of interest from buyers, including a Canadian man who purchased a unit sight-unseen. He knew where he wanted to be and remembered when MGM was asking $500,000 for a studio unit in 2007.”
“Prices start at $228,000 for a 574-square-foot studio, going to $365,000 for an 800-square-foot, one bedroom unit on the lower floors. Two-bedroom units range from the low $500,000s to $900,000s, and a three-bedroom unit near the top of the tower is more than $1 million. ‘A lot of our clientele is from Southern California, Canada, South America,’ Navarro said.”
Casino City Times on Nevada. “High-rise market investors are still out there and the size of their investment pool has grown larger, said Dennis Smith, president of Home Builders Research in Las Vegas. ‘We’ve got hedge funds where money is no object,’ Smith said at a high-rise panel presented by the Women’s Council of Realtors. ‘They can raise money. The cash is there. They can go overseas and talk to clients about buying something in Las Vegas for less than the cost to produce it.’”
“Matt Brimhall, VP of sales at Trump Las Vegas, said units that cost $1,000 a square foot to build are being sold at $500 a square foot. Demand for high-rise condos is reaching a peak he hasn’t seen since the days of ‘make-believe’ projects. ‘Overall, we see more people wanting to live that lifestyle, but they’re from outside Nevada,’ Brimhall said. ‘Vancouver, Toronto, Beijing, Hong Kong, Singapore … we always find out when there’s a delay in the wire (funds).’”
“Jim Brooks, owner of Brooks & Associates realty firm said it’s almost all investors buying condo-hotels in Las Vegas, with about two-thirds of his clients coming from Southern California. Others are from Florida and New York. Return on investment is minimal, he said. People aren’t buying them as ‘cash cows,’ expecting to see returns of 8 percent to 10 percent.”
The Associated Press on Nevada. “Amid a buffet of government-run mortgage relief programs that many struggling Nevada residents say they’ve heard nothing about, Bruce Breslow thinks he finally has a program that fatigued homeowners will pay attention to. The proposed program would have the state create a $150 million nonprofit to buy up distressed mortgages en masse and refinance them. The newly appointed director of Nevada’s Department of Business and Industry thinks it could help chip away at the tens of thousands of mortgages in Nevada that are severely delinquent.”
“‘I think the ’shadow inventory’ is the main thing that’s keeping homebuilders from moving into Nevada,’ said Breslow. ‘The threat of 52,000 homes marching toward foreclosure keeps it unstable.’”
“Real estate experts say people who are seriously behind on their payments or have stopped paying altogether aren’t reading their mail and aren’t answering their phones, perhaps in an effort to avoid collectors. Bill Uffelman of the Nevada Bankers Association is skeptical that such large numbers of people don’t know there’s help. He thinks many people with delinquent mortgages simply don’t see banks foreclosing on people who skip payments, and decide not to pay themselves.”
“‘It’s amazing how many people say they don’t know these programs exist. The stories are there,’ Uffelman said. ‘The reality is there are a lot of people in Clark County and Nevada saying, ‘I didn’t have to pay my mortgage for the past two or three years. You’re the dummy (for paying).’”
“His optimism aside, Breslow said the $150 million pot of money can only go so far. That might help 700 or 800 homes, until people whose mortgage the nonprofit buys can pay back into the fund and replenish it, allowing the program to bring in new underwater homes.”
The Las Vegas Sun in Nevada. “The Nevada Legislature is the land of ‘unintended consequences’ — the term used for the effects of bills that aren’t anticipated. The best example from last session is a mortgage foreclosure bill, Assembly Bill 284. Its intent was to crack down on ‘robo-signings’ of mortgage documents, to prevent fraudulent paperwork and keep a bank from wrongfully taking someone’s home. The unintended consequence: It caused a dramatic drop in foreclosures in Nevada when it went into effect in October 2011.”
“On the surface, stopping foreclosures is great. But banking lobbyists and housing experts say it has created another problem — people staying in their homes without paying the mortgage and with no intention of doing so. These so-called ’strategic squatters’ are potentially creating another housing bubble and slowing the Nevada housing market’s recovery, analysts said.”
The Arizona Republic. “Steady improvement in metro Phoenix’s new-home market has developers and homebuilders scrambling to buy property for dozens of new subdivisions projected to spring up over the next few years. With new-home building up 71 percent in 2012 over 2011 and the number of available lots dwindling, homebuilders sealed nearly 100 land deals in December alone that will create thousands of homesites.”
“For decades, the homebuilding industry has been one of the state’s biggest economic engines, with at least one out of every three dollars generated statewide tied to housing, according to Arizona Republic research. ‘When I look at what’s going on in the Phoenix-area housing market, I am bullish. Employment and population growth are up. Buyers are purchasing new homes, and builders are making a mad dash to buy more lots to keep up with demand,’ said Charley Freericks, president of Scottsdale-based developer DMB. ‘We have gone over the numbers carefully and see 17,000 new homes going up this year.’”
“Real-estate analyst Mike Orr believes builders must construct more houses in the Phoenix area this year to keep up with buyer demand. Another reason: The number of houses offered for resale has hovered near a record low for the past year. ‘It seems many people may have decided to hang onto their homes in an effort to let values keep going up. I also anticipate another possible drop in supply this spring,’ said Orr. ‘Unless homebuilders can start keeping up with rising demand, we may have a chronic supply problem.’”
“Kim Underwood, who now rents in Tempe, has been shopping for a new home in the southeast Valley for the past few months. Prices are higher than she expected, so she’s expanding her search. ‘I know a couple who bought for under $300,000 in Gilbert last summer. I looked at houses in their neighborhood, and prices were $20,000 to $30,000 higher,’ she said.”
The Casa Grande Dispatch in Arizona. “‘2012 was all about low inventory, which has been driving up home prices,’ explains Orr. ‘Foreclosures and short sales have gone down, eliminating the sources of many cheap homes, so the more expensive types of transactions, like normal resales and new-home sales, went up. With prices moving substantially higher, it’s not surprising that buyer interest eased a little,’ Orr says. ‘We still see multiple bids for many resale listings, but demand isn’t as strong as it was in spring 2012.’”
AZ Family in Arizona. “Good news for folks looking to buy a home in the Phoenix-area market. While it’s still a buyers’ market for the most part, that buyer is changing.Valley realtors say investors have pretty much bowed out of the area. Realtor Jardin Ratzken says the valley market used to be flooded with investors from elsewhere, thanks to low housing prices. But now with prices rising and inventory drying up, investor interest seems to be cooling, as they look elsewhere for deals. ‘Right now investors are backing out go to different markets due to the fact prices rose dramatically over the last 12 months,’ Ratzken says.”
The East Valley Tribune in Arizona. “Careful, East Valley. With apologies to Marty McFly, that forming line many think is leading to recovery instead is into an economic time machine that’s once again taking us back to the future. It’s the same machine Arizonans have eagerly returned to after every economic downturn in recent memory. Set the controls to postwar Arizona, say 1955, and — poof! — our old friends from Hallcraft, Allied, Suggs, John F. Long and the other great homebuilders of mid-century are there to greet us.”
“And whenever that economy went sour, community leaders vowed to diversify it as it rebounded so that when the next recession struck, the increased variety of financial infusion would have lessened that crisis’ severity, perhaps even its longevity. But no sooner did the sun shine on us once more, back into the time machine we went.”
“Morgan Brennan of Forbes magazine reported in January that Phoenix’s position as the 8th fastest-growing American city was not expected by the magazine’s staff as it compiled its list of the top 20 of 2012. ‘Hard hit by the bursting of the housing bubble, the desert metropolis is welcoming a fresh influx of newcomers, particularly from California and the Midwest,’ Brennan wrote, predicting that Phoenix’s population would increase by 2.7 percent this year, the fourth-highest rate on that list.”
“Brennan quoted an expert, Lee McPheters of Arizona State University as saying that the number of jobs here is increasing in the health care, warehousing, construction and service industries. Sounds terrific, right? But here’s McPheters quoted by Brennan: ‘Interestingly, it’s younger people, ages 20-29, coming in now who don’t have a house to sell, are unmarried, that are the driver of growth here now,’ he told her.”
“Young arrivals are a vital component to growth, but with no house to put on the market back home, it’s not quite clear whether they want a house to buy here. What we have been learning about the next generation of families is that the Great Recession has taught many of them that a 30-year mortgage might not be the most desirable thing, both from a financial standpoint and from the outlook of a quick pivot to a new community to take advantage of.”
“So the siren song begins again. Come to Arizona and build homes. Come to Arizona and the sunshine in the gorgeous Sonoran desert. Live the resort lifestyle. These slogans sound virtually the same as they did in 1955, 1975 and 1995. Our community leaders, financial experts, residents, must at long last listen to the experts, see the changes in the attitudes of the young, and step away from the time machine, because the past is no longer there to greet us.”
“We must plan a real future based on different economic pillars in addition to the proliferation of rooftops. New Arizonans should be always welcome. But we have to make sure they have jobs. Powerful as it is, the housing market has let Arizona down once too often for it to stand alone again.”