Banks ‘Tighten Purse Strings’ In Las Vegas
The Review Journal reports from Las Vegas. “Loan officer Bob Charles has worked eight months trying to find construction financing for a luxury condo project in Las Vegas that may be ‘caught in the same mud’ as Club Renaissance, a 60-story downtown tower that was announced in January 2005 but has yet to break ground.”
“‘Of the 80-plus lenders that would have thrown their money at this project last year with the frivolousness that Paris Hilton shows when she throws money at her next party, only two lenders are left that will even take a call on a condo project in Vegas,’ Charles said. ‘Well, Paris Hilton came out last month to say that she’s not partying anymore and lenders have mostly done the same.’”
“Banks have tightened their purse strings on construction financing for high-rise condo projects in Las Vegas, especially after projects such as Krystal Sands, Aqua Blue and Icon were canceled, leaving buyers high and dry and Las Vegas with a black eye on Wall Street.”
“Demand for housing has cooled, so builders are looking to unload their inventory and are not as aggressive as they had been in building new units, said Paul Engler, for Chase commercial real estate banking in Phoenix. ‘It’s been interesting times all over the country,’ he said. ‘We’ve been picky about condo projects we’ve invested with. What we’re all watching is affordability of housing, which bleeds all the way down to land prices.’”
“‘What is somewhat unique to Vegas is the number of deals brought forward by completely inexperienced developers and often on unremarkable sites, and we’re talking about $100 million-plus proposed developments,’ said Jeff Teetsel (with) Fremont Investment and Loan.”
“Las Vegas has next to no primary occupant demand to supplement the demand from second-, third- or fourth-home buyers for the very high-end units,’ Teetsel said. ‘In a market with not much more than 1,000 high-rise units ever completed before the last couple years, it was absurd to see 40,000 to 50,000 proposed units announced in the space of two to three years. It’s not surprising to see a number never get out of the ground.’”
“Until recently, all a developer needed to obtain high-rise entitlements in Las Vegas was a mock-up of a possible project, so hundreds of ‘wannabe developers jumped into the pool,’ Charles said. Developers who failed to lock in their construction costs are just buying time now and it doesn’t look as if they’re going to make it, Charles said.”
“‘So, are things bad? Well, I just saw an ad to try to entice people to buy from a certain Vegas condo under construction that said, ‘Free one-year mortgage, free one-year HOAs, no down payments,’ so I’d say it looks bad,’ he said.”
The Nevada Appeal. “Nothing can illustrate the area housing market better than the tale of a newlywed couple with dreams of equity. About a year before Sara and Cory married, they had a dream of the perfect career in house flipping.”
“After a five-year national housing boom the market had started to slow over the year into a hot pool of uncertainty, she’s cautious about house flipping here. ‘The market here, it is too late. It’s too expensive,’ she says.”
“Boom areas of Nevada could have the most dismal price slump in the nation. Carson City is on the list of metropolitan areas projected to have the largest decline in median housing prices. One sign of a scare: seller incentives. Local real estate agent Bob Fredlund said sellers are getting competitive to sweeten the deal. They are giving higher commissions to the buyer’s agent, cash awards of $10,000, trips to Hawaii.”
“‘The people really in trouble are the speculators,’ says Gil Yanuck, assistant state director for the AARP’s Tax-Aide program. ‘They went and refinanced their house to speculate and buy another piece of property that they thought they were going to hold on for two to three months and flip it. Now they have two mortgage payments to make.’”
‘As a commercial contractor, Crisci Custom Builders benefits from the slowdown in the Las Vegas housing market, Crisci Vice President Rick Ramberg said. Residential builders are ‘backfilling’ the shortage of construction labor in Las Vegas, especially the ‘dirt guys’ who do grading and underground utility work, Ramberg said. ‘They’re looking to us for work right now,’ he said.’
OT: The current nobel prize winner in economics does NOT own his home!! There’s a story here for the press to pick up.
I don’t doubt it but where did you get that info?
Interview on CNBC when asked about his assets.
Nice to know we “priced-out” renters are in Nobel company.
Saw the video interview. His response to the question why he does not own a car or house that he does not want hard assets, just paper assets (liquid assets?). Should be nice to know the rationale behind that thinking. OTOH, I will keep on renting and keep my assets liquid just to keep in-line with the newest Nobel prize winner.
“‘What is somewhat unique to Vegas is the number of deals brought forward by completely inexperienced developers and often on unremarkable sites, and we’re talking about $100 million-plus proposed developments,’ said Jeff Teetsel (with) Fremont Investment and Loan
_______________________________________________
We have an inexperience developer in Bakersfield who is building twin 31 story towers at a cost of $400 million.
Is that tool in Bakersfield really going to build those condo towers? I see he still has that $2.2 million River Oak home for sale still. Did that tool buy that thing or is he just listing it for someone else?
He purchased to flip. I am waiting for another price drop. He has gone from $2.6 to $2.2. He did receive a substantial commission on the “sale/purchase” in March 2006 when he “bought” it for $1,750,000. 7 months later and the carrying costs are starting to eat away at his profits.
Per the newspaper a few weeks back - They have spen $2 million on studies, drawings, etc.. and have investors “lined up” to participate in the deal of a lifetime. Go Figure.
What would one do with a 31-story tower in BAKERSFIELD??? Use it to pump oil?
And you wonder why this bubble is out of control?? Exactly - We have enough land here for 5 million people.
One thing Bakersfield has is plenty of land. He bought it to flip. Sounds to me like a desperate attempt to gain cash fast.
Is it going to be a prison?
If your speaking in metaphors, then the answer is yes.
LOL.
“‘The people really in trouble are the speculators,’ says Gil Yanuck, assistant state director for the AARP’s Tax-Aide program.
Uh…is this the same AARP that retirees belong to? You know, the retirees that sucked out and spent equity in HELOCs all over the country?
You know, I think this whole housing bubble can be tied into our nations fixation with consumerism. The whole idea that no one will like you if you don’t have stuff is ridiculous but it is what we have become.The greed in this bubble is just crazy people. How can you rationally justify these 600k stucco boxes, come on folks. I am not sure where we are headed with all this but could get very ugly. I have been researching the net about anti-consumerism and find some pretty interesting writing out there. Loneliness, depression, suicide, lack of friends are all a result of this mess.Some of my readings are suggesting that we are trying to consume our way to happiness. Ain’t going to happen people.You know the corporations are making big bucks on the whole deal.My message is that there are way more probelms here than merely financial.
Well, look no further than the second article mentioned. Newlyweds with big ideas about house flipping for a “career.” Heaven forbid they might actually have jobs and go to work somewhere. And of course, no thought is given to the next GF who would be the buyer of the flips. I was a lazy slacker myself when I got out of school. I didn’t want to work at all - still don’t. So, counter-intuitively, the way out was to work my ass off for about 15 years so as to not have to work again (the greater fools in the stock market helped though, I have to admit).
Do their flipping jobs count towards employment? no wonder the unemployment rate keeps dropping. So many entrepreneurs. If flipping don’t work out, they will come back to search for real job, and there goes the unemployment rate….lol
The unemployment rate is only the measure of people who lost a real job in the last 6 months. So they, along with millions others, would be uncounted in the official figures. Still think we have “record low unemployment”? Feh.
I was away for a couple of days…did anyone comment on the 30% haircut on this high end condo project in Boston…The last line in the article says it all..
http://business.bostonherald.com/businessNews/view.bg?articleid=161259
They are giving higher commissions to the buyer’s agent, cash awards of $10,000, trips to Hawaii.
…anything but lower the price. This is the Realty Clowns at work trying desperately to save comps.
“Incentives.” Don’t make me laugh. I not only don’t want incentives, I don’t want to do deals with people making incentives. Incentives mean I am competing against people who attach some value to incentives. Forget that. Why swim in a pool full of people who lack bladder control? I can give a good price on a solid asset but not until all the idjits get flushed out. Incentives are weird things. They are debt financed depreciable assets. I’ve seen it in person for decades. The people who moved their savings in the 80s for a toaster all atwitter about the toaster and none to the interest rate. The 90s when the two weeks in Wakiki was “free.” and now the 00s where Hummers are considered sweeteners.
“Why swim in a pool full of people who lack bladder control?”
ROFLMAO!!!
Thanks, I needed that!
and our buddy greenspan is back in the news. “housing has bottomed out”. “the bubble was the result of the end of communism, not easy credit”
i kid you not. he is either
A) trying to preserve his legacy or…
B) having initial signs of senility
I vote for initial signs of senilty. We saw the same symptoms in Reagan during his second term as president.
Actually, G has a point. The collaspe of the Soviet model released tremendous amounts of mis-directed consumer dollars; the advent of the real information age and the internet spawned huge new information-related businesses; and the development of JIT marketing models shot productivity two the moon. These led to the overkill of easy money/no-risk lending. The same thing happened 80 years ago, but it ending badly. We called it the Great Depression.
It has been argued that the advent of mass production had a similar boom-bust effect on the economy from the 1920s to the 1930s as the transition you suggest is currently underway in the wake of the tech boom-bust.
http://eh.net/bookreviews/library/0071.shtml
‘Well, Paris Hilton came out last month to say that she’s not partying anymore and lenders have mostly done the same.’
Sounds like the wild debauchery has morphed into a funeral.
Bummer…
Sobering article. Really hit home. Comments don’t make sense…. but I never read past the part about Paris Hilton announcing the end to partying.
“‘What is somewhat unique to Vegas is the number of deals brought forward by completely inexperienced developers and often on unremarkable sites, and we’re talking about $100 million-plus proposed developments,’ said Jeff Teetsel (with) Fremont Investment and Loan.”
This is not unique to Vegas. Take a look at any number of developments in Arizona. Amateurs, fools, and scoundels optioned farm/ranch land, filed bogus and incomplete subdivision reports, set up accounting practices that make Enron look respectable. All in all, in Arizona, it’s been like “Jackass 3″.
What happens if a condo HOA goes bust? It sounds like a lot of these places are selling slowly so their has to be a chance of a 20% occuppied building going broke due to a lack of hoa dues to support maintenance, staff, etc.
They just assess the rest of the occupants more. That’s why you should avoid HOAs (especially for SFH) like the plague.
HOAs for SFH are not nearly as risky as condo associations. Condo fees are significant because they include upkeep for a significant amount of common space and capital expenses (like a new roof) and maintenance.
HOAs can be extrememly helpful in keeping your neighborhood a nice place to live, or they can be overly restrictive and a PITA. Some are anal about housing colors and have strict architectural control boards. But there are also people who end up having a neighbor move in and park a big rusty RV on the street and put up an ugly chain-link fence in the front yard and wish they had some rules. Best case is to find out about your hoa before you move in and to become involved to make sure you don’t get any NAZIs elected to the HOA board.
Northern VA is on the money. A good HOA will keep the dirtballs from parking on the grass and mostly stay out of the way. My annual dues are $360. Most of that is to pay for the insurance costs on the community pool.
I was thinking about what happens if the HOA goes bk (can they do that- has it happened?) or is there some sort of assurance of continued maintenance and upkeep. These big condo towers with a lot of unsold inventory gotta be bleeding cash to keep up the buildings.
If a condo board is in debt and defaults, the bank can seize any condos in the building to make up for it. NEVER let your condo assoc. go into debt if you can at all help it.
If you pay your fees they can’t take your unit but in order to recoup direct losses and sometimes lawyer fees etc it can raise the HOA dues. In one unit I own a group of buyers tried to sue the association for allowing the trees, that were there went they bought the place, to grow so large it blocked their view of the pool. It cost the association a ton of money in lawyer fees and obviously created hate and discontent among various condo owners. The settlement was to cut down the trees so they could get their view back - too bad they were some gorgeous trees!! They now cost me an extra $10 per month for who knows how long. Self centered bastards with no idea that trees grow larger each and every year!!
‘Free one-year mortgage, free one-year HOAs, no down payments,’ so I’d say it looks bad,’
seeing these signs in San Diego, too
Saw my first one this week in Los Angeles, 1 one year HOA paid and 10k back to the borrower.
All these jackass builders or sellers have to do is lower the DAM PRICE! Most likely they would sell the unit, but they are trying to keep median prices high and keep the real estate market going.
The local rags are now covering this mess in ernest, but have yet to cover the real nightmare, and that is how dependent our economy is on housing. No high paying jobs here outside of the scope of housing. Dark times are looming for NNV.
just met the latest fb-er today in Carson City …bragging that you can get a real swell dealy by telling a real estate agent to only show you homes for sale that have been on the market for 90 days or more. Claims you can get them to come down as much as $10,000. Big deal, I am still not biting …still renting. They just bought a home in CC for over $400 and it’s 25 years old! Standard size …3bdrm 2 bath.
““‘So, are things bad? Well, I just saw an ad to try to entice people to buy from a certain Vegas condo under construction that said, ‘Free one-year mortgage, free one-year HOAs, no down payments,’ so I’d say it looks bad,’ he said.”
Nice way to live one year for free and then walk out. Only in America. ?It is a great country or what?”, as Larry Kudlow would ask.
Jas Jain
Jas,
I agree. People will move in and *never* make a mortgage or HOA payment. In fact, sign me up for a cool hundred units. Yes, I’ll offer them out for rent at 30 cents on the dollar. (First, last, and deposit required.) That’s what, $800/month unit? Or about a cool million…
Foreclosure will complete after 15 months… Hmmm…
Cue soundtrack 2001 space oddesy:
Cue actors in cave man outfits waking up with the sunrise.
“Las Vegas has next to no primary occupant demand to supplement the demand from second-, third- or fourth-home buyers for the very high-end units,’ Teetsel said. ‘In a market with not much more than 1,000 high-rise units ever completed before the last couple years, it was absurd to see 40,000 to 50,000 proposed units announced in the space of two to three years. It’s not surprising to see a number never get out of the ground.’”
Man has gained IQ.
I’m sorry Dave, I can’t let you finance that.
LOL!
Su-zanne… Suuuuu-zaaannnee… where does your mortgage I/O…
Man has read blog.
Yeah, GS… isn’t this EXACTLY what we told LVLandlord last year?
That was the best mental picture I’ve ever gotten from a blog.
They call him Flipper, Flipper, faster than lightning,
No-one you see, is smarter than he,
And we know Flipper, lives in a world full of wonder,
Flying there-under, under the sea!
Paris Hilton cant party anymore as part of her DUI defense.