“Wishful Thinking” In Las Vegas
In Business Las Vegas reports from Nevada. “In his latest take on the Las Vegas housing market in light of new home sales remaining weak, new home prices dropping and inventory of existing homes increasing, local housing analyst Dennis Smith said he appears to have underestimated what was happening when he predicted at the end of 2006 that the market was bottoming out.”
“Smith said any suggestions that the market was going to improve by the end of 2007 appears to have been just wishful thinking. Smiths said he wouldn’t be surprised if some neighborhoods saw home prices drop as much as 20 to 30 percent because of a glut in those areas.”
“The fallout from the subprime market has been felt by the housing market because of tighter credit standards, Smith said. In some cases, it’s taking a credit score of 720 to qualify for a 30-year fixed loan. ‘I have heard this from builders and lenders, and it is not helping sales,’ Smith said.”
“The growing inventory of existing homes also makes it harder for those who want to sell their home and buy a new one. Smith reported that the cancellation rate in March ranged from 24 percent in the northwest to 42 percent in the south valley.”
“Michael Krein, who handles foreclosure cases, said what’s happening in the foreclosure market is nothing in comparison to what’s coming. He said he was handling about 500 repossessed properties and would like to add staff to handle another 500.”
“Many adjustable rate mortgages will kick in by November and a second wave of cases entering foreclosure will occur, he said. ‘The worst is yet to come,’ Krein said.”
“John Restrepo, principal of Restrepo Consulting Group, spoke at a commercial real estate seminar when he joked about the three reasons why people should believe economists: 1. We have a firm grasp of the obvious. 2. We generally don’t know what we are talking about, but we make you feel it’s your fault.”
“3. We have forecasted nine out of the last five recessions.”
The Associated Press. “In the rampant real estate speculation of the Las Vegas valley three years ago, people lined up outside Pulte Homes sales offices overnight.”
“Having seen his house in an upscale part of suburban Henderson jump $200,000 in value in 18 months, Sam Schwartz felt he couldn’t miss any part of the boom. He spent the night in the parking lot with about a hundred other people.”
“Most people waiting were flippers just like him, he said. ‘We had seen real evidence of what was possible in this crazy, inflated market, and we just wanted to get a piece of that investment equity,’ Schwartz said.”
“But when home prices unexpectedly took a backward step, many investors seeking to cash in quickly were left ‘upside-down,’ or owing more on their mortgages than what their homes were worth.”
“The result was a glut of homes in the marketplace, communities spotted with empty houses and for sale signs, and a foreclosure rate in Nevada that leads the nation as owners unable to sell became saddled with unbearable debt payments.”
“Realty Trac statistics show dozens of homebuyers in the Las Vegas area have more than one home in the foreclosure process, a telltale sign of investments gone wrong. One person has as many as 15 mortgaged properties in arrears.”
“The bulk of the state’s foreclosures, or 91 percent in March, were in Clark County. One of every 30 homes in Clark County began the process toward foreclosure last year.”
“The day Schwartz reserved his home, the sales staff was raising prices $20,000 after every fifth buyer came inside. The $500,000 house he and his wife were eyeing had shot up to $540,000 by the time they sat down. Somehow, it still seemed like a good deal.”
“‘Everybody was thinking, ‘Hey it’s not the end of the world, because the homes across town are selling for $720,000. We have almost $200,000 in equity in the house and it isn’t even built yet,’ Schwartz said.”
“The Schwartzes were able to cancel before closing on a property that suddenly was worth only $490,000, and recoup their deposit on a legal technicality. Schwartz, a 44-year-old life coach, said he ‘narrowly escaped financial disaster.’ But…he expects to see among the clients he coaches to succeed in their lives and careers.”
“‘There’s going to be a lot of depression, a lot of anger. A lot drinking, gambling, and desperate stuff going on,’ he said.”
“New home builders are slowing down the pace of new projects in Las Vegas and are giving agents commissions of up to 12 percent and up to $100,000 in upgrades such as pools, granite countertops and appliances. ‘The speculators completely dried up,’ said Paul Murad, a real estate observer and author of ‘Manhattanizing Las Vegas.’”
“In March, the number of resale listings for single family homes, condos and townhouses in the Las Vegas valley grew 30 percent from a year ago to 27,282, according to the Greater Las Vegas Association of Realtors. Sales and the value of homes sold were both down 38 percent from a year ago.”
“State lawmakers are considering a range of bills that clamp down on the easy mortgage lending that helped heat up the market. ‘The biggest loan I ever saw, a person bought a $1 million property and only had to come up with $1,000 in cash,’ said Scott Bice, the state’s commissioner of mortgage lending.”
“‘I don’t think anything will ever prevent speculation,’ he said, but added that new regulations and tighter credit requirements by lenders will eventually return the market to the good old days: ‘When it takes good credit and money in a transaction to close it.’”
‘Officials at Riverwalk Towers, which used to be the Comstock Casino, report they have sold about 90 percent of their units. There still are about 13 units left, including a penthouse, said Tasheena Weishaar, director of marketing. ‘Everything has slowed down, but I don’t think that the condo market is in the same category as the housing market,’ Weishaar said. ‘We have not slowed down as much as they have.’
‘The market is not as hot as it was in 2006, but a large part of that is a lack of speculators, Clark said. ‘I’ve been on the project for six months now, and we have not had any speculators buy in that period of time,’ Clark said. ‘People are driving harder bargains, but we’re still meeting our sales goals.’
‘”The market is not as hot as it was in 2006, but a large part of that is a lack of speculators,” Clark said.’
I am very skeptical of reports that former bubble markets have run out of speculators. The problem is not that there is a shortage of speculators, but rather that speculators have rapidly transformed themselves from buyers to sellers. Such is the nature of market crashes.
‘Everything has slowed down, but I don’t think that the condo market is in the same category as the housing market,’ Weishaar said. ‘We have not slowed down as much as they have.”
Wow, look how the condo market is doing.
I thought the condo market was part of the housing market. BTW is the condo market doing worse?
Let’s cut to the chase…
Everything that has gone wrong economically, the past decade, has been the result of gambling.
First step towards our country becoming solvent again?
BAN GAMBLING
speculating on commodities is gambling
The only speculation in regards to commodities, is when your holdings are represented by a few blips on your computer screen and nothing more.
That is gambling.
soooo, we should only be allowed to invest in areas that are 100% sure things? Remember, RE “only went up” for quite some time.
No thanks, I’d rather make my own investment decisions, thank you. Keep your hands in your own pocket
The specualtors submitted liar loans and the lenders or builders didn’t call them on it . Normally the rules are in place that a speculator has to put more money down and pay higher rates and fees and they have to have the debt of the payment count against their debt ratio . A speculator loan is a higher risk loan and people will walk from spec. homes before they walk from their personal residences . Because of the liar loan rubber-stamping lending going on the investors/flippers did not really qualify . Usually the lending requirments for speculators limits speculation purchasing in the greater market .So in the final analysis it was another aspect of fraud and faulty lending that cause the excess speculation purchases .
In fact, during the housing boom the builders were marketing to speculators rather than end-users in spite of the builders advertising that a project was a end-user project .
Now look ,there are a bunch of new home/condo projects out there that are vacant with the speculators unable to sell .
The builders along with their “special lenders” would of continued with this sell out to speculators game but the market turned and builders had to reduce to get end-users .
I do question how much blame needs to go to the builders and their special lenders and speculation borrowers that were in large part fraudulent .
In 2006 the builders switched to incentive and cash-back loan fraud that undercut the speculators and I’m sure they are going to get sued for that foul play also by the time this all shakes out . All the greedy people players deserve each other and they will end up in lawsuits with each other . Gee , and it started out looking like such a good realtionship .
Gambling with your own money is one thing. Gambling with someone else’s… generally leads to doom.
The Great Depression is one instance of laissez-faire economics unchecked. The current housing debacle would have been prevented by requiring just 5% down. Our current Reality is the best argument to anyone who wonders why the market can’t just handle itself.
No offence, but if you think Americas first great depression was caused by laissez-faire economics you understand very little about markets and money. The ebb and flow of markets has always been there but it took manipulation by regulation of the economic system to create a cycle of the magnitude of the credit expansion called the roaring 20’s that was followed by the necessary contraction called the “Great Depression”. People don’t normally loan perfectly good money to fools, but you throw in artificlly low interest rates on competling investemets, along with a long period of goverment postponed correction, and people do stupid things.
“In his latest take on the Las Vegas housing market analyst Dennis Smith said he appears to have underestimated what was happening when he predicted at the end of 2006 that the market was bottoming out.”
“Smith said any suggestions that the market was going to improve by the end of 2007 appears to have been just wishful thinking.
- Dennis was about 6 -12 months behind the curve … so START looking for the bottom at the end of 2008.
Don’t forget the golden rule of 7-10 years real estate cycles. The bottom will be in 2014
I like that Golden Rule.
I also think that for some locations, it’s going to be sooner. Others? Could be much longer.
In any case, the average mortgage payment in California at the recent housing peak was 22% higher than at the last peak in 1990. And that’s including adjustments for inflation.
The bottom is certainly a long ways off.
When using history as a guide please keep in mind previous boom times weren’t built on the Ponzi financing schemes we’ve seen during this one. The writing is on the wall - the next few years will bring double digit corrections in many areas (except my area, of course).
you are neglecting the effect of a higly probable population decline along with boomer retirement effects.
Japan had their 20 years. We will have ours.
What the heck is a “local housing market analyst”, and what was he thinking when he announced we’d reached the “bottom” after about one year, prices off by single digits. Who pays these people?
lainv girl:
He wasn’t the only one!
Interest rates are low. Everyone wants a home, and has asset protection against the money creation of the Centralbankers.
Problem of course, was very few realized the massive speculation & fraud perpetrated by buyers, lenders,mortgage investors & sellers that brought the US {and the globe} to this excess!!! Clearity of these issues only began to come to light when the Sub-prime lending implosion of 2007.
“only began to come to light…”
Yes, only began. Many still can’t see (or choose not to see) the continuing downturn in housing. To be looking for a “bottom” this soon is either being naive or deceitful.
Bingo inspired ,you hit it on the nose IMO.
It is really different this time .Under the terms of “crazy lending “the only way to prevent the crash was by real estate going up every year . As much as the cheerleaders tried to get another rally going ,hoping that the market woud continue to increase yearly ,it wasn’t in the cards .
“Smith said any suggestions that the market was going to improve by the end of 2007 appears to have been just wishful thinking. Smiths said he wouldn’t be surprised if some neighborhoods saw home prices drop as much as 20 to 30 percent because of a glut in those areas.
The fallout from the subprime market has been felt by the housing market because of tighter credit standards, Smith said. In some cases, it’s taking a credit score of 720 to qualify for a 30-year fixed loan. ‘I have heard this from builders and lenders, and it is not helping sales,’ Smith said.”
If people like Smith keep giving their honest opinions, the LV market will drop like a rock. The REIC ought to set up a hush fund to bribe folks like Smith to keep their mouths shut.
Credit score of 720? My guess is there aren’t a whole lot of people like that anymore, I’m seeing a whole lot of commercials here in LA for help with debt relief/debt counselling, and now there are signs posted on electricity posts in my neighborhood to “fix your credit”.
You would be surprised, I think. Basically if you have a lot of credit cards, can make the minimum payments on time, and still have at least 30% of your available credit unused, you’re a slam-dunk for a 720.
I have to believe that there are still a fair number of people out there who can manage that much. For the “credit repair” companies to thrive, I imagine that even 10% of the population in trouble at any one time would be enough. Imagine that you had a product to sell that 10% of the population really thought they needed - and that 10% was constantly churning. It would be hard to fail in a business like that.
“fix your credit” LOL they are going to get “fixed” alright, like going to the sharks for money.
SEE my post today on the “local market comments” I visited an auction, details listed….in short, it didn’t go well.
Barry Ritholtz had a post up the other day on a company that allows you to rent out your credit to people applying for loans. They pay you a fee and you list them as an authorized user on a high limit credit card. This is supposed to “flow through” to their credit rating.
I’m not sure if we are nearing the end of this insanity or only beginning.
“‘There’s going to be a lot of depression, a lot of anger. A lot drinking, gambling, and desperate stuff going on,’ he said.”
I’ve never seen Vegas better described.
Is this supposed to describe something new for LV?
Fear And Loathing In Las Vegas!
My brother in law’s father represents this perfectly. Just got laid off from his high paying casino management job, but has nothing to show for it since he was spending like crazy and had leveraged his house up to the hilt to pay for his new wife’s habits. Poor guy is like 70 years old so what is he gonna do now? His plan was to take what little he had to the casino to try and win enough to cover what he owes! Luckily his sons stopped him, but there is no good news in his future anyway I’m sure.
Yeah, we were visiting relative in Henderson last year. Everyone’s got a similar story to tell:
An in-law went into the home of a recently deceased aunt and found around $5,000 stuffed under a mattress. And then another $1,000 hidden elsewhere. Off to the casino she instantly went.
She ended up literally tearing the whole house apart and found another fifty grand or so. Needless to say, that money didn’t last long.
We drove by Henderson last week…
Very ghosty.
Poor guy? Please.
Sounds like the new wife might have a plan though.
Ha! I saw him this morning!
Mr Las Vegas
Sounds like the ‘life coach’ needs a life coach.
1.What kind of credentials do you need to be a “life coach”?
2. Who actually seeks out and pays a guy like this?
Life Coach = another way to throw away your money.
I’m guessing 99% of his clients are females who think they need hand-holding and “affirmation”, whatever the hell that means, and the other 1% are pre-operative transsexuals. This is one of those silly make-believe careers that’s going to pop like a soap bubble in any economic crash.
Check out Nordine.com for a laugh - this house sold in 2006 for 407K, now on the market (still overpriced) at 295K (guess they ran out of illegal aliens with credit scores of 720):
http://www.nordine.com/flyers/1624_57th.pdf
That’s hilarious, good find. I’m glad to see they beautified the front yard for the listing photo.
But hey, it comes with a garbage disposal!
I know people who won’t even drive through that area on the freeway, due to the remote risk of getting a flat tire and being forced to pull off.
And the place is mostly gutted, but they ask $295? That price is off by almost an order of magnitude.
It is because it is bank owned:
http://lalife.com/address/1624_W_57th_St_Los_Angeles_CA_90062
What is sad is that it has a chance to sell at that price to a flipper (yes, we still have those in LA)
No worries. As the flyer states, they have “mucho REOs”
LOL.
Professor Shiller predicting big crash (is he a perma-bear or is this news, I don’t know?):
http://www.newsmax.com/money/archives/st/2007/4/25/104537.cfm
Schiller has been rather bearish on equities and housing for quite a while, but his analysis is scientific. He also called the dot com bust. I would not use him for market timing, but for a good overview. Remember that he’s the one who published the housing price, inflation adjusted graph, for 1890’s to the present, showing that the recent RE boom is the biggest since the 1890’s.
Sir John Templeton predicting housing crash (it’s an advertisement, but still worth the read):
http://www.newsmax.com/fir/fir-templeton3b.cfm?promo_code=29F5-1
“While euphoria sweeps stock markets here and worldwide, there are at least a few voices of dissent. One, unsurprisingly, is legendary value investor Jeremy Grantham - the man Dick Cheney, plus a lot of other rich people, trusts with his money. Grantham … has been a voice of caution for years. But he has upped his concerns in his latest letter to shareholders. Grantham says we are now seeing the first worldwide bubble in history covering all asset classes.
“‘Everything is in bubble territory,’ he says. ‘Everything. The bursting of this bubble will be across all countries and all assets.’
“‘From Indian antiquities to modern Chinese art,’ he wrote in a letter to clients this week following a six-week world tour, ‘from land in Panama to Mayfair; from forestry, infrastructure and the junkiest bonds to mundane blue chips; it’s bubble time!’
I read John Maudlins newsletter where this was posted. One great quote from the article…
-”‘Everyone, everywhere is reinforcing one another,’ he wrote.”
This sums up this ponzi gig that the housing market has just experienced.
“Realty Trac statistics show dozens of homebuyers in the Las Vegas area have more than one home in the foreclosure process, a telltale sign of investments gone wrong. One person has as many as 15 mortgaged properties in arrears.”
Casey and Jeff are just two that we’ve heard about; there’s many more in the wings.
Remember the old days, when LV_landlord used to argue “it’ll never happen here”? And all those other trolls who argued that RE would never go down…LOL. We still have clowns like that up here in Vancouver, but I expect they’ll be similarly silent by this time next year.
Yeah, Id love to get an interview with her now, ha,ha. I have lived in Las Vegas since October(from LA due to job transfer). This market is just stupid and must go bust because:
1)The is no money in Vegas-it is a blue collar, immigrant driven,White trash (forgive me PC types) town.
2)I am renting a huge house for 1550 a month. House is in a cul de sac of 12 homes-5 have been for sale for months and I never have even seen 1 prospective buyer looking.
3)The median price doubled from 2003-2006(like other bubble market) with very little demographic change-what market force caused this-only one Californians cashing out and speculating.
4)Teaser loans are resetting.
This will be a huge shake out!
Crazy:
I’ve spend a lot of time on LV over the last 15 years, and I largely agree with you, but a couple of things.
1. The “trash” is rainbow colored.
2. You would be anazed at what some of the union employees are pulling down. Yes, it’s blue collar, but it’s substantial money nontheless. And the town is heavily unionized.
3. There are a fair number of successful small businesses there, but they are buried in the statistics, which are dominated by gaming.
4. LV remains a popular destination for young people looking for a way out of SoCal. These folks do not show up in the housing numbers in proportion to their numbers, because a lot of them are smart enough to take advantage of the low rents.
All of that said, greater LV housing prices are going to crash like a depleted uranium brick. The culprits are massive overbuilding, insane speculative price run-ups, and malinvestment (building the wrong kind of housing). But it won’t be because there is no money in Vegas.
Hey sm,
Yes, I was just using the term “white trash” as a type rather than race, it is many different ethnic groups.
I do agree that it is a union town where even maids make over 30 K a year but the population is highly uneducated, and 60-70K for a union electrician or pipefitter doent go that far with 3-4 kids etc. If you want some facts check out any of the demographic numbers on Vegas, median income is one of the lower in the country, education low, crime high etc. If you want some visual clues just go to a grocery or mall even in West Vegas(the good side of town), the words that will come to mind are polyester, beehive hairdoos, cellulite etc-not a pretty picture.
Ooooh, building the wrong kind of housing. As in: highrise $500k 1br condos in vegas.
That would make a great weekend topic by itself.
Unfortunately, the number one industry outside of tourism is construction. Outside the strip, Vegas is going to turn into one HUGE ghost town.
Hey, yeah, what happened to lasvegaslandlord? This blog is not nearly as much fun without Nemesis.
“But when home prices unexpectedly took a backward step, many investors seeking to cash in quickly were left ‘upside-down,’ or owing more on their mortgages than what their homes were worth.”
Yeah, prices “unexpectedly took a backward step.” Unexpectedly for folks with their heads firmly planted in their rears.
“But when home prices unexpectedly took a backward step, many investors seeking to cash in quickly were left ‘upside-down,…’”
Sounds like they backed into Vlad The Impaler.
Vlad_Tepes
Would make for an excellent nom de blog…
“‘The speculators completely dried up,’ ”
Well this is not exactly true…until I see the emaciated mummified “dried up” corpses of the flippers…I’ll bide my time.
Right . Didn’t the equity locust go to Tulsa OK. recently looking for cheap property to flip ? These “market makers” keep putting tract in these off the wall towns with no jobs to lure the traveling locust to invest . Some of the locust are tied up with the last spec. purchase they made that they can’t sell . All the seminar groups claim the rich baby boomers are going to buy the flipped property .
I remember 40 years ago a bunch of people started buying up land in Palmdale because of the rumor that they were going to build a airport in the area . Still no airport .
Isn’t Edwards AFB out there?
“Michael Krein, who handles foreclosure cases, said what’s happening in the foreclosure market is nothing in comparison to what’s coming. He said he was handling about 500 repossessed properties and would like to add staff to handle another 500.”
Staff work…that would work out great for the flippers and 2nd home owners. Look above work is available… thats the only thing thats positive.
It’s VEGAS Mr. Highroller..You WIN some…You LOSE SOME
BUT 15 ??? That’s ENTERTAINMENT!….tee hee hee
“Smith said any suggestions that the market was going to improve by the end of 2007 appears to have been just wishful thinking. Smiths said he wouldn’t be surprised if some neighborhoods saw home prices drop as much as 20 to 30 percent because of a glut in those areas.”
He finally started reading Ben’s blog……about time!!
Crazy in OC.
“There is no-money in Las Vegas” immagrant driven PC town”….
Funny what a wealth of knowledge someone from SoCal learns after 6 months.
Don’t get out much do ya fella?
Here’s a tip!
4 or 5 Chinese businessmen can drop in one weekend enough $$ to employ & cover costs for the entire strip for 1 month. The Chinese love gambling so much, several of the LV businessmen have expanded to MacCau and another has agreed to a $4 Billion hotel casino in BaRiaVungTau Province in Viet Nam. I also, read where the Wynn Treasurer sold a few thousand of his shares for $2mill. plus.
Oh, and if you have wheels, the KY.Derby will be soon, make sure you make a tour of at least 4 or 5 of the hundred or more so casino’s that will be show casing that event for the weekend. The handle will be mind boggling….but not like when a big fight is in town. On those weekends,
alot of the country’s drug money finds it’s way through the money cages, and into Las Vegas’s pockets.
For us to keep. Thanks Cali we love yah!
So will the big Chinese spenders keep going to Vegas, or will they stay in Macao and SE Asia?
I wish I knew?
OC crazy:
I thought I would share just one moe thing.
That typifies Las Vegas and real money in this town.
Several years ago I had the pleasure of meeting & knowing a man named Jack Kent Cook. {now deseased} He lived in Vegas off of Rancho Dr. You may know of him being previously from SoCal. Let’s see he owned the LA Collisium (called The house that Jackbuilt) Lakers,Kings, Redskins (his true passion) Group W, had cable companies around the country, his marriage settlement at the time was 1st in the Guiness book of records. He left us to go to DC to be with his beloved Skins. So why did Jack come here?
Same reason others like him do..no estate tax and no income tax.
Have you ever heard of a man named GB Henderson (now deseased)?.
Of course not! His home is under ground off of E Flamingo near the TGIFridays. It’s on the LV bus tour! He lived and died here. Here is a partial on his resume - owned most of the property from Koval to Md Pkwy E Flamingo to DI. He financed a man named Spano’s money to build/finance apartment buildings in LV in the 1970’s The G-3 Grumman jet {premier exec jet) was originally financed by him when Paulson from VanNuys CA ran out of money. He owned a Swiss bank, was a principal client of J Ardan - NY gold dealers. Oh, he made his fortune merging his company with Avon Products - womens cosmetics and became their President. Oh yeah, he was the President of the NYSE for a time before I met him.
Funny thing with all that money in SoCal why Paulson & Spano’s came to Gerry ( a man with vision) a guy in Vegas?
correction
:A Collisium s/be :LA Forum - Is the house that Jack built
sorry -
What a bunch of scumbags! Everyone of these thugs raped the system now they have a change of heart?
All the so called experts politicians the REIC all come out after this disaster went to extreme levels.