Sin City's Foreclosure Sin
Thursday, October 11, 2007PAUL KANGAS: The national foreclosure rate doubled in September from the year-ago period. According to Realtytrac, there were nearly 224,000 foreclosure filings last month. Las Vegas made the top 10 cities with high foreclosure rates, reporting one foreclosure filing for every 150 households. As Stephanie Dhue reports, what happens in Vegas is being watched in the real estate industry nationwide.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: In this gambling town, making money on real estate seemed like a sure bet just a few years ago. In 2004, home prices in Las Vegas skyrocketed 46 percent. But over the last year and a half, home prices have steadily declined and buyers have all but disappeared. Carol Smolen's three bedroom, three and a half bath home has sat on the market since July, with no offers.
CAROL SMOLEN, LAS VEGAS HOMEOWNER: I think people feel they must sell their homes before they can buy something and most people that are coming to look have not done that. They are coming to look to see what's on the market. They are kind of checking it out and they have this big concern looming that they are not going to be able to sell their homes and that's kind of a snowball effect.
DHUE: Smolen has already bought a new home and says she can afford to hold onto both. Not everyone is so lucky. The signs of distress are hard to miss. Las Vegas has 24,000 homes for sale. Many of them are vacant. And the city has one of the nation's highest foreclosure rates. Mike Brunson is a home appraiser. He describes how he felt during the market frenzy, pressured by builders to give favorable reports.
MIKE BRUNSON, CERTIFIED RESIDENTIAL APPRAISER, ASCENT APPRAISAL, INC.: This is too much too fast and there's really just far too much liability. People aren't giving us the time to analyze the real estate market and figure out what it's really doing. And the second half of it was when you did tell them what it was really doing, they didn't like those answers.
DHUE: Brunson shifted his business away from lenders and builders and now provides expert testimony in mortgage fraud cases. He thinks it will take two years for home prices here to stop sliding.
BRUNSON: The issue is, economic purchasing power has gone away. People can't afford housing anymore.
DHUE: Still, some see a good hand in Las Vegas real estate. Home prices have already fallen 8 percent and some sellers are now willing to make deals. One reason some people are betting the housing slump here won't last long is that commercial development is still strong. Take for example, MGM Mirage's city center project. Right now, 4,000 people are working on its construction and once complete in 2009, it will employ up to 14,000 people. In the next five years, the gaming industry is expected to pump $40 billion into hotel and casino projects, which should create 80,000 new jobs and demand for 40,000 homes. While Amstar Homes President David McEntire expects buyers to come back to the table early next year, he says now is the time to buy.
DAVID MCENTIRE, PRESIDENT, AMSTAR HOMES: By sheer virtue of the fact that we don't have any more land to build on, the stakes are higher than they've ever been, the opportunities are greater than it's going to be tomorrow.
DHUE: But today, the market is in transition and builder incentives are having some unexpected consequences.
MCENTIRE: We're seeing the cancellation rates exaggerated as a byproduct of the incentives in the market. Folks are writing a contract and then continuing to shop and where they find a better incentive, they are canceling one and going into another one.
DHUE: What's in the cards for Las Vegas depends on if the overall economy is dealt a blow from the housing downturn and how much that dampens travel and tourism. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Las Vegas.
