Irvine Housing Blog

Las Vegas: Building Is Booming in a City of Empty Houses

http://www.nytimes.com/2010/05/16/business/16builder.html?src=busln

Such a 180.  I lived in Las Vegas for a year and a half, 2004-5.  My coworkers were deep in the housing bubble fiasco.  Real estate was a huge topic in the office.  Had coworkers moving to new bigger houses and selling or renting their old ones.  They all had the latest toys and cars.  I think I was the only renter in the office of 25.  I felt so poor hehe.  I was renting a 1000 ft^2 studio loft with all appliances for $650 a month.  If I stayed another year I prolly would have been sucked into it.

Now that I think back it was kind of funny.  Noone ever mentioned hanging out at the casinos after work.  I only went into casinos with coworkers to just go to the theaters in there.  They were all anti-gambling as a pastime.

This is a brilliant idea if your goal is to end up on the cover of the Wall Street Journal in handcuffs all for the promise of a 6% roi.  Advice for Casino owners: the last thing you need is to bite the hand that feeds you. 

I would avoid investing in Las Vegas just as I would avoid Riverside.  They are both in full fledged death spirals.  When house prices are down 50% and unemployment is at 20% there is no where to go but down.  Put your money in safe havens.  If you want to live in Riverside or Las Vegas that’s a different story.  Investing in residential RE in either place is a fools game.

Used to golf at RSJ every Sunday for years..it’s a so-so course, built on a landfill so sometimes there was an odor, but you could at least get on without a tee time.  Mile square was impossible on a Sunday without an advance time.

Always thought those condos on the course looked like dumps, the kind made for the “lower” working classes.  I certainly did not want to live there.

No offense to the bulls but I would never pay north of $300K for anything there.  But if you want to pay $500k to own a dumpy apartment built on a municipal golf course that was built on a landfill… more power to you.

“If values never come back, you are certainly no worse off by renting”

Are they obligated to stay on as renters? What if rents go down but Superfund is increasing the rent 2% a year?

Then they should walk from Superfund because prices most likely were flat to down.

IrvineRenter: “you will need to wait two years before getting a new government insured loan to purchase a house”

Two years is a long time. Nobody can guarantee that lending standards will stay the same. Credit scoring models are changing dynamically to mitigate losses. It is purely mathematical. The more foreclosures, the more effect they have.

By the way, it may sound absurd, but some non-FICO scoring models already punish people for living in hardest hit zip codes. It would be nice to see more redlining.

IrvineRenter: “You will be paying an above-market rent to stay in your home. Plus, you will agree to a 2% automatic yearly rental increase.”

Why to pay much more then other renters?

Moving is not expensive for do-it-yourself guy. Just $250 can buy the best monthly rent (U-Haul truck, 2 helpers, free boxes, pack and unpack yourself).

You relate: “The gaming interests in Las Vegas can save their local housing market” ... “My friends and I with Superfund are coming to town, and we want to save your home and clean up the mess that lenders made of your life.”

How altruistic!

I read recently where MGM may go bust soon; Ritz Carlton Lake Las Vegas Hotel Casino And Resort in Henderson, owned by DB, went bust, so the liquidity even in the gaming interests themselves is not there ... like Las Vegas these organizations are all illusion and sleight of hand.

I once worked for a mining company that owned a property in Platoro Colorado that had yen carry trade loans from a big bank in Japan. And it bought and fixed up cabins for its workers in the town of Platoro, near Antonito: it was a type of wild-cat investment you propose in your blog today. The properties were dilapidated, but with investment, improved quite nicely; the company’s investment restored the community. Unfortunately, the mining company never found the mother load of silver and gold, and left Colorado. I do not know what became of the nicely restored mountain cabins; but I do know the company lost tens of millions of dollars on its project: it was a gamble, that unfortunately, did not pay off.

Sheryl Crow sings she’s Leaving Las Vegas—smart woman. A global financial collapse is coming and it is going to be “mean”. I suggest that one leave the city for the country. Yes, the safest and best place to live, is out in the country; like out in Whatcom County in Washington state on a farm.

The mutual fund Vicex, traded as VICEX, which trades in “sin stocks”, has done well over the years. It has outperformed the Russell 2000, IWM and the Dow, DIA, since its inception. From 2003 to 2005, it rose 80% and then went on to a peak gain in 2007 of 160%. You relate that home prices in Las Vegas doubled between 2003 and 2005. So if one took out a second or a HELOC on his property and invested it in VICEX, then one could have had 80% gain on the loan proceeds.

The Las Vegas Case Shiller Price Chart is a valuable investment chart; I had the opportunity to invest in a rental condo in Las Vegas in 1992 and 1993, but thought the market overpriced and declined to invest. Then came financial deregulation with the repeal of Glass Steagall. It was a vote of 92 to 8 in the US Senate for repeal. Being a naive-simpleton, I had no idea of what the true meaning of the term “financial deregulation” meant: it legalized new products such as CDOs and Option ARMs to capitalize the insightful and impoverish the foolish. Financial deregulation is Orwellian Doublespeak at its best. Look how real estate values took off right after Glass Steagall was repealed and as Alan Greenspan, the Czar of Credit Liquidity, lowered interest rates! The Senators and The Fed Chief remind me so much of The Cat In The Hat, come alive, that is the Dr. Seuss Character who wearing a tall, red and white-striped hat and red bow tie, lead the children in a riotous party. So today, the riotous party continues with HAMP, GSE 96.5% LTV home loans, and the FASB 157 entitlement allowing banks to value mortgages to manager’s best estimate rather than to market. But wait, there is more, just this month the European Finance Ministers met in Summit and announced a sovereign debt bailout superfund that has created an EU Treasury and made Jean-Claude Trichet effectively the European Economic Government Seignior responsible for selling state and corprated debt and issuing seigniorage aid for Greece. Thus more Cat-In-The-Hat-Ism.   

The Case Shiller chart shows a bell curve—prices must return to normal—they will return to 1993 level when there is a black swan event, such as a failed Treasury Auction, or war between Israel and Syria, that suddenly evaporates credit liquidity from the Ten Year US Treasury market place.   

The article references Summerlin; it is interesting that it is a master planned community of The Howard Hughes Corporation, an affiliate of General Growth Properties, (hat tip to Wikipedia); prices have a long, long ways to fall.

And they even have a much, much, much further way to fall in Paradise Valley. What a name! I never knew there was such a place until I read the Melinda Fulmer MSN Real Estate article Hard Times In Paradise. I then went Redfin and found the average priced home at 1.7 Million, like the one at 7131 E Berneil Ln, Paradise Valley, AZ 85253.

Why, just why in the world, with a depression coming soon, would someone buy the condo you feature? I sure do not want to be living near UCI and the 405 freeway, now or ever, and be committed to a mortgage.

Well thanks for another good article; please keep warning of the California koolaid. I feel sorry for the people trapped in mortgages.

Does anyone have an opinion on the new Irvine development Central Park West? It’s located at Jamboree and Michelson. The grand opening is Saturday. There are about 6 different residences.

You’re a genius, robert. I love how you spell things out.

I really feel that the only way to get past all this mess in the world is default.

Let homeowners default.
Let sovereign nations default.
Stop rolling over the debt with endless bailouts. Why is it so inconceivable that people/governments are unable to pay their debts? Let it happen- that’s the risk part investing. If there is no risk there is only moral hazard.

Prices begin at $400,000 for the Maxfield, $500,000 for the Granville, and $600,00 for the Chelsea.

Redfin provides a search listing for condominiums in Irvine; and relates they sell for $341/sq which is a 10.9% decrease over the last year. After reading this blog, and knowning that prices are falling, and likely to continue to fall, why, just why, are you interested in a buying a condo?

You can use the link to go to photos of the condos; frankly I don’t think they look that great.

We were within months of moving out of LV now we might have to stay.
Housing here is a complete cluster fu&*.
We sold our two houses here in 2005 and have been renting ever since.  I cannot tell you how many friends here are set to walk away from their homes.  People owing $400k on a home that is now worth $120k is the norm.
Problem is these homes were complete crap to start with.  Now that we may be staying we see great prices on homes that we do not want.
Homes that were built in the past 10 years have virtually no yard and these subdivisions popped up in the least desirable places.
I can see some areas going the way of Detroit and being bulldozed.
It is a real mess.

I read this twice and still can’t decide if you are serious.

1) Every Las Vegas taking a toxic mortgage/heloc did so willingly.

2) They - lenders and borrowers - should all burn, figuratively speaking of course.

3) We Las Vegans live in a recourse state, meaning creditors will wait (after a strategic default) until you’re back on your feet and then pounce.

The nationwide pity party for “poor, disadvantaged” borrowers has really gotten out of hand.

I have been going to Vegas almost quarterly for a decade or more. Gaming is off 30%. Hotel room cost down about 20%. Locals dont gamble nearly as much as you would think. Most DONT at all. They can`t afford it. And most long term residents burn out after just a couple years of living there. Last place a Casino worker wants to be after work. When the next round of foreclosures blasts through the system. Vegas will be in even worse shape housing wise. Commercial is sucking wind even worse. Just too much supply now that the growth has contracted so quickly and broadly. All those Europeans I saw a couple years ago when the Euro was at $1.60+. They were vapor on my last trip. Chinese still strong. Midweek the place is damn near empty.

IrvineRenter,
I think the evil banker beaten by the Invincible is mislabeled.  With the govt near unlimited bailouts, the banksters are likely to beat the day lights out of the taxpayers.  I see govt attempts to reinflate bubbles and just actively transferring liability on the defective loans and defective ratings from the banks to the taxpayers.

The comeback of Las Vegas is not a given—Detroit and Gary were booming cities.  Every body wants a car and the US needs steel. LV’s has new competition on the lower end from the Indian casino and on the high end from new Asian gambling centers and older European establishments.  LV still has advantages such as boxing and big draw entertainers and cheap airfare, no passport requirements.  Foods also better than the Indian casino that I’ve visited.

BK will likely be the best path to wipe out the debt in a recourse state. 

LV might need to do some late 1980’s TX style bulldozing of empty houses and commercial buildings.  Detroit is starting the “right sizing.”

I was just in LV less than 3 weeks ago.

The only heavy gamblers are asian.  Many flown in at the hotels’ expense.  (A little known secret is how many gambling addicts there are in the Asian community - but i digress.)

I talked to all the casino workers - consierge, etc. and - to a man they wined at how vegas is dead.  They say all the current patrons are “discount/coupon” tourists, there in heavily discounted rooms who sight-see, go to discounted shows, but do not gamble, do not buy in the Casino stores/spas and DO NOT TIP. 

Even the LV Club scene with its reality TV celebs they pay to come party are in trouble.

LV housing market is dead.  IR, LV was not growing on its own, that was SOCAL home sell money flowing in that caused the run-up.  LV is not a self-contained market.  Until CAL is up running and creating profit, LV RE is not going anywhere.