Lunacy in Las Vegas Housing

**sca037** · 10-26-2009, 10:16

By: Diana Olick
CNBC Real Estate Reporter

Just when you think you've heard it all in today's housing market, along comes a story that takes all those statistics and all those monthly foreclosure reports and all that testimony to Congress and just drop kicks them all out the window.

I'm going to tell you about a nice young woman named Katie. Last week Katie tried to buy a house in Las Vegas, and got a lesson in real estate reality that she will never forget.

Let's back up a bit for some background. Katie and her husband live in Maryland and are about to have their first child. Both work, but Katie's husband, who has a very solid government job, is being transferred to Vegas. And please note, the government is paying all his moving expenses, including Realtor and closing costs. Both he and Katie have credit scores right around 800. So off the two went to Vegas, thinking they were in the right place at the right time.

The foreclosure capital of America, Vegas home prices are down more than 50 percent from their peak in 2006. The median price of a home there is $138,000, but, interestingly, the inventory is down to a less than 3-month supply. Compare that to the national inventory, now at an 8.5 month supply. Despite the low supply, prices are not recovering quickly because the sales are all by banks, looking to unload properties quickly.

But back to Katie. Her Realtor, who is also an old friend, emailed Katie the following warnings before her arrival on the Vegas strip:

- This market is crazy and many things are just not going to make any sense.

- I can guarantee you 99.99% of the listings emailed to you will no longer be available by the time you get here.

- Properties are selling in the blink of an eye.

- Properties are getting multiple offers within a few days of being on the market, the most offers I've heard a house had recently was 44 offers (I know, crazy).

- This market is crazy and many things are just not going to make any sense.

- 40% of all transactions are cash purchases, which makes it harder for the buyers who are financing to get their offers accepted.

- We have 1/2 the inventory we had a year ago and 4 times as many buyers as we did a year ago.

- Chances are we will have to submit several offers to have the chance of getting 1 accepted.

- This market is crazy and many things are just not going to make any sense.

- You will probably leave not knowing if you have a house or not because banks take 2 to 3 weeks to respond, because this market is crazy… you know the rest.

I'm guessing you noted the crazy part. Katie is looking in the $150-200,000 price range. Despite the warnings, Katie was completely unprepared for what she found. In seven days, she saw 50 homes. All but one were foreclosures.

On the first day, Katie and her husband saw 13 homes.

Only three were anywhere close to move-in condition, despite the fact that all of the homes were built in 2005 or later. All were foreclosed properties. "People find out a year before they're ever kicked out, so what do they do for that year?" says Katie. "Completely destroy their homes."

I know we've already heard about this, as had Katie, but the destruction was even beyond her expectations. "There's no cleaning that would help." There was dirt rubbed on the walls, graffiti, holes in the walls and garbage deposited inside the holes. The smell? "I couldn't get past it." Obviously there was no hardware on the doors and no appliances, kitchen cabinets, stovetops...whatever could go went. 75 percent of the homes she went into were an instant no.

But here's the crazy part:

"We went to a home that had been on the market for one day, and the key was stolen out of the lock box. Our Realtor said immediately, 'You want this home.' She told us another Realtor had stolen the key because they wanted their client to get it. So what did my Realtor do? She broke in. And sure enough this was the home we fell in love with. It was on for $132,000 so we decided to be really aggressive and offered $160,000, plus we had government backing on our loan. Well our Realtor called that night and said, 'You're not going to get the home. They got 30 offers and half are cash offers, so the bank is not even going to look at you.' The banks just want the cash to unload these places."

Finally, on day 7 of looking, and after having 7 offers ignored by the banks (who owned all the homes), the Realtor called Katie with "a gold mine." Yes, an owner-occupied, regular home. A rare non-foreclosure. They went immediately and put in an offer. The owner claims to like them, but she ended up with 10 offers and is still mulling.

Ironically, in a market still flooding with new foreclosed properties every day, at the end of their week Katie and her husband met with a local builder. "We know our money will not get us as much, but they're giving away the granite and hardwoods for free." It's not in their ideal location, and they wouldn't be able to move in until March, the month their first baby is due. But at least they don't have to deal with the banks, the filth and the competition.

Oh, and by the way, a fun factoid on Katie's Realtor: She bought her brand new home in 2005 for $240,000. According to the comps she runs daily, she says it's now worth between $90-110,000. So in January she decided to stop paying her mortgage. No financial hardship, she just figured she was throwing money away. The bank hasn't gotten to her yet, so she's just been living there for free. At some point, she knows, her bank will foreclose, but she's fine with that. She says she'll do far better financially renting for a while.

This is what the housing market has come to.

http://shock-treatment65.newsvine.co...vegas-housing-

**tosugrad** · 10-26-2009, 10:47

Originally Posted by sca037

But here's the crazy part:

"We went to a home that had been on the market for one day, and the key was stolen out of the lock box. Our Realtor said immediately, 'You want this home.' She told us another Realtor had stolen the key because they wanted their client to get it.

Wow wow wow

This is a pretty common tactic, I think, as Ive had it done to either houses I was buying or selling several times in the last 10 years.

**Dtrigg** · 10-26-2009, 10:49

Entire story is just crazy!

**Cozmo** · 10-26-2009, 13:15

That has actually crossed my mind. Just stop paying the mortgage on the condo i don't want and buy another house and let this one forclose. The banks are wise to this and won't let you get a 2nd loan now without proof of having someone in a lease to rent the old place.

You'd better hope you didn't need to get any credit for anything whatsoever in the next several years though.

**Vega$ NSX** · 10-26-2009, 14:45

Hmmm, is odd that I wasn't really surprised or shocked by this much at all? I guess I'm just too jaded and surrounded by all this lunacy that it all just seems like commonplace.

The latest stats I saw put that over 90% of the houses are upside down (worth less than the value of the mortgage).

Land and materials are more expensive than existing new homes. Meaning you can buy a house out here cheaper than the cost of equivalent land and materials and that's not even adding in the cost of labor.

Two properties I own doubled in value in less than a year back in 2002. My third property dropped by 50% in less than a year in 2009.

This is just the tip of the iceberg. As ridiculous as the residential market is, the commercial market is about ten times as worse. On my drive home I can pass by approximately 2-3 billion dollars of abandoned or incomplete commercial construction.

**queenlives** · 10-26-2009, 15:25

the very same thing happened to the (remote) owner owner who evicted squatting relatives from a house she owns just down the street.

the atty she used to handle the eviction suggested a local realtor he knew. the remote owner ok'd the realtor to check out the house and provided a local person to be there w/the keys to allow entry. the local person had to leave after letting the realtor in so what happened next was the realtor had the locks changed - while she waited - so no one else had access to the house.

the remote owner found out about it and called me to ask for assistance (i came to know her through our city offices). i put her in touch w/our realtor, who then signed her listing, changed the locks, put the place on the market and had multiple offers in 2 weeks.

whataworld.

as for commercial real estate, it seems that stuff has been hitting the fan for a while and is increasingly difficult.

putting my money in my mattress... or, better yet, my bee hives

**Sulley** · 10-26-2009, 16:35

That exact article could be written about my little town in Central California. Just change the byline.

There was an article in the paper a couple weeks back. Bay area real estate agent bought a home here to flip, before the market collapsed. She quit paying and on the way out of town(apparently she felt the bank and everyone had screwed her), gave the keys to a homeless guy and told him to move in. Not only do the banks have to go thru all the process to foreclose, they then have to do an eviction, even if the people are squatters.

Sulley

**Dtrigg** · 10-26-2009, 17:12

What are people thinking now a days?

**Cairo94507** · 10-27-2009, 05:30

Hard to be sympathetic to those that bought 3500 sq. ft, custom homes when they should have been shopping for starter homes within their budget. I sort of class real estate loan people in the same class as car salesman. All they care about is making the sale and could not care less if you ever make a payment.

**steveny** · 10-27-2009, 06:14

Originally Posted by queenlives

putting my money in my mattress... or, better yet, my bee hives

I am renting a big bumble bee suit and coming to your place with a sack.

**steveny** · 10-27-2009, 06:15

Originally Posted by Sulley

That exact article could be written about my little town in Central California. Just change the byline.

There was an article in the paper a couple weeks back. Bay area real estate agent bought a home here to flip, before the market collapsed. She quit paying and on the way out of town(apparently she felt the bank and everyone had screwed her), gave the keys to a homeless guy and told him to move in. Not only do the banks have to go thru all the process to foreclose, they then have to do an eviction, even if the people are squatters.

Sulley

Best way to get rid of squatters, throw a bag of weed in the window then call the police.

**CL65 Captain** · 10-27-2009, 06:49

Originally Posted by steveny

Best way to get rid of squatters, throw a bag of weed in the window then call the police.

If you did that at my house, it would be gone (up in smoke) before the police even arrived.

**queenlives** · 10-27-2009, 07:40

Originally Posted by steveny

I am renting a big bumble bee suit and coming to your place with a sack.

hahahahaha... but it won't work.

"the girls" are trained to keep out intruders and bumble bees are considered intruders.

if you show up in this first costume, they might just get let you in; show up in the 2nd costume and they'll re-direct you to SF

**swerve** · 10-27-2009, 07:54

Originally Posted by CL65 Captain

If you did that at my house, it would be gone (up in smoke) before the police even arrived.

lol

**excellon** · 10-27-2009, 10:16

I have to wonder what are all these "investors" are doing with the houses that they paid CASH for?

Seems to me that Las Vegas may become a "ghost town" where you're the only one living on the street with empty houses next door with FOR RENT signs. (Like our high-rise condos).

These "investors" are giving people of Las Vegas a false hope that the market is picking up and people are moving to Las Vegas at an irregular rate (how many are at the same time leaving?)

**Whatwasthat** · 10-27-2009, 10:23

Originally Posted by CL65 Captain

If you did that at my house, it would be gone (up in smoke) before the police even arrived.

I'll help you get rid of the evidence.

**Dr.Honda** · 10-28-2009, 10:08

Originally Posted by Cairo94507

Hard to be sympathetic to those that bought 3500 sq. ft, custom homes when they should have been shopping for starter homes within their budget.

'zactly! and yet, the Mc Mansions keep popping up around here. These homes will NEVER sell. dummies

**JorjeM** · 10-29-2009, 23:17

Im in Vegas right now, half the reason is my gf's bday the other half is to purchase real estate. The kind of house you can buy here now for $400-450 is really really crazy. I wont be going back home till iv bought something! The only downside for me is since im from Canada i have to put down 40% otherwise id be looking at something even more crazy!