Chinese Ghost Cities Coming To The Las Vegas Housing Market
Submitted by Mike Krieger of Liberty Blitzkrieg blog,
Let’s face it, the Las Vegas real estate market has gone full Chinese. By full Chinese I mean a centrally planned bubble has been created that is just asking to blow up. I’ve covered the renewed insanity of the Las Vegas market before, but this article from yesterday’s Wall Street Journal provides even more detail. In a nutshell, as a result of Assembly Bill 284, which essentially made foreclosures impossible in Nevada, extremely delinquent homes are not coming for sale, and this phony market signal is leading to rampant overbuilding and price speculation.
Here are some numbers. Utility data showed nearly 64,000 vacant homes in Las Vegas at the end of last September, only 8,000 of which are on the market. Meanwhile, new home sales are up 87% and new building permits are up 52% this year. What’s the end result? Another bubble, but this time one where Blackstone and other private equity firms are pricing out average citizens with elevated all cash bids. USA! USA! From the WSJ:
LAS VEGAS—In a city dotted with tens of thousands of vacant houses, Jericho Guarin figured it would be easy to buy his first home. But nearly a year after beginning a search late last summer, he has come up dry.
“It has been a nightmare,” says the 37-year-old U.S. Air Force officer. “There are plenty of empty houses, but they’re just not for sale.”
Thank you for your service Mr. Guarin, now go rent from Blackstone.
Many real-estate agents, home builders and consumer advocates argue that the law, intended to remedy foreclosure-processing abuses, has backfired. Some owners who are behind on payments aren’t maintaining their homes as banks refrain from eviction proceedings. The perverse outcome: Inventory shortages have spurred new developments despite a glut of properties stuck in foreclosure limbo.
“The people hurt most by this law are the middle class,” says Steve Hawks, a real-estate agent in Henderson, Nev. He refers to the phenomenon wrought by the foreclosure measure, Assembly Bill 284, as the “A.B. 284 bubble.”
The middle class…what’s that?
Mr. Guarin, the Air Force Captain, is preapproved for a mortgage backed by the Veterans Administration for up to $185,000. But like many buyers who need financing, he is at a severe disadvantage because sellers often prefer all-cash deals that won’t be tied up by a low appraisal or other red tape. “There’s no way I can match the cash offers,” says Mr. Guarin.
With investors in the game, more properties are commanding prices above asking—a phenomenon real-estate agent Bryan Lebo knows all too well. Recently, he listed a bank-owned property for $86,000. The home, which he said needed around $20,000 in repairs, drew 41 offers—39 of them all-cash—and sold to an investor for $135,000. “If you’re an honest working person, you pretty much don’t have a chance,” says Mr. Lebo of current market conditions.
The inventory shortages, meanwhile, have been a boon for some—especially builders. “A.B. 284 has been great for us. It darn near eliminated the constant inflow of foreclosures on the resale market,” says Robert Beville, president of Harmony Homes, a local home builder. Mr. Beville says Harmony has sold 57 homes this year to cash buyers, compared to 70 in all of 2012. Realtors say investors are planning to flip the homes to a new buyer on the bet that prices will have jumped even more by the time the homes are built.
Wait, what year is this??
The inventory situation has also allowed more builders to get back into the game. According to the most recent available statistics, Las Vegas had just 4,300 previously owned homes listed for sale in April, down 70% from two years ago. New home sales, meanwhile, are up by 87% so far this year.
So far this year, the number of new building permits issued for new home construction is up 52% from the year-ago period—one of the largest jumps in the nation.
Mr. Jordan spent six months looking for an existing home and another three months looking for new properties before he signed a contract to pay $362,500 on a four-bedroom house that broke ground last month. The home, which was about 10% above his initial budget, should be completed by September.
Sure, why would a citizen have the right to buy an empty home at market prices when he can be forced into a brand new one 10% above his budget.
Among the nation’s 30 largest metro areas, Las Vegas had the highest share of loans that were 90 days or more past due but not yet referred to foreclosure as of April, according to the most recent data from Lender Processing Services.
Nearly 45,000 loans are either 90 days or more past due or in foreclosure. Local electric-utility data showed nearly 64,000 vacant homes at the end of last September, according to a tally by analysts at the University of Nevada-Las Vegas. Fewer than 8,000 of those units were listed for sale.
Meanwhile, Mr. Peters sees little to celebrate. Even though A.B. 284 has benefited his clients, “there has to be turnover in the housing market for it to recover,” he says. “It’s caused another bubble to erupt. We saw the same thing eight years ago. We know it’s unsustainable.”
Bubbles and bullshit. It’s the American way.
Full article here.
- advertisements -
- advertisements -