San Diego Housing Bubble News and Analysis

When I lived in San Diego, I used to go to Vegas quite a bit for fun & relaxation. I came very close to buying a vacation home in Henderson (suburb of Las Vegas) back in 2001 but talked myself out of it. I have several friends who still own vacation homes there. All of them bought before the big run-up in pricing that took place in Vegas during the bubble. I just did a quick search on Realtor.com for Henderson and between $150k-$200k and there are a lot of homes for sale in that range that are a lot nicer than the one you posted.
Does your friend know Las Vegas well and if so, does she specifically want to live in Las Vegas? Henderson has been the area for the last 10+ years where people would prefer to live and it's only 20 minutes from "The Strip" and is a much cleaner and better developed area than the majority of Las Vegas where $200k houses are concerned.
BTW: Las Vegas has a gazillion homes for sales because they also had a huge housing bubble. It will probably take them much longer than SoCal to recover from it. Many of the homes for sale are empty and your friend could have her choice of homes for a huge discount over what they were selling for a couple of years ago. Here's a site that tracks Las Vegas sales & inventory:
http://bubbletracking.blogspot.com/2008/...
Just my two cents.

She's a single mom with a 6 yr old son. The boy's father has threatened to sue her for full custody if she takes the kid out of the school district that he's in now (which I think is in this area). So I think the prime motivation is to not move the kid to a new school at this time.

Yup, she knows the area well. Unfortunately, it sounds like she's not getting great advice from the realtor and she's new to the home buying process. For example, he refused to show her any non-foreclosure properties. What's up with that?

My instincts tell me that prices (like here) are going to decline even more. I think she'd probably be better off renting for one more year and getting better educated about the process vs. expecting her realtor to "take care of her".

When I pressed her about things like what rate she locked in, who the title company was, what papers has she signed, escrow documents, etc. she didnt know. She said "the realtor has a 6 inch file and told me not to worry about anything." She was supposed to close over a week ago. As of Friday, she was told "we're working on it!"

The lender also wanted proof of her $500/mo child support payments and proof that she was her son's mother.

She's a first time buyer, trying to buy a home with no money down (FHA) and credit scores in the range of 660-700 (depending on the bureau).

My guess is that the realtor is trying to move this property for some reason (who knows maybe he's an investor-owner), and cant find a lender to underwrite the loan. But I dont know all of the details.

I just wrote her and advised to try to get out of the purchase if she can. She put down $1500 to open escrow, which she thinks she will lose. I told her if she waits a year the same place may go down to $150K, and to consider the $1500 a lesson learned, sucky as that is.

Also told her to work on her credit scores so she gets the best rate.

I'm not sure she will heed my advice...but I didnt want to tell her that prices will go down if the LV market is diff than here. From what I see online, there is huge standing inventory of new, existing and foreclosures. No bueno, as my gardener says...

I think that you just gave her some very good advice. She should wait a minimum of one more year before buying anything in this price range in the Las Vegas area. Right now, there are 3773 SFR's for sale in the Las Vegas/Henderson area between $150k-$200k. That's a lot of homes to move and with tighter qualification standards in place, they're not going to move quickly. The odds are in her favor that prices will continue to fall in the Las Vegas area for at least a couple of more years.

Hey Ex-SD,

Thanks for the info.

3773 is a LOT of inventory to move. Basically, her approach is the polar opposite of how I would handle it - but I cant force her to be rational. I've tried to give her the best advice I can, but I'm not sure she is really listening. She's kind of panicked right now and not thinking clearly.

I believe SCUBA divers are taught to "Stop. Think. Act." Not "Act. Stop. Think." It's too bad more people dont learn to dive :->

While I'm no Vegas expert, seems like your friends realtor is no expert either. $167 per foot seems high for Vegas. This weekend's LA Times shows several new homes in the Inland Empire for $100 a foot or less! I was amazed.

The Zillow estimate on the place is about $212K I think.

I'm not sure how valid a "Z-estimate" is...

I hope she can get out of the it. The place definitely needs TLC and is not a particularly good deal. It's small and older. I think a similar place in Temecula would go for about $160K (if that).

There seems to be something fishy about the realtor. I mean, if you're given a closing date, isnt the seller supposed to abide by that? She was told that she has to pay a per diem rate because the place didnt close on time.

It all sounds odd to me.

I'm not expert on Vegas, but I do know that everytime they start running out of buildable land there, the federal Government releases/sells more land to developers, and I remember they cancelled several auctions recently because of lack of interest. So I would say Vegas is screwed for a while, and not even close to the bottom!

I've been looking at homes on ziprealty.com, and if I had to guess, I would say that things look overpriced. Some of the homes are true dumps and the prices are still high.

I thought LV might be a slightly different market since gambling/tourism is so huge there.

Maybe they are lagging behind SoCA in terms of price drops, etc?

Maybe they are lagging behind SoCA in terms of price drops, etc?

Actually Vegas has led SoCal by quite a bit in terms of decline. Its a secondary market, its health is totally linked to LA/SD, where the majority of its customers come from.

Josh

Josh, you are sooooooo right. I just read an article within the last couple of days where the subject was how the number of visitors had fallen in Las Vegas within the last year. Hotels have had to lay off employees in all departments. Sure, they have a lot of conventions that bring people from all over the USA but their year-round salvation is people who live in SoCal and NorCal that visit LV on week-ends and vacations. I've read where approximately 50% of the homes that are for sale in the LV area are vacant. If you flip through Realtor.com and look at the homes in different price ranges, you'll see that many of them have no furniture in them so I suspect that the article that I read is correct.

I really have nothing good to say about Vegas, or its RE market. To me the city is very unappealing. I would say they have plenty of homes, and while casinos and gambling aren't going anywhere, even in a severe recession, the wages earned by a typical employee still can't justify the high prices of homes. Its supply and demand, and theres plenty of supply.

Vegas has been getting hammered in RE and will continue to do so. Hard to say if it will bottom out quicker then SD or not but I would sit tight and not touch Vegas right now.

SD Realtor

Meanwhile, the price of a buffet in Vegas remains unaffected by the housing slump...

Wow, I cannot even list all the ways this home purchase is a bad idea but I will try:
1. It is in a bad neighborhood
2. It is very small
3. If she went to rent something in this area with this square footage her payment would be like $800 a month not the $1,500 she is looking at if she purchases
4. There are homes in Summerlin, generally considered to have the best schools, with 500 more sq feet for about the same price
5. Did she have her realtor check the pending foreclosures and unpaid taxes in this neighborhood
6. This home is old, when was the AC replaced, hot water heater, etc
7. There are some homes that are becoming a good idea to own rather than rent in LV, but this is not one of them

I am still stunned someone would still consider that place. Here is a listing from the KB Homes website. A brand new home with 500 more square feet for the same price.

Lets just say new home builders are quite happy to negotiate too.

http://www.kbhome.com/Community~CommID~0...

I was pretty stunned, too.

She has been very intimidated by the home-buying process. The realtor is a friend of the family (nice friend, eh?) who immediately started pushing her to buy this place after she was forced out of a rental home that foreclosed. The realtor only wanted to show her foreclosures and seemed to be especially pushing this place.

I have given her my "information is power - and if you close your eyes and rely/trust other people you are then powerless, and therefore a victim" lecture. To no avail, I think. She seems to think that because she isnt putting any money down that she doesnt have the same rights as other home buyers...or that she cant "bug" the realtor with too many questions.

My understanding is that she has to stay in the area because of her kid's school - she doesnt want to uproot him. Right now, she, her parents and the kid's father all live within a mile or so of each other. As a single mom, this is important to her since custody is shared. The kid's father also apparently threatened to sue her for full custody if she moved him to another school district.

The place really does look like a dump - and the price is shocking. Esp since the bank just paid $191K for it a few months ago. I told her, if anything, she should offer LESS than what the bank paid, not more.

LV Renter, thanks for your insight. I'm going to try to pass on the comments to her.

Hope it was helpful. I do not have kids so I cannot fully understand the school district issue, but if their father is in the district, they share custody, and she HAS to buy, driving the kid five miles to that school for a much nicer home for the same money does not seem like to much of a hurdle.

The school district in that area is not the district that people move into, it is one they move out of.

May you should ask her to find out what the realtor commission is on this place based on sales price.

Here are some cold hearted statements. When people say the market has hit bottom, I will use this case as an example, if a single mother with no savings, previously paying $800/month on rent can still qualify to borrow $200K on a dump the market has further to fall. How will she be able to handle issues that come up with the house (A/C, appliances, electrical, etc). How can she afford $1,500 if she is not able to save with a much lower payment? Until we reach a point where today's sale is not tomorrow's foreclosure the market will continue to fall.

Actually, I dont know how much rent she was previously paying on her other rental house.

To be fair, she does earn between $70-$75K/year and does have a healthy amount of money stashed in a money market - but that money is the child support for her kid. She saves every dime so that he'll have plenty of dough for college.

The "wrinkle" is that a hefty portion of her income is tips. And apparently Mr. UnderWriter doesnt like that.

The thing I most object to in this entire situation (besides the atrocious house) is that she doesnt seem to want to learn about the process and just wants her realtor to "take care of her." Ugh!

When I ask questions, she does not know the most basic answers - e.g. "You are getting a home warranty, right?" (Answer: "what is a home warranty?"). I kid you not.

I bought a townhouse in 2003 on a lower salary and a lot of nerve. I ended up selling it in 2006 and making a profit. I also tried to be as informed as possible and learned a lot in the process.

So, in my opinion, trying to buy a house when one is....shall we say "informationally retarded" is almost worse than being financially stupid.

Ah, well. Thanks LVR for your feedback.

My assumption on rent as based on what an unit like that rents for. Technically in NV stated income loans were made illegal. If she has not been fully reporting her tips, and very few do, the underwriter is looking at her tax returns and determining her ability to pay.

I do not understand exactly what you mean she has saved for the kid. Wouldn't it be a better situation to have a lower payment.

I am glad she is a saver, she can definitely afford this place. Of course the questions is whether she should afford this place, when there are much nicer places.

I think her "base" income is around $40K. I think the rest is tips. But, I'm not 100% sure of the details.

If underwriters are only considering ~$40K annual income, with no down pmt and credit scores under 700, I can see why there might be a problem.

Again, I dont know all of the details about her finances. She mentioned that she religiously "stashes away" the kid's child support money and essentially pretends it's not there. She wants to be sure that he has a healthy college nest egg when the time comes. She didnt even want the bank to consider it as "income". However, they told her she wouldnt be able to buy a house unless she did include it.

At one point, I suggested she try to buy a bigger, newer house (using some of her kid's money) so that she could rent out a room and get help with the mortgage. I think that's what I would do in her situation.

Unfortunately, she is very spun up right now and fixated on the fact that this is not working out - again. She has tried to buy a home three different times in recent years and each time it hasnt worked out. Even in the boom days when mortgages were being given to anyone with a pulse.

I suppose if the bank wont underwrite, there must be a good reason for it.

My biggest concern is not the fact that she was willing to buy a dumpy house, in a bad neighborhood, for too much dough...it's her willingness to just walk into this blindly without considering all aspects of the purchase, being informed, etc. It is downright scary.

I passed on your comments to her. I said, "sorry if this hurts your feelings, but I think you should know what someone else familiar with your RE market thinks."

Sigh.

My view on Las Vegas

1) Fairly weak job base. Mostly blue-collar service and construction jobs means that people don't get to save a lot and cannot buy homes in normal conditions-->limited local buyers
2) Lots of speculative investment means many empty homes in the area. It takes 2 months to lease up a house now with incentives
2) Rental home prices don't vary as greatly with SF as you would think. A crappy small 3bd rents for marginally less than a new 4bd in a better neighborhood.

so what for your friend
1) don't buy period
2) shop around for a rental home. You will be able to get more than you would expect.

Good luck

CDMA ENG...

So SDduuuude is probably wondering why I haven't chimmed in. I am one of the few Vegas Native's out there (and yes I know the real names of everyone in the movie Casino) and I am still connected to the town via freinds and family though I lay my head in the Loma Portal. Everyone is right about not buying. Without getting into details that town has not seen the worst of it yet and prices will only go down. The rest of the paragraph is antedotal but I think serves as the writing on the wall.

1) My mother is a hiring agent at the Clark County School District and is seeing application for people WAY over qualified for janitor, clerks, and other lowing paying positions.

2) Friends in the construction business has seen all work stop at the residential level. Big projects such as schools, casinos, and other bond fund work continues but beyond that there is no "works" in planning.

3) Anytime I am home I am seeing new and old house vacant, in some cases, for years.

4) There is no real industry in that town other than Hospitality. Once the building stops those in the building trade will have to also give up thier homes either through foreclosers or short sales. After all they are not going to be able to maintain the same lifestyle when there are 3 bodies for 1 job.

5) Vegas has been in a boom before 85'. I think it is time the party is over.

All this leads to lower prices in the market. In fact the cities biggest problems right now is muck filled abandon swimming pools and the DEA's chasing meth labs from vacants.

My two cents,

I know she wants a home for the child but it really isnt in thier best interest right now.

Take Care...

You are right. She wants to give her kid some stability and roots. They've bounced around several rentals in his 7 year lifetime and she's fed up. She's afraid to rent another house because so many renters are now being forced out due to F-closure. As far as I know, there is no way to know if a landlord is headed in that direction.

Things sound pretty dismal in LV. My husband almost accepted a decent position there over a year ago. In retrospect, I'm so happy that we opted not to do that. LV holds little fascination for me - I hate crowds and if I'm going to ignite two $100 bills, I'd frankly rather buy a pair of shoes rathern than throw it away in a casino.

A quick update re my friend in Vegas.

She allegedly called her realtor and said she wanted out of the contract. He tried to bully her, threatening that she would lose her deposit given to the title co, that she was "making the biggest mistake of her life", etc.

She told him that she'd rather lose $1500 than make a $205K mistake."

So, she drove over to his office to pick up her paperwork. This guy had copies of all of her personal records. After making her wait for over an hour, he finally handed the paperwork over.

Guess what? i dont think she was even in escrow. Just as I suspected, he could not find someone to underwrite the loan. There was a notice dated May 30 that said, "cannot underwrite."

She also found that the realtor had forged her name on a number of documents - including a waived right to inspection and something agreeing to a loan with 7% interest.

Needless to say my friend is pretty shaken by all of this. SHe keeps saying, "but he told me he was going to take care of me and look out for my interests."

LV Renter, I passed on your feedback. She still wants to buy. Her next step is to go to her credit union - someone there offered to help her try to get the $1500 back and look for a loan.

This is all so weird. This slimebag is a friend of her family's and goes to the same church. Guess he's missing a moral center. Probably goes to church to network and find other 'marks.'

Ugh.

dharmagirl : I sincerely hope that she can get her deposit returned without a bunch of drama but even if she loses it, that will be nothing compared to the $$$$$$ she would have lost by buying that rat-trap of a house.
Re. :The realtor friend who goes to her church"...........this is an all to common story where a lot of unscrupulous people use churches to find their marks. I don't have anything to do with religion but have nothing against those who find what they're looking for in the churches. I just wish people would wise up and quit being gullible and allowing themselves to be taken by these "friends that they meet in their churches".
Anyway, I was happy to hear that she removed herself from the transaction.

CDMA ENG...

I grew up there and one learn thing about being in Vegas: You can only trust a very small percentage of the people you meet there. Remember, this was a town where people with little or no education could make a lot of money. That kind of place attracts a lot of people but mostly those of a bad sort. Sounds like your friend is learning this the hard way but being a vetern of the town I would have thought she knew by now. Some people are just naturally trusting and they make easy marks in Vegas.

Every repairman my mother has ever hired has tried to rip her off and she always calls me after an estimate to see if things sound legit. They usually are not.

Take care,

CDMA

She has lived in Vegas for at least 10 years. However, her parents - who are very religious - also live there. This realtor goes to their church, therefore my friend thought he was "trustworthy" and a "good Christian."

Big mistake IMO. I'd like to think she has learned her lesson but I really dont think she has. My friend is a bit neurotic and fairly panicky. I think she is anxious to find someone to just take responsibility for her, hold her hand and tell her it will all be OK. Ugh.

I've tried to tell her in every, freakin' way that I can, that you simply cant give up your own 'personal power' like that....that it's important to maintain some control, be educated about what you're doing, the process, etc.

However, whenever the conversation gets to that point she says, "so, did I tell you that my son got a gold star in art class today?"

And, yes, she has been taken by a number of people she thought she could trust. She entrusted her son to a babysitter (whom she thought was a good friend). It turns out that the woman's teen age son was molesting her 3 year old son. Her kid's father is a jerk who only dates strippers, and she's been burned by other people. The only thing that keeps her in Lost Wages is her parents.

CDMA, your mom is lucky that have you! I cant imagine living in Vegas and being forced to be suspicious of everyone and anyone.

CDMA ENG...

My Mother was LDS, yes there are mormons in Vegas like you wouldn't believe. After all they settled damn near everything in the area! Anyway she was brought up the same way as your friend. Christian... turn the other cheeck... Well my dad was something of the same sort as your friends ex. Liked fast woman... the whole vegas scene. he was and exec at a casino so it was "there" all the time. Dad though, was a good dad in that he did send the support checks and we same him regularyly. Mom didnt want to live in LV either but she didnt want to take us from out dad either. My mother made a lot of sacrifices for us kids and was a easy target for sharks. It took her some time but she is no ones victim anymore. The only thing is that being around so many other moral-less ppl (I am flawed person and know but never have taken advantage of someone) it made her bitter and tired. People who have lived thier awhile forget that peoples attitudes are different in other places. PPL in Vegas think that all cities are like that after awhile. I hear ppl complain about this place but it is heaven here compared to there. I hope she gets some benefit out of this blog. Because if she reads it she will mark my words in 10 years.

PS All the kids I grew up with have drug habits except for a very few. Not that it isnt everywhere but it is abundent there.

I will never raise my child there...

Good Luck,

CDMA