September 19, 2006 at 4:20 PM #7550vegasrenterParticipant
The locals tell new Las Vegas residents that this town will either make you or break you. I know it didn’t make me, but at least I’m still alive, healthy, and solvent.
WARNING – If you’re impatient, avoid the following epic and just skip to the end!
I bought a house in Sugar Land (Houston) in 1996 for $76K. To avoid a layoff in May 2002, I sold that house for $101K (first sale ever in my subdivision over $100K!) and moved to Las Vegas for a one-year temp job, with the understanding that I might get laid off after that.
I moved my family into a Henderson (Las Vegas) rental, zoned for the best elementary school in the (huge) district. I didn’t want to buy an overpriced ($170K for a 1600sf 3/2 SFH much like what I had just sold in Texas for $101K) stuccobox with my job prospects so rocky. First mistake! The axe came sooner than expected – The Las Vegas project was cancelled soon after I moved, and my last paycheck was in Jan 2003.
Since my industry had imploded, I returned to grad school briefly, and started interviewing like crazy to get into a more stable industry. During Spring through Summer 2003, the housing prices continued going up about one percent a month like they had in 2002. In October 2003, I got a job offer, except the starting date was TBD, depending on when the client green-lighted the project.
So here I am, with a job offer but no paycheck, and that same month, the Henderson/Las Vegas real estate market starts accelerating in a big way. Talk about heartburn! The market started going up by multiple % a month and friends advised me to buy a house with a liar loan before they went up any further. Great advice, but I was took chicken. Big mistake! In Jan 2004 through March 2004, every listing in Henderson had a dozen offers in the first hour and the prices were going up 10%+ a month!
My project finally got approved in March 2004, and I bought (overbid list by $15K) a 2,000sf 3/2 on a 10,000sf lot in a nice part of Henderson. At my pay rate, I had to use a 5-year interest-only ARM at 4.5% and a HELOC for the other 20%. Even though I had qualified for 100% financing, I ended up writing a check for $30K at closing because the house didn’t appraise, and I had agreed to make up any difference.
I closed in April 2004 with a (free) 3-month lease-back to the seller. About a month into the lease-back, the Las Vegas housing market turned. Inventory started climbing like a rocket, and days on market went from hours to weeks to months. In July 2004 when my sellers moved out, I was able to sell (with a Realtor that’s one of the good guys) for a total net loss of $3K. Another mistake.
In Dec 2004, My landlord put my rental up for sale, and I declined to buy it, because 1. He was asking almost double what it was worth a year and a half before, 2. The market looked ugly, with rapidly rising inventory and flat prices, and 3. I couldn’t afford it.
In January 2005, I moved into a rental condo in Henderson for $1,000/month.
In 2005, interest rates went back down, and Henderson/Las Vegas prices went up another 25% that year. I’m starting (well, continuing) to feel like a big pathetic loser at this point.
Forward to March 2006. My landlord – a young single guy, calls me and lets me know he will be selling the Condo. I agree to keep the place clean and allow showings during the listing while I line up another rental. I call my Realtor (same one this whole time) and ask if I should continue renting or give in and buy a place. He says don’t even think about buying, just rent and wait until if/when the market recovers.
The condo started as the cheapest listing in the complex for 2 months and got no offers. The feedback from buyer’s realtors was that it showed nicely, but there were 27 units for sale, and only one sale during that period (for $25K less than my unit’s list price).
In June, My landlord died (a friend of mine, sad to say), and now my rental will go into probate. The prices peaked in 2005 at about $450K (with lots of upgrades including a [no joking] lot premium). As I write, with no closings since the $320K one, the rumor is that a listing (my floor plan) for $315K is in escrow for $300K cash – no way to confirm that until closing.
So it’s good and bad. If I had bought when I arrived, I’d have a nice, low, fixed payment on a nice house and huge equity. If I had kept my 2004 house, I’d still have good equity, but an ARM reset coming up in 2009. If I had bought my first rental in Jan 2005, I’d be somewhere between even and totally screwed.
For now, here I am, living in a nice neighborhood for rent I can afford, but probably needing to move within a few months. I may have the opportunity to buy my rented condo from the heirs, but I would need a pretty steep discount from current market to step into that.
So what do you think – am I screwed, half-screwed, or not screwed?September 19, 2006 at 4:41 PM #35888barnaby33Participant
Definitely not screwed, not even close. Real estate did not have a once in a lifetime run-up, with a permanently high plateau. This has happened before, prices came down to earth. Its certainly not fun though.
I was/am in a similar situation. When prices were cheap my job was very shaky. By the time my job was stable enough to consider buying prices had gone through the roof.
Opportunities will come again. Either through price declines outright, or inflation. I’m betting on more of the former, than the latter. One way or another housing will go back to being affordable, especially in Vegas. Its the water situation out there you need to worry about, not housing.
JoshSeptember 19, 2006 at 5:25 PM #35894vegasrenterParticipant
“Its the water situation out there you need to worry about, not housing.”
LOL I’m actually in the water business here. Las Vegas has the highest fresh water use per capita of any large city in the world. We’re also spending $billions to build pipelines to wells all over sparsely-populated central Nevada so LV can steal, I mean lease, their water rights! Lake Mead these days looks like a huge, mostly-empty bathtub.September 19, 2006 at 8:29 PM #35906AnonymousGuest
I vote for “not screwed”.
whatever decision you made was the best decision you could have made considering your position at the time. There is never any reason to lament about the past, you will not change it. In retrospect, you can only learn from it. Considering the current market, I would say that you made some good decisions along the way, getting out of your mortgage was a great one!September 19, 2006 at 8:43 PM #35908zeropointzeroParticipant
You don’t have a large mortgage on a potentially depreciating asset in a city in the desert that is highly sensitive to national econimic trends. You don’t a mortgage payment that may reset to an unaffordable rate at some point in the next couple years, or has a prepayment penalty, or is actually adding to your principal balance. You have time to hopefully get a good handle on what is happening in the market and strengthen your own financial situation. Sounds to me like you’re just fine.
Of course – none of that matters if wifey’s not on board! 🙂
Seriously though – sounds fine to me. And about the few bucks you lost on your last transaction – that sounds like a lot less expensive education than others are receiving from the current marlet. Cheers!September 19, 2006 at 9:18 PM #35910AnonymousGuest
My husband and I moved to Vegas in Aug 04 (at the TOP of the Vegas market). I cannot tell you how many people told us, back then, that we were idiots for not buying. I mean, people were downright insulting our intelligence (despite the fact that we are both successful career people with advanced degrees!). Because we had sooo much debt from medical school, buying a home was not possible for us. Well thank God for that debt. We’ve spent the last 2 years paying Sallie Mae rather than Fannie Mae and that was the best decision we ever made. No more school debt and we have been seeing the prices here decline. The homes even in super fancy ‘hoods are staying on the market longer (like, some for 18+ mos) and are finally coming down. We have found a smart realtor who agrees with our approach – we said we’ll talk about buying here once there’s a serious correction. I really feel like it is going to happen here as every home we have looked at is EMPTY – ie no one has ever lived in it! Flippers came and bought up the whole city and once their ARMS adjust they will all be jumping ship. THAT is when you should reenter market!September 19, 2006 at 9:45 PM #35912ybcParticipant
vrudny, are you rehired? Good luck.September 19, 2006 at 11:25 PM #35918barnaby33Participant
VegasRenter, tell me more! Water is the issue of the 21st century. We don’t see it here cozy in the US yet, but all over the world water is a huge issue. What issues are you currently confronting? Where do you see Vegas in 5/10/20 just based on water consumption issues?
- You must be logged in to reply to this topic.