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I thought this article in the Vegas SEVEN magazine was interesting because it interviews builders, sellers and craftsmen who did great during the local boom, ignored the signs of the boom ending, tried to survive effects of the crash and how they are recovering now.
Quote:
During the real-estate-fueled boom of the mid-2000s, Las Vegas routinely made international headlines for its economic super-performance. The market here outpaced others year after year, with median home prices rising from $125,000 in 2000 to more than $300,000 in 2006, when more than 5,000 people moved here each month.
By the end of 2006, the suburbs were stretching to the horizons, the number of visitors to the Strip topped 32.4 million, and the MGM’s $9.2 billion CityCenter—an audacious blend of over-the-top architecture, gaming, hotel rooms, condominiums, celebrity-ordained restaurants and nightclubs, fine art and shopping—was under way. The word “Manhattanization” was on everybody’s lips as other high-rises were planned all over town, monuments to our unchecked swagger. It seemed there was no limit.
It was perhaps inevitable, then, that when the bust came Las Vegas fell harder and further than most. It’s been five years since the subprime mortgage market collapsed, pulling Las Vegas down with it.
This is the story of the rise and fall, as told by some of the builders, sellers and craftsmen who are still working their way through the ravages of the Great Recession.
Real estate agent
High end kitchen cabinet desighner
Vice President of a Home Builders Association
President of a commercial property owner
Vice President of a Title company
CEO of a construction company
All six have rise and fall stories. Probably one of the best wake up calls...
Quote:
LEE: I had all the toys. I had a $100,000 Mercedes, I had a Toyota pick-up that was jacked up with big tires, I had a ’57 Thunderbird. And I had the lifestyle. I had eight credit cards with a combined credit limit of $250,000. I was thinking I was the **** of the walk. And then it stopped.
It hit me when I was sitting at my desk getting ready to pay my bills. I make salary plus commission, so the more business there is out there, that’s where I afforded all of these luxury toys. Well I sat at my desk—I’ll never forget this—and I’m filling out my bills, and my commission check just came in, and it was 70 percent less than what it was a year ago. I looked at what I owed, and I said, I cannot make those payments. I cannot pay those credit cards. I do not have the money. I can’t borrow it. So the decision process at that time was, There’s not enough money, and there’s probably not going to be enough money for a long time because we could see it collapsing all over, and I said, OK, which credit card am I not going to pay?
The fallout from the whole thing is still a mess. I have a friend who purchased a place in the 300s during the boom. So many of her neighbors walked away after the bust- and the houses were snapped up by investors who put shady renters in there. The neighborhood went to hell in a very short period of time. Tomorrows slums come with granite counter tops.
It was a very interesting time. We got into RE in 2000. It was really not an interest of mine and I was dragged by my wife. We had a significant advantage over most. We ate well whether we sold anything or not.
We did almost nothing in 2000. Put together one sizable three way deal and had it collapse when it turns out the initial HOA had a two dog limit and the first buyer had three dogs. Likely could have been worked as they were miniatures but it came up at the last minute and blew it up.
We made a little money in 2001, did pretty well in 2002 and made a whole lot of money in 2003, 2004 and 2005. Three times what Levine in the article did.
The hard thing was to figure out what the hell was going on. We discounted the high rises as nonsense...and then watch some friends make a literal bundle on them. That went on a whole lot in 2004 and 2005. People bought things at outrageous prices and turned right around and sold them at even more outrageous prices...often without ever taking title.
We began to suspect the gig was up in 3Q2004. That is when the new build hit the wall. Sales went from roaring numbers to practically zero in a couple of months. Pulte dropped prices greatly even though they had six months of customers who were going to come in and demand a cut. And then the volume rolled off. For a long time though the price held up pretty well.
The theory behind all this was tough to deal with...what the hell was going on? It proved to be a bubble but was it really? Or did the banks choose to make a bubble rather than let it run out in due course.
Las Vegas had alway been a well disciplined RE market. It was of the Texas type. Slow improvement year over year...3% best case. And it kind of fit the TX model...thousands of acres of cheap land available to support growth forever.
But that changed all of a sudden. BLM no longer gave away land. They wanted a competitive price for it. So suddenly we went from the "free land" of the midwest to the "locked up land" of Southern CA.
Some of us thought we had gone into the standard OC saw-tooth curve. A large run up followed by five years or more of slow decline followed by a sharp run up. And perhaps we had...up to the big break in 2008 it looked like a long term slow decay with very limited volume. Then at the end of 2008 and early 2009 the world fell in. Note though the selling was virtually all by the banks. Even at this late date the selling has only recently gotten to 40% non-distressed and they are still selling at a large advantage to the distressed properties.
For those professionally in the RE business the bad time was mid 2006 to mid 2008. Once the banks broke loose it was again quite possible to make a reasonable buck.
We are now down to 16% foreclosures from over 80 in early 2009. The remainder is split roughly evenly between shorts and non-distressed. And we still have more than a $25 per SF differential.
So what next? August is again up by at least 2% maybe 3. And volume appears to be weakening.
These people were our friends, family and coworkers.
I remember everyone telling me I had to buy a house why I could still get one for less than half a million.
The problem I saw was that the money was too easy for some. Let's be honest here, some of those people had no business making over 100k a year and the selection process was so wide open that people with little education or training in fiscal responsibility were making ridiculous piles of cash. Some people I knew were making bank like that and my thought was that it all seemed to easy. I think a lot of those people simply did not know how to handle all the money they made.
I personally thought we could weather the storm and that n two years we'd be back on top getting ready to open Fountainblue.
I still think Vegas will come back.
I finally bought me a house in 2010 and for less than half a mill. 250k in what at one time sold for 600k. The house is now worth less than what I paid for it, so I guess in a way I am underwater, lol.
We've lost a great deal of friends because of this.
The banks sure did their part to help fuel the fire when they discovered they could slice up and sell off the risk. When I bought in 2000, I had to have documentation out the ying-yang. Everything but a note from my mother (and this WAS on a govt. encouraged first time buyers program) by 2004-2005, the "fog a mirror get a loan" policy had apparently kicked in, because I went to go look for a new house and got one of the biggest WTF moments of my life when I saw the prices, and waiting lists. Waiting lists, seriously?! I didn't buy, but I didn't sell either.
My original next door neighbor was smart. He sold at the top of the market and moved someplace cheaper.
These people were our friends, family and coworkers.
I remember everyone telling me I had to buy a house why I could still get one for less than half a million.
The problem I saw was that the money was too easy for some. Let's be honest here, some of those people had no business making over 100k a year and the selection process was so wide open that people with little education or training in fiscal responsibility were making ridiculous piles of cash. Some people I knew were making bank like that and my thought was that it all seemed to easy. I think a lot of those people simply did not know how to handle all the money they made.
I personally thought we could weather the storm and that n two years we'd be back on top getting ready to open Fountainblue.
I still think Vegas will come back.
I finally bought me a house in 2010 and for less than half a mill. 250k in what at one time sold for 600k. The house is now worth less than what I paid for it, so I guess in a way I am underwater, lol.
We've lost a great deal of friends because of this.
Quote:
I was making $140,000 in 2006. It was stupid money. And I’m thinking, even if I make two-thirds of this for the next number of years, I’m made in the shade.
JEFF ADLER: A designer of high-end kitchen cabinets who now works in closet design.
The banks sure did their part to help fuel the fire when they discovered they could slice up and sell off the risk. When I bought in 2000, I had to have documentation out the ying-yang. Everything but a note from my mother (and this WAS on a govt. encouraged first time buyers program) by 2004-2005, the "fog a mirror get a loan" policy had apparently kicked in, because I went to go look for a new house and got one of the biggest WTF moments of my life when I saw the prices, and waiting lists. Waiting lists, seriously?! I didn't buy, but I didn't sell either.
My original next door neighbor was smart. He sold at the top of the market and moved someplace cheaper.
Sounds like my old Chief(now retired). He owned 3 homes that he purchased in the late 90s out here in Vegas. Sold all 3 in the mid 2000s. Now he is living care free in a trailer park somewhere on Boulder Highway.
Anyone ever heard of "Inclusionary Zoning"?
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The issue we were discussing was how to keep housing affordable for teachers, firemen, police officers and different people in the economy because they were starting to get priced out. We were having discussions about inclusionary zoning, where you’d have to keep one house cheaper in your subdivisions for teachers to buy.
JENNIFER LEWIS: Vice president of the Lewis Group of Companies
If you really thought the *** might be up in 2004, why were you still advising people to buy as late as 2007? If you thought the world was falling in, in 2008 and 2009, why was that the time you were calling bottom every few months?
I'm happy to find myself agreeing with your history of the Las Vegas real estate market. But this is a 180-degree flip for you. Why the change?
If you really thought the *** might be up in 2004, why were you still advising people to buy as late as 2007? If you thought the world was falling in, in 2008 and 2009, why was that the time you were calling bottom every few months?
I'm happy to find myself agreeing with your history of the Las Vegas real estate market. But this is a 180-degree flip for you. Why the change?
PS -- Hey mods, why is j.i.g. "asterisked out"?
My story has never changed. You hear version of my story that may appear to have but I have nothing to do with those.
We got very cautious after late 2004. But at the time there was no indication of a big bust. In fact there was no indication as late as 2007. My personal view in that period was that we should batten down the hatches for a 5 or 6 year downturn. And with low volumes. So it was going to be a far less pleasant RE market then it turned out.
And I urged those who needed to be cautious to do so as early as 2007. I did not expect the burst though...but I thought we would spend five years spiraling down.
I have suggested one bottom and one bottom only and it clearly was. That was in 2Q2009. It did not hold but that happens. There was a sharp change in direction at that time no matter whose data you use. And from the local SFR data it was a clear and reasonably long term bottom.
By the way why in the world is it to my betterment to call a bottom? As I have pointed out any number of times professional I prefer velocity to anything else. A good bank sell off is a lot better than a 25% rise if it cut all the volume off. So if you wish to be suspicious at least pick a theory with some rationality.
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