From David Streitfeld in the NY Times: In City of Homes That Sit Empty, Building Booms
Home prices in Las Vegas are down by 60 per cent from 2006 in one of the steepest descents in modern times. There are 9,517 spanking new houses sitting empty. An additional 5,600 homes were repossessed by lenders in the first three months of this year and could soon be for sale.
Yet builders here are putting up 1,100 homes, and they are frantically buying lots for even more.
Las Vegas is trying to recover by building what it does not need
Some of the demand is coming from families that are getting shut out of the bidding for foreclosures by syndicates that pay in cash, and some is from investors who are back on the prowl.
Land and labour costs have fallen significantly, so the newest homes are competitively priced. Some of the boom-era homes, meanwhile, are in developments that feel like ghost towns. And many Americans will always believe the latest model of something is their only option, an attitude builders are doing their utmost to reinforce.
Photo: Calculated Risk
Many buyers have been frustrated recently trying to buy homes, especially at the low end. They are competing with cash buyers, or they have to endure endless delays with short sales (although the process is improving), and meanwhile the lenders have been slow to foreclose. This has created an opportunity for builders – even though there is no need for new supply in places like Las Vegas.Click on image for larger graph in new window.
This graph (from this post earlier this week) shows the negative equity and near negative equity by state. The graph is based on the data in the First American CoreLogic Q1 2010 negative equity report this week.
From the report:
- Negative equity continues to be concentrated in five states: Nevada, which had the highest percentage negative equity with 70 per cent of all of its mortgaged properties underwater, followed by Arizona (51 per cent), Florida (48 per cent), Michigan (39 per cent) and California (34 per cent). Las Vegas remains the top ranked CBSA with 75% of mortgaged properties being underwater, followed by Stockton (65%), Modesto (62%), Vallejo-Fairfield (60%) and Phoenix (58%).
The good news for buyers is there are probably many more distressed sales coming.