Vacant homes aplenty but building goes on in Vegas
City trying to fuel recovery by building, which creates more jobs
(LAS VEGAS) In a plastic tent under a glorious desert sky, Richard Lee preached the gospel of the second chance.
The chance to make money on the next housing boom 'is like it's never been', Mr Lee, a real estate promoter, assured a crowd of agents, investors and bankers. 'We're going to come back like you've never seen us before.'
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. It is an unlikely pattern being repeated in many of the areas where the housing crash was most severe.
'There's a surprising rebound in the hardest-hit markets,' said Brad Hunter, chief economist with the consultant Metrostudy. 'People are buying again.'
From the recession's lows, construction has nearly doubled in Las Vegas, Phoenix and Tucson. It is up 74 per cent in inland Southern California and soaring in Florida.
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 that builders are doing their utmost to reinforce.
In Phoenix, a billboard for Fulton Homes summed up the builders' marketing approach. 'Does your foreclosure have tenants?' it asks, next to a picture of a mammoth cockroach.
Brent Anderson, a marketing executive with another Southwest builder, Meritage Homes, said that it bought 713 lots in stricken Arizona last year, and was on the verge of starting construction in a new Phoenix community called Lyon's Gate.
'We're building them because we're selling them,' Mr Anderson said. 'Our customers wouldn't care if there were 50 homes in an established neighbourhood of 1980 or 1990 vintage, all foreclosed, empty and for sale at US$10,000 less. They want new. And what are we going to do, let someone else build it?'
All of this goes contrary to conventional wisdom, which suggests an improved market for builders is years away. Nationwide, new home sales at the beginning of this year plunged to a level below any recorded since 1963, when the figures were first officially tabulated.
Simply put, the country already has too many houses, the legacy of wide-scale overbuilding during the boom. The Census Bureau says that there are two million vacant homes for sale, about double the historical level. Fewer new households, moreover, are being formed as families double up for economic reasons, putting a further brake on demand.
Even some builders agree with the pessimists when it comes to Las Vegas. Meritage Homes, for example, has largely withdrawn from the city. 'We don't think it will come back for a long time,' Mr Anderson said.
American West is betting the opposite is true. The developer, which is privately held and is based here, builds nowhere else. The evening under the tent with Mr Lee was the official start of American West's new community, called Reserve at Coronado Ranch.
Before it opened, buyers began putting down money for the houses, which sell for under US$300,000. 'For the first time in three or four years, we have pent-up demand,' said American West's vice-president for sales, Jeff Canarelli.
Disregard what you may have heard about how hard times may usher in an era of restraint. 'With our buyers, they always want bigger,' Mr Canarelli said. An American West home introduced during the recession comes equipped with an elevator.
There is a benefit to the seeming madness in places like Las Vegas. Building homes is the traditional fuel of a recovery. 'Housing is construction. It's tables. It's paint. It's couches. It's toilets,' said Sally Taylor, a specialist in liquor and gambling establishments who attended the American West festivities. 'If we build more houses, we're creating more jobs.'
Across the street from Reserve's three model homes is a new strip mall. Only one building is occupied, a gambling parlour. Others will start to be filled when more buyers join Snider and Hallman finds a renter.
Analysts have calculated that it could take as long as a decade for inventories to return to their pre-crash levels and for demand to once again exceed supply. That is a grim prospect for any owner who hopes to accrue equity through rising prices.
A few experts, however, are starting to think the path to a better market will be much shorter. Stephen Auth, chief investment officer at financial services company Federated Investors, is a housing bull.
He says he does not believe that many extended families will end up all living in one place.
'That's an unsustainable environment - Grandma coming home, Johnny moving back in with his new wife,' Mr Auth said. 'They're going to move back out. The great housing depression is nearly over.'
New-home sales in March rose 27 per cent. But most analysts attributed the jump to the pending expiration of yet another government incentive, a tax credit for buyers, and said that sales would quickly slump again. -- NYT
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
No takers: Bank-owned homes in the Silverado neighbourhood of Las Vegas. The US has too many houses, the legacy of wide-scale overbuilding during the boom
Posts
No comments:
Post a Comment