Financing-plan trouble halts Vantage Lofts work

Slade chairman cites problems with lender

By HUBBLE SMITH
REVIEW-JOURNAL

Construction has stopped on Vantage Lofts in Henderson and the sales center is closed while Slade Development works out a new financing plan, Chairman Stacy Slade said.

"We're restructuring the capital and during that time, I didn't want to be delinquent on payments to a bunch of subcontractors," Slade said.

He expects financing will be in place within the next couple of weeks and then he'll proceed with construction.

The first building with 40 units is near completion and people could be moving into their units within the next three to four months, he said. He's been communicating with buyers on the project's status.

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"The market is down. That's no secret," Slade said. "Based on the climate and the market, sales are not what we anticipated. We thought there would be a correction. Vegas has always had nice steady growth. When we've had a downturn, it hasn't been that dramatic. We've always had ups and downs, but never a correction as dramatic as this."

Slade said his second-position lender, sometimes called mezzanine, hasn't cooperated in restructuring the loan and was "causing difficulty for us." He is asking for deferred interest payments.

Scripps Investments and Loans of La Jolla, Calif., is the primary lender on the $160 million project, which will have more than 300 units on 20 acres when completed.

Completion of the 110-unit first phase was originally scheduled for early 2007. Again, a change in the secondary lender, along with design and engineering issues, delayed the project, Slade said.

"I'm very positive that the project will get completed," he said. "It's still a great project, but the market's got to come back for us to finish out."

Vantage Lofts is on Gibson Road near the foothills of Black Mountain. Floor plans range from 1,000 square feet to 2,600 square feet. Sales prices are holding steady at about $400 a square foot with some incentives, Slade said.

HIGH-RISE DEAD: Pinnacle Las Vegas, a high-rise condo project planned for the former site of Falconi Honda on Tropicana Avenue, has been canceled.

The sales gallery was closed Feb. 22 and agents have been laid off, said Kyle Waugh of Rise Realty, the broker of record. Nevada Title has been instructed to expedite the release of buyers' deposits along with interest in accordance to their contract, he said.

"It's unfortunate because we were very successful in selling the units in a short period of time," Waugh said. "Pinnacle offered a great package. I talked to several buyers and they're happy that their deposits are being returned, but they're disappointed that it didn't get out of the ground."

Pinnacle was distinguished in its design by a "sky bridge" connecting two 36-story towers with 1,100 luxury condo units. YWS was the architect.

When the $650 million project was announced in 2005, developers were confident it wouldn't end up in the junk pile with other high-rises such as Krystal Sands, Aqua Blue and Icon because the 12-acre site was owned free and clear by Angelo Falconi. The land was valued at about $8 million an acre.

RISING VACANCY: Apartment vacancy in Las Vegas rose to 9 percent in January, up from 8.4 percent in December, CB Richard Ellis, a commercial real estate brokerage, reported. The breakdown by class shows 7.76 percent for Class A (28,082 units), 9.38 percent for Class B (42,000 units) and 9.67 percent for Class C (26,148 units).

TOP SELLER: High-rise condo broker Aaron Auxier of Luxury Realty Group said he set sales records at MGM Mirage's CityCenter with three units at The Harmon Residences that went for $1,500, $2,000 and $2,400 a square foot. It's the most expensive price-per-square-foot home or condo ever sold in Las Vegas, he said. The previous record was just over $1,300 a square foot for a luxury condo.

KORTE PROJECT: Korte Co. was named general contractor for $1.2 million in tenant improvement work at the 28,000-square-foot Stein Mart store at Shadow Mountain Marketplace, 6435 N. Decatur Blvd.

PALAZZO STORES: Crisci Builders finished interior buildout for Diane Von Furstenberg women's fashions and Elton's men's store inside the Palazzo. The two jobs were worth $1.6 million.

Las Vegas Default Highlights

Commercial-Property Crunch
By JENNIFER S. FORSYTH, MICHAEL CORKERY and TAMARA AUDI
January 17, 2008; Page A1

The credit crunch that roared through the residential real-estate market is starting to bite commercial projects, too.

Yesterday, Ian Bruce Eichner, the developer of a twin-tower casino resort in the heart of Las Vegas, defaulted on a $760 million loan from Deutsche Bank AG after he failed to get refinancing. The default on the loan supporting the $3 billion Cosmopolitan Resort Casino is a signal of trouble for Mr. Eichner, who gained notice during an earlier real-estate downturn in the early 1990s when he lost several projects in New York City.

Owners and developers of some of the country's choicest properties are having trouble refinancing shorter-term loans they received during the boom days.

Recent casualties include Centro Properties Group of Australia, one of the largest owners of shopping centers in the U.S. Its stock has sunk because it can't refinance $3.4 billion in short-term debt. Also, New York developer Harry Macklowe, who bought a group of Manhattan office buildings last year at the top of the market, is struggling to repay some $7 billion in debt that comes due in February. Mr. Macklowe just put his prized General Motors Building in midtown Manhattan on the block.

During the boom, investment banks made loans for both commercial and residential properties, quickly packaged them into securities and sold them to investors. Last summer, the market for securities backed by subprime home loans seized up as defaults by these less credit-worthy borrowers surged. The subprime problem is at the heart of huge write-downs on Wall Street, where the toll is set to pass $100 billion.

Now the same system is breaking down in commercial property, because few investors want securities backed by loans to commercial real-estate owners. Moody's Investors Service warned last week that the corporate default rate for the construction and building industry could reach 12% this year and predicted a 6% default rate in the hotel, gaming and leisure industries.

Notice of Default

Mr. Eichner yesterday received a notice of default on the $760 million loan, which came due Tuesday. He had failed to obtain refinancing to pay back the loan. The default triggered technical defaults on additional debt totaling $175 million.

Mr. Eichner may still succeed in finding new investors, something he has been struggling to do for weeks. Work is continuing on the 3,000-room casino and hotel, which is scheduled to open in late 2009, according to a spokesman for the casino. He said he didn't know whether it would be halted by the default action.

Mr. Eichner released a written statement blaming "current challenges within the real estate and debt capital markets which are out of our control." The statement said he is working with Deutsche Bank and Merrill Lynch & Co. on raising new equity. "This action by our lender comes as no surprise," the statement said. Representatives of Deutsche Bank and Merrill Lynch declined to comment.

The Cosmopolitan includes 2,184 "condo hotel" units, which are condominiums that typically get rented out as hotel rooms. During the housing boom, speculators in cities such as Las Vegas, Miami and San Diego snapped up these units because they promised to rise in value while also producing rental income.

Lately investors have soured on condo hotels. In Las Vegas, a group of buyers are suing a development partnership behind the Signature condo-hotel project, claiming room rates aren't as high as promised. A spokesman for MGM Mirage, now the operator of the project, denied that promises were made about the rates.

The Cosmopolitan spokesman said that 84% of the condo-hotel units have been sold. "It's a successful offering," he said.

The Cosmopolitan is designed to include a high-rise hotel tower, to be managed by Global Hyatt Corp. as a Grand Hyatt, as well as another tower with the condo-hotel units. The developers announced in September that chef Philippe Chow's upscale New York restaurant would open a branch in the development and that Wolfgang Puck Catering would supply the hotel catering.

Mr. Eichner's problems come as Las Vegas is in the midst of an unprecedented construction boom that is affecting nearly every corner of the Strip, the broad thoroughfare at the city's center lined with hotels and casinos.

The Venetian, a lavish casino hotel, is holding a grand opening this week of a $2 billion addition called the Palazzo. MGM Mirage's massive CityCenter project promises to transform a large chunk of the Strip with residential properties and noncasino luxury hotels. Some $35 billion of new construction is planned or under way in Las Vegas, according to the Las Vegas Convention and Visitors Authority. That is expected to produce about 40,000 new hotel rooms by 2012.

However, some projects are seeing delays or getting canceled as financing dries up and the housing market slows. Plans to renovate the legendary Las Vegas Tropicana are on hold after the casino's owner, Kentucky-based Columbia Sussex Corp., had troubles with another casino in Atlantic City, N.J.

Living on the Edge

Messrs. Macklowe and Eichner both have histories of living on the edge. Mr. Macklowe lost the Hotel Macklowe near Times Square and at least two other properties in the real-estate bust of the early 1990s. Mr. Eichner lost a series of buildings, including two prominent New York skyscrapers, in that period. His saga was portrayed in a 1993 book by Jerry Adler: "High Rise: How 1,000 Men and Women Worked Around the Clock for Five Years and Lost $200 Million Building a Skyscraper."

After bottoming out, Mr. Eichner began his comeback in Miami with a condominium project in the land-precious South Beach that was touted as the "last great oceanfront property" there. The project was recently completed, according to the company's Web site.

Then he turned his attention to Las Vegas. Unlike many projects on the Strip that raise money via public stock or bond markets, the Cosmopolitan is privately owned and financed.

Around April of last year, commercial lenders started to get nervous about the lax underwriting standards that developed during the property boom. Bankers began to raise interest rates and required borrowers to put in more of their own money into deals.

Experts assess chance of recession

Real Estate and Development
By Brian Wargo / Staff Writer

In a city dependent on tourism and a housing industry clinging to hope for a quick recovery, Las Vegas Realtors, developers and investors remain anxious about whether the U.S. is headed for a recession.

Those fears only grow when Federal Reserve Chairman Ben Bernanke recently warned of threats to the economy — that economic growth will likely slow noticeably in the coming months because of oil prices adding to inflation. Despite his warning, he quickly added that the economy would rebound by the middle of 2008.

Throughout an Urban Land Institute conference in Las Vegas that brought some of the leading investors and developers in the country, the consensus was that although the U.S. economy is slowing and growth rates of investments have to be adjusted because of it, there won't be a recession.

The biggest concern is the fallout from the subprime lending woes and its effect on the credit markets and the housing industry with a rising number of foreclosures. To put it into context, Hessam Nadji, managing director of research services at Marcus & Millichap, says the financial impact of an expected 2 million foreclosures is expected to be about 3 percent of gross domestic product. That's well below the 8.5 percent of GDP during the S&L Crisis and recession of the early 1990s, he said.

"This is not unlike other bumps in the road that we have had except that it is much bigger psychologically," Nadji says. "There is clearly an overreaction."

That doesn't mean there aren't concerns, however, he says.

Job growth has slowed and there are questions of where the jobs will come from because 40 percent of those created over the last five years were related to the real estate market.

Nadji also says retail sales have slowed in part because consumers have lost discretionary income from their housing equity.

Although some cite a study that shows that if borrowing against a house stopped completely, it wouldn't greatly impact retail sales, others continue to remain concerned about consumer spending.

Ron Sturzenegger, the global head of real estate and lodging with Banc of America Securities, says recessions happen a lot of different ways. Some recessions are financial or a corporate crisis while others are a consumer crisis.

When it comes to financial institutions, many are writing off bad loans for billions of dollars and saying they're fine. They are so well capitalized compared to how they were in the 1980s and 1990s, that they can afford to take substantial write downs and say they are strong financially, Sturzenegger says.

Corporations are doing well with their earnings, he says. That brings us to the consumer.

"The biggest question is what happens to the consumer when their houses don't have the ATM effect," Sturzenegger says. "What if they actually have to put money into the house to support the loan or their adjustable rate mortgages are ratcheting up and their payments go from $400 a month to $850 or $900. And then they struggle to make their payment. The issue right now is not a financial or corporate problem but what will the consumer ultimately do. If we do lead ourselves to a recession, it starts at that end of the market."

Daniel Hurwitz, the president and chief operating officer of Ohio-based Developers Diversified, which owns and manages more than 740 retail properties in the U.S. and abroad, says anyone who predicts a recession isn't looking at the facts because there is growth in wages, jobs and retail sales. He much of the equity people took out of their homes didn't go to retail sales and the fallout shouldn't hit that sector hard.

"We don't think there will be a recession," Hurwitz says. "We think it is all overblown."

Hurwitz says he's heard from retailers in the same exact center in the same product line who talk about their sales growth. One complains that the oil prices or economic slowdown has lowered their sales and the other will say they're doing great.

"We have had a lot of excuses coming through the pipeline," Hurwitz says. "It's about merchandising. The losers are going to look for an excuse."

Chris Cole, chief executive of Cole Cos., a Phoenix firm that partners with investors on commercial developments, says the U.S. technological advantage over other countries will erode over the next decade or two but for now the U.S. is in a good position. It is an affluent society with people earning and inheriting record amounts. That wealth of Baby Boomers will work its way through the economy for another 20 years, he said.

Looking ahead at commercial real estate: Brian McAuliffe, managing director, chief investment officer with RREEF Alternative Investments, says he's most bullish on the apartment sector given what's happening in the housing market. Demand will remain strong because of the challenges of getting mortgages and higher debt payments and people's fear of buying because values will decline in six months to a year, he said.

McAuliffe said he foresees more construction of garden apartments because commodity costs for lumber and drywall are coming down with a drop in home construction.

"That is a sector we are very bullish on," McAuliffe says. "When you look at the demand for the apartment sector, you have to look at two areas — one is the existing tenants that you have and the other is the demand for space. Obviously, we feel very confident on renewals. We have already seen signs where it is increasing, and we expect that to continue because of the ability to get financing today is more challenging because you need higher debt payments. You all know the fear factor that if you are going to buy a home today and in six months or a year from how it is worth less."

The office market is solid because of the inherent value of leases, lack of supply coming online and strong corporate earnings. The warehouse and distribution market is expected to slow with vacancy increasing, he says.

The retail market is one that McAuliffe said has peaked and has a lot of supply threats.

Hurwitz said he doesn't agree with that assessment of the retail market.

"The supply pressure in retail doesn't mean it's overbuilt," Hurwitz said. "It means we are under demolished. If you look at our vacancy rate, they can move a little bit, but they don't move very much because most retail has 10 percent or less of spec space."

Availabilty of credit: The fallout of the credit crunch on the housing market has many concerned that future development will be slowed in Las Vegas and other locales, but many of the experts don't think that will be the case.

Sturzenegger says interest remains very strong among pension funds, insurance companies, private equity investors and foreign investors.

"There is a lot of money lined up on the sidelines trying to figure out a way to get back into real estate," Sturzenegger says. "It's probably not as much as we had in May, but they just don't know where to come into the market."

What the market faces today is a debt problem, Sturzenegger says.

The big financial institutions committed to loans in April through June but stopped selling the debt and found themselves with a real large inventory of real estate loans that they couldn't sell for prices they thought they could. Once those loans go through the system, the real estate lending market comes right back in.

"The reason I feel so confident about it is because there is so much liquidity," he says. "We have a pricing problem, not a credit problem. We just need to find out where the right price is. You will see as much as $50 billion in real estate loans go back into the market between now and the end of first quarter of next year, and we will have a more liquid real estate market once again."

Election impact on real estate: While there's plenty of attention focused on capital markets, the economy and housing industry for its impact on real estate investment and development, add one more item to the watch list — the 2008 presidential election.

Daniel Hurwitz says the election's outcome will have a big impact on real estate.

"I think there is a perception that if the Democrats are going to come in and there is going to be a massive overhaul of tax policy," Hurwitz says. "I think you are going to see a lot of real estate hit the market. There are a lot of large private portfolios of real estate out there today that are watching that situation very, very carefully."

In other news:

Services were held last Friday for Harold J. "Hal" Ober, past president of the Southern Nevada Home Builders Association. Ober, who has an elementary school named after him and his wife, D'vorre, was a native of Pittsburgh who moved to Clark County in 1977.

He developed nearly 30 communities in Las Vegas, including the Desert Shores master-planned community. The family requested donations be sent to the Hal Ober College Scholarship Fund care of Jewish Family Service Agency; 4794 S. Eastern Ave.; Las Vegas, 89119.

NASCAR's favorite burger joint plans 20 Las Vegas stores

Checkers franchise owner will face stiff competition in war for the local burger buyer
BY VALERIE MILLER

Burger King, McDonald's, Sonic and gobs of other fast food offerings fill bellies throughout the valley everyday. Now, locals will have one more choice to satisfy their burger-and-fries cravings.

Checkers Drive-In Restaurants announced plans recently to open 20 area stores throughout the next four years. The Las Vegas expansion is part of the Tampa, Fla.-based chain's efforts to move west. It already has California operations in Fresno and Orange County.

The first franchise development agreement was made with David Meldrum and Nick Nasrollahi, who spent 20 years with the Jack in the Box organization. Nasrollahi says he plans to own and operate all 20 of the local franchises, as opposed to subfranchising out the territory as some franchise owners do.

"I intend to open seven to 10 by the end of 2008, and 10 to 12 by the end of 2009. After that, it will probably be two to three per year," he said. "Within four years, I would like to have the 20 (stores) done. That's the target."

North Las Vegas will likely be the site of the first Checkers, he said. The company is considering other locations for building the signature checkered modular restaurants. General ground leases will be signed with shopping centers for most locations.

"We will be opening restaurants throughout the valley," he said.

Nasrollahi predicted "great hamburgers" and Checkers' specialty pies will be hot sellers, drawing people to the quick eateries. Checkers' typical store model has two drive-throughs and an outdoor patio for customers. The franchisee said the double drive-throughs will set the chain apart, even if a few vintage McDonald's have such a feature.

Major competition will come from Sonic, Jack in the Box, and McDonald's, as well as Burger King, In-N-Out Burger and Carl's Jr., Nasrollahi believes. The prices will be competitive, however, he said. They will fall in between the pack. The average burger combo meal will run about $5.

Nasrollahi said his goal is to be competitive and offer better quality, but franchise costs aren't cheap. The initial franchise fee is $30,000. The modular building and equipment costs run in the "low $300,000s," said Ron Levondosky, the executive vice president of franchise operations at Checkers Drive-In Restaurants. Another 4 percent of annual net sales is paid back to the owners of the Checkers name.

Each restaurant will have 25 to 40 employees. The restaurants are smaller is size, at about 800 square feet, which saves the franchisee real estate costs, he noted. Any given shift may have eight to 14 employees working.

Checkers was founded in Mobile, Ala., in 1986. It is now one of the official burger restaurants of NASCAR. It has 826 stores nationwide with plans to open 40 stores this year and 80 more across the country next year. Its food has a cult following, as does In-N-Out's, Levondosky said. The seasoned, battered fries are the chain's most popular fare. Oldies music is piped in to set the Fifties' drive-in mood.

Checkers' model thrives on becoming part of the neighborhood it serves, store by store, rather than mass marketing, he added.

"That's what we do best. We provide cups to (high school) football teams for their concessions and for little league. Then they come to us after the game," he said.

The Checkers exec adknowledged that competition in the Las Vegas market will be stiff.

"On the East Coast, we don't have the Carl's Jr.'s, In-N-Outs or Jack in the Boxes," he said.

Levondosky was buoyed by the success of Checkers in California markets, however, where those other chains do have a presence.

Checkers' move to Las Vegas makes sense, said Pat Moreo, the chair of the Food and Beverage Management department at the University of Nevada, Las Vegas' William F. Harrah College of Hotel Administration.

"I think it will be perfect for them. I think it will work well," he said.

Take-out food trends are on the Tampa-based chain's side, Moreo said.

"People are cooking at home less and less."

North Las Vegas home prices rising faster than incomes

In a report by the Associated Press, analysis of the housing market indicates that national median home prices are rising faster than median incomes. The gap, which has been growing since 1990, is contributing to the struggling housing market and Southern Nevada seems to be matching the national trend.

According to the report, the national median income grew 60 percent between 1990 and 2006, while median home prices more than doubled. Locally that disparity leaned toward the bleaker side as the median income in North Las Vegas doubled, while home prices increased fivefold.

The current housing slump has been likened to the dot-com bubble of the late 1990s, where rising stock prices gave way to riskier lending, which in turn lead to a spectacular bust. Similar to the dot-com bubble, current rising home prices have been attributed to risky lending and low interest rates, rather than actual increases in income.

As bad as the housing slump may be right now, it still hasn’t bottomed out and it’ll be awhile longer before the market begins its recovery.

LOOKING IN ON: GAMING

Profits rise, but customers might not be betting more

By Liz Benston
Las Vegas Sun

Suburban casino giants Station Casinos and Boyd Gaming Corp. increased their profits in the second quarter, suggesting that the local gambling economy isn't faring as badly as expected from the slump in the housing market, which has earned Nevada the distinction as the state with the highest rate of foreclosures.

On the other hand, continued population growth could be masking the effects of a tougher economy and a more tight-fisted customer. So we may never know how much Las Vegas' housing troubles are factoring into the performance of locals casinos.

What makes Las Vegas unique among gaming market s is the region's consistently strong population growth - and the steady stream of new gamblers it provides. Neither company has been able to specify how much of its profit growth is because of existing customers spending more money versus an increase in customers.

Boyd's locals casinos reported an increase in operating cash flow (the best indicator of how well its casinos are doing) of just less than 3 percent compared with a year ago, while Station's biggest casinos reported an increase of 4 percent. Station's companywide profit was down 44 percent in part because of costs related to expansion and its planned buyout . Analysts say Station, which is expected to go private this year in a management-led buyout, isn't maximizing profit to meet Wall Street expectations.

The troubled housing market has probably has had some effect on gambling budgets, even among those who are gainfully employed or retired with a healthy nest egg. It's no secret that gamblers, before home values headed south, tapped into home equity for cash. Now that home values have fallen, analysts say , homeowners are feeling less flush.

Local s casinos are expected to get a boost as the Strip's construction boom gets under way and the newest wave of luxury resorts opens in the coming years, employing tens of thousands of people.

People who build casinos then spend money inside them.

• • •

During its more than 14 years as a public company, Station Casinos' stock has risen by 575 percent - one of the best-performing stocks of its size. That works out to an average annual increase of about 15 percent, steady enough to invoke comparisons to the steam engine trains implied in the company's name and reflecting the fact that about 80 percent of company revenue comes from gambling, which has grown with the Las Vegas population.

That may be why 72 percent of stockholders, not including top executives and other company insiders, voted Monday in favor of a management-led buyout to take the company private.

At least six groups of shareholders, including a pension fund for firefighters in West Palm Beach, Fla., had filed suit against Station, arguing that management's $90 per share offer was too low and accusing it of self-dealing at the expense of outside shareholders.

And yet, more than 50 percent of Station shares are held by giant mutual funds and other institutions that manage tens of millions - even billions - of dollars and employ research specialists to analyze buyouts. That includes folks whose funds hold Station shares.

To settle the shareholder lawsuit, Station management agreed to disclose additional financial details before the vote, including the prospect that the company's operating cash flow will more than double, to $1 billion, by 2010. That suit is pending.

For the smaller fraction of shares purchased directly by individuals, including the loyal Station gamblers so enamored with the company as to buy shares, selling after such a good run was probably just as difficult as cashing out after an especially lucky streak in the casino. Most gamblers, naturally, would prefer to let it ride.

Las Vegas and the Distressed Property Market

Market Conditions for the Nation

Reported By
Sean Brown
As of 06/26/2007

Since the implosion of the sub-prime mortgage market at the beginning of 2007, the distressed property market has really gained momentum. This is especially true of markets like Las Vegas, where the extreme appreciation of 2003-2005 has been met with a year long cool down and the start of a slide in property value. The Office of Federal Housing Enterprise Oversight’s (OFHEO www.ofheo.gov) recently released their Q1 2007 Housing Pricing Index (HPI) report and cited Las Vegas as appreciating 1.69% for the year and depreciating 0.41% for the first quarter of 2007. Looking at the current MLS data, it looks like the depreciation in second quarter will likely meet or exceed the first quarter.

When looking to invest in a market like Las Vegas, you need to consider which investment vehicles or strategies might actually be profitable. Rent is definitely too low for properties to cash flow positively with a down payment of 20% or less. This leads most local investors to the distressed property vehicles, but not all of these vehicles work well in down and depreciating market. Therefore, before you invest too much time in learning about a specific vehicle you need to determine if it will actually result in a profit. The most well known distressed property investment vehicles are the Notice of Default List, Short Sales, Foreclosures (“on the court house steps”), and Bank Owned REOs (Real Estate Owned).

There are a total of 25,659 available properties on the Las Vegas MLS with only 2,995 additional properties under contract. Of the available properties, 2,048 (7.9%) are flagged as short sales. A short sale is where the property is being sold for less than the combination of what is owed on the property and the cost of selling it, so you approach the bank about taking less than the full amount of the loan.

Working short sales is very different than working the other pre-foreclosure investment strategy, the Notice of Default (NOD) list. When working with the NOD list, you are dealing with the owner and you are looking for properties that have a high equity, low Loan-to-Value (LTV) ratio. You need the low LTV because your profit is the difference between what the value of the home is and the amount the banks need to pay off the loan.

While negotiating with the owners over the equity in their house might sound challenging, it is usually cut and dried. They either understand the situation they are in and are willing to negotiate or they don’t fully comprehend that they are about to lose their house and will shut you out entirely, and this can be determined quite quickly. If they stonewall you, you move on to the next property. If they are willing to negotiate, the process is relatively simple.

In a short sale, however, you will be dealing directly with the bank and you’ll be looking at properties where the LTV will likely exceed 100%. The problem for the investor is two fold. First, where is the profit in this deal with the bank? Logically, the bank will want to get the most they can for the property, minimizing their losses. Seldom are banks willing to let a property go for anything considerably below today’s current market value, so this makes it very hard for the investor to work in their profit.

The other hurdle that you will face is that the banks are notoriously slow in dealing with short sales. Banks regularly take 4-8 weeks just to respond to an offer, and if a property is already in the foreclosure process, that time could easily extend past the Notice of Foreclosure Sale date. Additionally, the owner will have to be very cooperative in coming up with the required financial statements and writing the hardship letter, and owners who are in these situations are not typically quick to respond.

Foreclosures are really on the rise and depending on the source, Las Vegas is leading the pack. True foreclosures, what people sometimes refer to as “buying on the court house steps,” is a cash-intensive process that is very competitive in the Las Vegas market. This makes this vehicle very challenging for most individual investors. Clark County requires you to pay the full amount of the offer immediately before the next property is auctioned, which means you need to have cash for the entire purchase price with you right there. While there are a few bargains to be had, it is not the fire sale that you might think as the banks would still rather hold on to the property than give them away.

The banks’ current stance on valuing the properties on the high side leads to a growing REO market. REO stands for Real Estate Owned, and it is the term for a property the bank has foreclosed upon and did not sell at the county auction. What is amazing is that the banks will deny a short sale on a property only to drag it several months through the entire foreclosure process and then list it for less than the denied short sale price. While it is not yet a “fish in a barrel market,” some banks are starting to deal on a few of their properties.

Where is this all going? Either the banks will start dealing with the current owners utilizing workouts and short sales, or the REO market will explode. At the beginning of June, 2007, the banks were still playing hard ball, unwilling to negotiate in most short sale situations even in very reasonable scenarios. The only positive sign that we’ve seen recently is their willingness to arrange for workout programs for the current owners. These programs allow the owners to miss a few payments to try to get back on their feet, but this is truly a band-aid approach. Owners that are not able to make their payments today will more than likely not be able to make their payments at the end of summer, and we will still see the need for either a short sale or foreclosure.

Until the banks face the situation squarely and start accepting more short sales, the properties will flow to the REO market and that is a good place to be looking for some bargains. As the supply in that market swells, look for even further discounts to come. The local market tends to slow down in the fall and stagnate in the winter, so the distressed property market should be in its prime at that time.

Affordable Housing Hard to Find in Las Vegas

Sometimes called the working poor, thousands of families in Southern Nevada struggle to make ends meet, and affordable housing is becoming a distance dream for many of them.

Eyewitness News talked to one family who lives this everyday.

The young family plays by the book. Both parents work, their kids go to school, but they've gone from living in an apartment to living in a hotel. All because they say the cost of living in Southern Nevada is way out of their budget.

Brigette Young is talking about her annual income -- a number that does not add up when it comes to owning your own home. She's lived in Las Vegas for more than thirty years. A wife and mother of four, she and her husband both have jobs, but says it still isn't enough to survive.

She's trying to get help from a local agency to get a uniform and a new pair of shoes for her job. She and her husband have been trying to buy a home. But she says there just isn't enough help out there for families like hers.

"Barely making it because they need to lower the housing. Let most of us get into apartments. Right now, I am on a waiting list for housing. I've been on that list for two years now. I'm still waiting. Still waiting," Brigette said.

While she waits, she and her family have been forced to live in a motel for the last two weeks because the apartment they were living in was bought by the city of Las Vegas as part of a redevelopment project.

The young family is just one of many who are struggling, not only to buy a home but also to survive.

If this trend keeps going, it may force families to leave Las Vegas to find a more affordable place to live.

Flippers flop as hot housing markets cool in Vegas, elsewhere

Nevada leads the nation in foreclosure rates as owners unable to sell became saddled with unbearable debt payments

RYAN NAKASHIMA
AP Business Writer
April 29, 2007

LAS VEGAS - In the rampant real estate speculation of the Las Vegas valley three years ago, people lined up outside Pulte Homes sales offices overnight as if they were waiting for the release of the latest video game console or hot new movie.

Having seen his house in an upscale part of suburban Henderson jump $200,000 in value in 18 months, Sam Schwartz felt he couldn't miss any part of the boom.

He spent the night in the parking lot with TV, snacks and drinks, along with about a hundred other people.

Schwartz intended to buy a new home and then quickly sell it within the year - for a huge profit. Most people waiting were flippers just like him, he said.

"We had seen real evidence of what was possible in this crazy, inflated market, and we just wanted to get a piece of that investment equity," Schwartz said.

But when home prices unexpectedly took a backward step, many investors seeking to cash in quickly were left "upside-down," or owing more on their mortgages than what their homes were worth.

The result was a glut of homes in the marketplace, communities spotted with empty houses and for sale signs - and a foreclosure rate in Nevada that leads the nation as owners unable to sell became saddled with unbearable debt payments.

Foreclosure filings across the United States rose 47 percent last month from a year ago to 149,150 - one for every 775 households, according to statistics from Realty Trac Inc., a foreclosure listing service. And for the third straight month, Nevada's foreclosure rate led the nation when it rose 220 percent from a year earlier to 4,738 filings, or one in every 183 households.

Realty Trac statistics show dozens of homebuyers in the Las Vegas area have more than one home in the foreclosure process - a telltale sign of investments gone wrong. One person has as many as 15 mortgaged properties in arrears.

The bulk of the state's foreclosures - or 91 percent in March - were in Clark County, which encompasses the Las Vegas Valley. One of every 30 homes in Clark County began the process toward foreclosure last year.

The day Schwartz reserved his home, the sales staff was raising prices $20,000 after every fifth buyer came inside. The $500,000 house he and his wife were eyeing had shot up to $540,000 by the time they sat down. Somehow, it still seemed like a good deal.

"Everybody was thinking, 'Hey it's not the end of the world, because the homes across town are selling for $720,000. We have almost $200,000 in equity in the house and it isn't even built yet,"' Schwartz said.

He and his wife put down $5,000 on a home that would end up costing $560,000 with upgrades.

While the Schwartzes were able to cancel before closing on a property that suddenly was worth only $490,000 - and recoup their deposit on a legal technicality - others were less fortunate.

Schwartz, a 44-year-old life coach, said he "narrowly escaped financial disaster." But the effects of the housing crunch would reverberate for years, he said, something he expects to see among the clients he coaches to succeed in their lives and careers.

"There's going to be a lot of depression, a lot of anger. A lot of drinking, gambling, and desperate stuff going on."

More than other states hit by the mortgage lending crunch, the high foreclosure rate in Nevada, California and Florida was driven by speculation, said Rick Sharga, vice president of marketing for Realty Trac.

"It was a combustible mix of risky loans and risky real estate deals," he said.

Russ Valone, the chief executive of research firm MarketPointe Realty Advisors, said speculators in San Diego were putting deposits on downtown condo units under construction, assuming they could sell them at a profit when they were finished.

"There were guys out there that were rolling the dice just as if they were going to Las Vegas," Valone said.

When the market slowed, many buyers forfeited their deposits, or let their properties get repossessed by the banks. As a result, the inventory of unoccupied condo units downtown since early 2005 has soared fivefold, he said.

California had the third highest foreclosure rate at one in every 389 households, and its 31,434 filings in March accounted for a fifth of the nation's total, Realty Trac said.

New home builders are slowing down the pace of new projects in Las Vegas and are giving agents commissions of up to 12 percent and up to $100,000 in upgrades such as pools, granite countertops and appliances.

"The speculators completely dried up," said Paul Murad, a real estate observer and author of "Manhattanizing Las Vegas."

In Miami, the rush of condo building and speculative buying has slowed to a crawl, said real estate agent Penni Hurley. Florida's foreclosure filings rose 54 percent from a year ago to 14,303 in March, or one filing for every 511 households.

"The market was on steroids and now it's going through a much-needed correction," Hurley said.

With forecasts of a nationwide 1 percent home price decline this year, there's no way to flip for a profit now, said Jay Brinkmann, vice president of research and economics with the Mortgage Bankers Association.

"One would have to logically assume that (flippers) are no longer in the market," he said.

But some are still feeling the pain.

Jason Beaver, a Sunnyvale, Calif.-based Apple Inc. programmer, got caught up in the talk of the hot housing market from friends who bought multiple homes in Las Vegas and made a killing.

His name was drawn in a buyers' lottery in the Solera subdivision and he put $35,300 down on a $353,000 home in February 2004. The community is restricted to people age 55 or older; the 37-year-old Beaver had no intention of moving in.

That summer, the housing market began to soften. He nervously put the house on the market for a break-even price the same day escrow closed. He got no offers.

A tight market had suddenly become flush with resale homes as investors sought to cash out. Pulte was one of several builders to slash new home prices, in some cases by as much as $80,000 in a single day. Beaver and others are suing, but the company has said it was simply reacting to new conditions in an overheated market.

Beaver has been renting the home out for about a $1,000 a month, despite monthly expenses around $2,000.

And the supply of available homes is growing.

In March, the number of resale listings for single family homes, condos and townhouses in the Las Vegas valley grew 30 percent from a year ago to 27,282, according to the Greater Las Vegas Association of Realtors. Sales and the value of homes sold were both down 38 percent from a year ago. About half the homes available have been on the market for more than two months.

"Two years ago, you'd set a price that looked right and you'd get offers that were $20,000, $30,000, $40,000 over your list price. You have to be more realistic today," said Devin Reiss, president of the Realtors association.

With Nevada's fast-growing population and an estimated 8,000 net new residents coming to Las Vegas every month, experts predict the glut of housing will be cleared in six months to more than a year.

State lawmakers are considering a range of bills that clamp down on the easy mortgage lending that helped heat up the market, including making it a crime for lenders to issue mortgages with little or no verification of a borrower's ability to pay.

"The biggest loan I ever saw, a person bought a $1 million property and only had to come up with $1,000 in cash," said Scott Bice, the state's commissioner of mortgage lending.

"I don't think anything will ever prevent speculation," he said, but added that new regulations and tighter credit requirements by lenders will eventually return the market to the good old days: "When it takes good credit and money in a transaction to close it."

For those caught up in the frenzy of a few years ago, the changes come too little, too late.

Beaver figures he has spent $50,000 on his investment home, and will have to come up with $30,000 more to pay off the mortgage after he sells it at a loss.

While he's not completely sworn off real estate investing, Beaver said next time he'll try a more traditional approach - to buy and hold for the long term.

"The fast-growth, make-a-quick-buck real estate investment, I don't think I'll try again," he said.

New home sales plunge

By Brian Wargo / Staff Writer

February's new-home closings fell to their lowest point this decade as prices tumbled 5 percent from January, but the Las Vegas housing industry had a bit of a silver lining as housing starts reached their highest level since August, according to SalesTraq.

There were 1,441 new-home closings in February, a drop of nearly 50 percent from February 2006 and a decline of 30 percent from January's 2,052, according to SalesTraq, which compiles housing statistics. That's the lowest monthly total this decade.

In the resale market, the 2,594 homes sold in February was the lowest total since April 2001.

"I think it's always disappointing to see dismal results, and let's face it, those sales figures are disappointing," said Las Vegas housing analyst Steve Bottfeld, executive vice president of Marketing Solutions. "I would say they are disappointing numbers because the market is showing signs of recovery."

Bottfeld noted that home closing figures are a look at the past because it can take 60 to 180 days to close. He added that cold weather in December and January may have kept many people from looking.

Traffic through model homes has been stable since February, according to Las Vegas housing analyst Dennis Smith, the president of Home Builders Research. But it's still off 26.5 percent from the first two months of 2006.

None of the new numbers reflect the recent events in the subprime lending market in which it's tougher for people with lower credit scores to obtain mortgages. In addition, for the second consecutive month, Nevada ranked No. 1 in the country in the number of cases entering some stage of foreclosure. That should bring even more homes onto the market, but Smith said it won't pose a problem.

"I believe that investor demand for owning property in Las Vegas and pent-up consumer demand will absorb the homes going through foreclosure in a relatively short period of time," Smith said. "Consumers will buy foreclosed homes if they perceive a steal or deal."

With the decline in home sales, prices came down in February with the median price at $321,555, a drop of 5 percent from January's price of $339,253. The new-home price is the lowest since March 2006 when it was nearly $320,000.

When mid-rise, high-rise and condo conversions are removed from the equation, the statistics show prices for new single-family homes and condos have dropped 3.4 percent over February 2006 to $331,088, SalesTraq reported.

The home prices don't include the incentives that some builders are offering and have yet to disappear. Meritage Homes recently had a 48-hour weekend sale in which it was offering $60,000 in incentives for homes in Mountain's Edge.

"Homebuilders have attacked the inventory of unsold new homes," Smith said. "The selling incentives they have offered have been working. That is the difference with the resale (market). Homeowners are not prepared to slash the bottom line to whatever it takes to sell their home. That is why it will take so much longer to bring the inventory of active listings down to a more normal market level."

The bright spot in the new-home market: Builders are taking out more permits than they were at the end of 2006. There were 1,005 permits issued in February. Although that's 61 percent lower than the 2,548 permits issued in February 2006, it is the highest total since 1,764 permits were issued in August.

Some of that increase may be attributed to the recent opening of the Inspirada master-planned community in Henderson.

Although Bottfeld described some of the numbers as dismal, he said there's some favorable signs for the valley's housing market.

The median price of new homes is 3 percent higher than it was in February 2005 and the price of existing homes at $284,000 in February was 1.4 percent higher than a year ago, Bottfeld said. The number of existing homes for sale dipped 230 units from January and the number of new-home sales are double the number of new-home permits, he said.

"The next month or two will tell the tale of 2007, whether or not this is a real or false bottom," Bottfeld said.

With about a one-month supply of new homes and the demand for new homes outpacing supply over the last six months by more than 9,000, that should begin to cut in the resale inventory, Bottfeld said.

Smith remains optimistic about the long-term prospects for the housing market and suggested prices will go higher despite the slump, he said.

The key is the job growth, especially with states like Michigan losing manufacturing jobs and people looking to relocate to places like Las Vegas, Smith said.

"It's that simple," Smith said. "As long as we can show job growth, people from other parts will seek those jobs, and require housing. Our housing market has a much better outlook than most others around the country."

Subprime lending woes also a burden for builders

By Brian Wargo / Staff Writer

As if homebuilders didn't have enough to worry about with the slowdown in the housing market, national housing analyst John Burns, who also tracks the Las Vegas market, said builders shouldn't downplay the risk to their businesses from the troubled market for subprime mortgage loans. That will be especially true for builders in outlying areas, he said.

Federal bank regulators this month have called on lenders to use caution when making the loans by basing decisions on borrower's ability to repay loans at the full and final rate instead of a lower teaser rate.

The reasons behind the problems are flat home prices and rising adjustable rates, which are impacting those who bought in the last 24 months, Burns said. The subprime loans tend to reset after two years versus three for other loans and those borrowers are more likely to default, he said.

"The primary housing market will have significantly more stress 12 months from now than it has today unless mortgage rates fall dramatically or home price appreciation returns," Burns said of the nation's housing market.

An adjustable-rate loan made in early 2005 will result in a 30 percent increase in a borrower's mortgage payment, and the value of their home may have declined since they bought it, Burns said.

When he spoke at a housing conference last month in Las Vegas, Burns said he expected sales in the Las Vegas new-home market to stabilize by the end of 2007, essentially starting its recovery. But he said builders in satellite communities in Southern Nevada and Northern Arizona are affected more by the market's housing slowdown than subdivisions closer to the metropolitan area.

The problems in the subprime lending market make it more difficult for builders to sell homes to those with marginal credit histories, Burns said.

"The builders who are getting hurt the most today are the ones who are primarily selling entry-level homes on the outskirts of metropolitan areas,'' Burns said.

Mortgage industry view: Steve Schauer, president of National Lenders Service, a local mortgage broker, said that what's happening with subprime loans, however, can be good for the real estate industry in the long term.

There's quite a shake-up in the mortgage industry with several major companies closing nationwide and others tightening up their guidelines for mortgage loans. The problems for those lenders are the one-time buyers of risky loans on Wall Street are no longer purchasing them on the secondary market, Schauer said.

There's going to be problems when people who had low credit scores of below 600 and didn't have income verified were getting 100 percent loans with adjustable rate mortgages, he said. Those are people who shouldn't have been allowed to get a loan until they saved money, fixed their credit, or gotten better jobs, he said.

"They (the industry) knew they were going to have potential problems down the road, but nobody thought the market would change as quickly as it did," Schauer said.

Today, buyers with good credit and the income to support their mortgage payments won't have any problems getting loans, Schauer said. That's akin to the way it was five to six years ago.

People need credit scores of at least 640 to get financing, he said.

That easy accessibility to money helped fuel the boom in housing, which in turn led to a sharp jump in prices that has made housing unaffordable to many today, Schauer said. With fewer people able to get loans now, that should lessen demand and keep prices stable or lower them, he said.

Las Vegas economic index and housing:An index of leading economic indicators was flat in December as it was for most of 2006, according to the Center for Business and Economic Research at UNLV. Six of ten indicators for December were up over November but six of 10 indicators were down from December 2005.

The mix in the data shows no sign of recession, but it shows weakness, the report said. It is "highly likely" that the index will continue along its recent track through 2007 because of weakness in the residential housing sector, the report said.

The strength in travel and tourism has made up for the decline in residential construction, the report said. Construction employment recovered in December after dips in October and November.

National association of Realtors forecast: Pending sales of existing homes declined in January, with the NAR's index down 4 percent from December and 9 percent from January 2006. Despite the drop, the index has recovered from a low in October, said David Lereah, the NAR's chief economist. Poor weather hurt the index in January but he maintains there is an underlying pattern of stabilization. The index is derived from the pending sales of existing homes with transactions yet to be closed. The index in the West rose 0.2 percent in January over December, but that is 7 percent below January 2006.

An index for the commercial real estate market has increased for seven consecutive quarters and is holding at its highest level on record. Lereah said the growth in the commercial real estate sector, however, appears to be reaching a plateau.

In other news:

# According to the Web site of Chicago real estate firm Berg Properties, actor Nicolas Cage has increased his real estate holdings in Las Vegas by paying $8.5 million for a 14,306-square-foot, custom-designed mansion in the Spanish Hills Estates subdivision, where he'd already paid $2.25 million for a five-bedroom house. The mansion has an elevator, game room, workout room, three fireplaces, gourmet kitchen, and 16-car garage. The mansion built in 2003 had been listed for $9.95 million, the Web site reported. It said it wasn't clear if Cage bought the two properties for an investment, his family or himself, it said.

# Commerce CRG in Las Vegas and Phoenix-based Southwest Apartment Group of Cushman & Wakefield have announced a joint venture to service the Las Vegas apartment investment community. The venture, managed by Gary Cuff, formerly with NAI Horizon, provides information to apartment investors.

# Commerce CRG, which opened in Las Vegas in April 2006, has moved to a new location at 3800 Howard Hughes Parkway, Suite 1200. The new office is almost three times the size of its previous space in the Hughes Center.

# Anthem Highlands Shopping Center held its grand opening on March 10 with a 1950s classic-car themed event. The 124,000 square-foot shopping center is anchored by Albertsons and CVS Pharmacy. It is a project of Regency Centers.

What's the real state of the Vegas housing market?

Jan 11, 2007 10:27 AM

Depending on who you ask, the Las Vegas housing market can be either gloomy or bright. The current edition of Fortune Magazine predicts a bad year, but local experts say otherwise.

We've been hearing conflicting opinions for a while now: the market is turning around, the market is not turning around. Whom should we believe? The important thing to remember is that these are all predictions and speculation.

The article in this magazine about Las Vegas is not positive. But local experts say these analysts don't take into account the entire picture. The article is less than encouraging; Las Vegas housing still overpriced and a predicted market performance among the lowest in the nation.

Devon Reiss of the Greater Las Vegas Association of Realtors disagrees with Fortune Magazine's analysts, however. In fact, he says Fortune made similar predictions last year at this time and overall Vegas housing prices dropped only about two percent.

He says the analysts fail to take into account the uniqueness of our market. "The fact that we have so many people moving here every month, the tremendous job growth that we have. Also the lack of land that we have available for development."

The article predicts housing prices in Las Vegas will drop 6.6 percent this year and an additional 8.1 percent in 2008. But local analysts point to the current inventory, about 17,800 single family homes available compared with 23,000 last year.

They say the law of supply and demand will prevail, and contrary to the prediction in the article, the Vegas market could actually turn around. "You know, I'd like to believe October was the bottom of the valley," Reiss said. "If it's peaks and valleys, October may have been the bottom and I think we're going to see things back on the upside of the swing."

Something else they point out is that some developers are actually pulling back on permits, which means they won't be building as many new homes. And again, that may create more demand for existing homes, driving prices upward.

The Greater Las Vegas Association of Realtors also points out single family home sales went up 6 percent in December and condo sales went up 15 percent. They believe if sales do drop off, it won't be a significant drop.

Spiraling costs plague Las Vegas developers

Wednesday, November 01, 2006
By Peter Sanders and Christina Binkley, The Wall Street Journal

Casino giant Harrah's Entertainment Inc. has spent nearly $1 billion over the past year buying up land on and around the Las Vegas Strip for an ambitious redevelopment of the gambling mecca's tourist corridor. But the company hasn't revealed exactly what it plans to do with the 350 acres it has amassed.

One reason for the silence: mounting concerns about rising construction costs and a shortage of steel, concrete, window glass and other materials. And now that Harrah's is the target of a $15.5 billion buyout offer from two private-equity firms, it's even less clear how much of the giant plan will get the go-ahead.

MGM Mirage, Wynn Resorts Ltd. and Boyd Gaming Corp. have their own massive redevelopment projects in the works, plans that, if completed, promise to remake other parts of the Vegas Strip over the next decade. The companies are vying to build self-contained empires with so many lodging, shopping and eating options that guests won't be tempted to venture outside. But rising materials and construction costs are in almost every case either driving up the price tag substantially or prompting the developers to hedge their bets and scale back.

Perhaps the biggest, MGM Mirage's Project CityCenter, is steaming ahead. It now has an approved budget of $7 billion, up from the roughly $5 billion the company mentioned when it announced the project two years ago. Company officials now say full costs hadn't been calculated back then, and there have been a multitude of design changes: Condos were added, and open-air spaces were enclosed to protect tourists from heat.

But other projects may be reined in. Even before the current buyout offer, Harrah's investors were spooked by the potential price tag, which helped drive the company's stock price down precipitously in recent months. Now, Harrah's potential new owners -- the private-equity firms Apollo Management LP and Texas Pacific Group -- may not be eager to execute all of Harrah's plans, according to people familiar with the situation. These people say potential owners are likely to take a hard look at any major development project in Las Vegas if their bid is accepted.

In an earnings conference call with analysts last week, Harrah's Chief Executive Gary Loveman declined to comment on the buyout offer but said the company was moving ahead with its plans and expected to announce details in two to three months. He also struck note of caution: "The spiraling cost of construction ... in Las Vegas and everywhere else (has) made the consideration of these kinds of large projects much more difficult than in the past," he said.

Harrah's planned development is a response to competition from not just from MGM Mirage, but also from Boyd Gaming's proposed $4 billion Echelon Place, located farther up the Strip. There also is an Epcot-like plan that the mogul Steve Wynn is hatching for his Wynn Las Vegas casino.

Recent glitches are fallout from a global construction boom. Huge developments under way in China, the Middle East, Europe and the U.S. have created shortages and led to skyrocketing prices for steel, concrete and -- the latest casualty -- glass for skyscraper windows. Few big construction firms are available for new jobs.

Some contractors working in Las Vegas have placed staff members in China, where they work directly with factories to lock up supplies. "China went out and bought 50 percent of the world's scrap steel and ore 18 months ago," says Tony Marnell, chief executive of Marnell Correo, which built many of the most famous Las Vegas casinos, including the Bellagio and the Wynn. "We've had a man in China for two years making contracts to buy things direct."

An unintended consequence could be a sharp slowdown in hotel-room growth in Las Vegas. For the past five years, supply growth, measured by rooms, has been about 4 percent a year, says Bill Lerner, casino analyst for Deutsche Bank. With potential construction delays over the next two years, that rate could drop to an average of 1.8 percent a year over the next five -- a reversal of the scenario Wall Street feared, as new projects crowded the market.

Indeed, Station Casinos Inc., a local casino operator, recently opened its $900 million-plus Red Rock Resort far from the Strip, and a planned condominium tower for the site has been scrapped. In September, the company said the budget for its next suburban Vegas resort had increased by $150 million to $600 million. Glenn Christenson, Station's chief financial officer, attributed $30 million of the increase to higher construction costs. A company spokeswoman said Mr. Christensen was unavailable to comment.

MGM Mirage officials say the worst is over, in terms of rising costs for their massive project, which is set to open in November 2009, next door to the company's Bellagio casino, featuring multiple hotels, condominiums and retail space. It features a large shopping mall, called "SoBella," situated just south of Bellagio; a condo-hotel next to Bellagio, called "Vdara"; and two stand-alone condo towers, dubbed "Veer Towers." Plans also call for a branded Mandarin Oriental luxury hotel and a separate boutique hotel, the "Harmon."

Because of the project's scale, MGM Mirage has built its own concrete plant at the site; at the height of construction in mid-2008, it expects to have 7,000 workers swarming the site. By early next year, 20 cranes will be in use there. The company says it has locked in prices for items like steel, elevator shafts and is shopping globally for items like copper piping.

MGM Mirage executives say the worst is over in terms of their cost increases. "Raw material costs are going down, not up, now," says Jim Murren, president and chief financial officer at MGM Mirage. "We saw a huge spike in 2004 and 2005 but it started slowing near the end of 2005 and costs have been flat, to down, all year."

Meanwhile, construction on Encore, Mr. Wynn's new hotel and casino tower, is under way, and a second resort on the site of Las Vegas Sands Corp.'s Venetian casino -- the 3,000-room Palazzo -- is scheduled to open next year. At the south end of the Strip, the 34-acre Tropicana Hotel & Casino site is set to undergo a change in coming months when closely held Columbia Sussex Corp. completes its acquisition of Tropicana parent Aztar Corp. Details of that project haven't emerged, but Columbia officials have said they hope to add a number of large name-brand hotels to the site while keeping parts of the old Tropicana resort intact.

Pre-Sale Reservations are Set to Begin at MGM Project CityCenter -- Registration Underway

MGM Mirage Reveals Four New High Rise Condo Venues that will raise the bar in the new Architectural Renaissance that is underway on Las Vegas Boulevard.

Las Vegas, NV (PRWeb) November 1, 2006 -- VIP Brokers will meet in mid November at the Bellagio to begin the launch process Las Vegas' most exciting preconstruction project on the Strip, MGM CityCenter. MGM has unveiled plans for residences at the $7 billion Project CityCenter, being built in the heart of the Las Vegas strip between the Bellagio and the Monte Carlo Hotel, that will take Las Vegas new a new level in architectural design. CityCenter is the nation's most expensive private construction project and its largest collaboration of name-brand architects The 66-acre site will include four condominium developments encompassing five high-rise towers. Units in the development have a price range from $500,000 to $8 million.

Construction on Project CityCenter is underway. The development's most prominent feature, a 60-story, 4,000-room hotel-casino designed by Pelli Clarke Pelli, is beginning to take shape. The main casino-hotel will sit behind the Veer leaning condo towers without the typical Strip front location or dramatic entry facades that are the norm for Vegas hotels. And the CityCenter hotel tower will be shaped as an elongated S, not the usual Y shape, for a very dramatic architectural effect.

CityCenter will also include retail, entertainment, restaurants and other amenities in an urban village setting. An elliptical people mover has been designed to help visitors navigate between the four corners of Harmon Avenue and Las Vegas Boulevard which is destined to be one of the busiest intersections in the world.

The residential choices will include Veer, a condominium-only project, two condominium developments that will be built on top of boutique hotels, and VDara, a free-standing condo-hotel. The Veer leaning towers will house 810 loft-style condominiums, soaring 36 stories above Las Vegas Boulevard and prominently serving as the gateway to MGM CityCenter. The towers are the creation of German-born architect Helmut Jahn, known for sleek, ultramodern exteriors and unusual shapes.

Las Vegas architect Joel Bergman, who helped design the Mirage, Treasure Island and Paris Las Vegas, among other local resorts, said the towers will make other cutting-edge designs "look tame." The cutting edge leaning design will challenge engineers but benefit residents because their views will be less obstructed than would be in a conventional high rise. While appearing to be smooth glass from a distance, the building's skin will feature horizontal metal blades that will shade floor-to-ceiling windows from Las Vegas' summer heat. The illuminated blades will slowly change colors. Construction on Veer is set to begin in November and expected to be complete by 2010.

VDara, is a 1,543-unit condominium-hotel with units ranging from 500 square feet to 1,850 square feet. VDara will be built between Bellagio and the CityCenter hotel-casino. Fifty stories of elegant design, will offer fully furnished and fully appointed condo-hotel suites.

The Mandarin Oriental Hotel will have approximately 227 condominium units above the 400-room hotel tower, with the 4,100-square-foot penthouses coming with the highest price tag in Project CityCenter at $8 million. The Mandarin Oriental Hotel at CityCenter will include 400 hotel suites as well as more than 200 condominium ultra-luxurious residence units designed to appeal to an international jet set buyer profile. These units atop the Mandarin promise to be some of Las Vegas' most prime "trophy properties".

A second boutique hotel, The Harmon, will be operated by MGM Mirage. It will have 228 condominiums above its 400 hotel rooms. Developed by the Light Group, known for Panorama Towers and Spa Lofts, these units will appeal to the young, hip, and trendy buyers.

As the leading high rise condo sales team in Las Vegas, June & Lauren Stark of Ezra International Realty, have been chosen VIP real estate brokers to be part of the mid-November reservation pre-sale of MGM City Center. The Stark Team was instrumental in the very successful sell-out of TRUMP Towers Las Vegas, with June being featured on the TRUMP Towers promotional DVD and Lauren on HGTV giving a Trump Condo-Hotel Model Tour . As the #1 sales team in the Cosmopolitan Resort, being built across Harmon Avenue from Project City Center, the team has a solid track record of representing buyers in the first phases of preconstruction sales. Sky Las Vegas luxury condominiums on the strip, just honored the Stark Team as the # 1 sales agents by giving the team a new Saab convertible.

Cooling Las Vegas Housing Market Creates Unique Offers

Foreclosures have tripled in Nevada in the past year. More than 2,000 homes went into foreclosure in August -- setting a new record.

Experts say Nevada is outpacing the national rate as homeowners succumb to rising adjustable interest rates. Some homeowners who didn't put up down payments now owe more than their homes are worth.

The cooling housing market has made it tougher for sellers and as a result those sellers are offering some unique incentives to try to make a sale.

Homeowner Denny Segler is what most would call a motivated seller. His 1,298 square foot house has been on the market for two months, leading this real estate agent to up the ante in order to get it sold.

"I'm offering a new car in the driveway if somebody wants to buy this house. Rather than spend the money and give it to another agent, I'd just as soon give it to the people buying the house," Segler said.

He is proud of the two-story house purchased for one of his children, but never lived in. "We still have the starter packet that came with the house when it was purchased brand new."

Segler realizes that the current glut of homes for sale in the Las Vegas valley, means buyers can be more demanding than in years past.

"As soon as I get someone that's interested in this house, I'm willing to negotiate with them," he said.

Real estate agent Myrna Kingham calls it creative home buying. She says more sellers are offering incentives.
Carol Wilkinson, Reporter
Oct 15, 2006 10:48 PM EDT

While she says most sellers are honest, she cautions the buyer to beware. "Sometimes when something looks really good, it's too good to be true. I would say, if you see an ad, make the phone call, ask a lot of questions, and find out for sure what type of incentive you're getting," said Kingham, Tower Realty Group.

As further proof of a housing market slowdown, builders are also seeking price cuts from contractors to make new homes more affordable for potential buyers.

Real Estate and Development

Home sales, sweet home sales: Builders plot strategies
By Brian Wargo / Staff Writer

What does the future hold for new housing development in the Las Vegas Valley?

A San Diego real estate advisory group said it believes it has some answers.

While major homebuilders relinquish options and pull out of escrow on properties because of a soft new housing market, builders are already plotting strategies for where the market is heading next, according to Sullivan Real Estate Advisors, which recently gave a presentation at the Four Seasons to members of the housing and real estate industry.

For the local market that will mean a push for more affordable housing, said Ken Perlman, the Sullivan Group's vice president.

"Builders are looking for any strategy to keep their prices to what the public wants to generate home sales," Perlman said.

Because of the high cost of land, builders have shied away from making major purchases knowing that prices are already a factor in keeping people out of the new housing market, Perlman said. Builders are looking for land that helps keep their costs in check, he said.

That means looking for land closer to developed areas of the valley where infrastructure is in place and opting to build townhomes where there can be anywhere from 12 to 25 units per acre, Perlman said.

It's difficult to build a three-story condo with a parking garage for less than $350 a square foot, he said. Townhomes can be built for $200 to $225 a square foot. That enables a buyer to get 1,500 square feet at a lower cost than a 1,000 square-foot condo, he said.

"Las Vegas skipped that product and went from single-family homes to the urban boom," Perlman said.

Real estate research consultant John Restrepo places his bets on the next alternative to single-family homes being mid-rise projects that have five to nine or 10 stories and built over parking facilities.

They are the future of high-density residential development in the valley because they are more compatible with the Las Vegas lifestyle, household incomes and how the market is evolving, he said.

Las Vegas lacks the ocean and water views to make it a prominent high-rise condo market such as cities like Miami, Seattle, Chicago and Vancouver, he said.

"Mid-rise projects are the next evolutionary step in our move from a low-rise dominated residential market to a vertical market," Restrepo said. "It's a more organic step than to leap frog to high-rise from low-rise land-use patterns. If we look at the evolution of the world's major cities, there has always been a progression from a low-rise dominated to mid-rise then to high-rise land-use patterns."

Restrepo noted that the Southern Nevada luxury condo market has 4,288 existing and prospective units in 14 projects that have gone vertical, which amounts to 6.5 percent of the 66,075 units in 119 projects that are under construction and planned.

Restrepo said there should be sufficient demand to absorb the 4,288 units in the projects that have gone vertical. That's in addition to the 12,300 to 15,500 units or 20 percent to 25 percent of the 61,787 units among the 105 projects that have broken ground or are planned through 2011.

Some 38 percent of the projects that have gone vertical are located in the resort corridor, and 85 percent have been purchased by second-home buyers, investors and speculators, he said.

Because of the incredibly high cost of entry into the market, most mid- and high-rise luxury condo projects will be part of mixed-use developments initiated by Las Vegas' resort community, he said.

While there has been a slowdown in traffic for new homes, high-density projects continue to sell at a more measured and sustainable pace because of their scale and amenities, he said.

Housing market researcher Dennis Smith of Home Builders Research continues to say he expects a home price decline in the valley, possibly 10 percent. Smith said there will be some "fairly significant price cuts" in the existing home market in order to move some inventory; he said new home prices will fall as well.

"Some had enough equity gain due to the huge price increases to keep the property unoccupied for the 12-month period. Now as the market continues to cool and find the bottom, many of the owners of homes listed for sale have been unwilling to cut their prices, causing some vacant homes to sit on the market for months," Smith said.

As for new homes, Smith thinks many Las Vegas homebuilders will take advantage of lower material and labor costs to reduce new home prices in new communities.

Real estate tracker Steve Bottfeld takes aim at those who believe housing prices in the Las Vegas Valley are severely overpriced, calling such claims of national experts "poppycock and balderdash." He argued that the median price of an existing home at $329,897 is nearly 13 percent ahead of August 2005 at a time of all-time inventory and cooling demand.

"Under ordinary circumstances, rising prices in the face of those two factors would not make economic sense, but this is Las Vegas and there is always more than meets the eye," Bottfeld said.

Bottfeld argues that 12 percent to 15 percent of the market that would have purchased new and resale homes are now purchasing vertical housing instead — that's 15,000 sales from traditional markets.

Prices will remain stable because builders are rapidly reducing the number of new homes. But he added that he's not saying prices won't dip or that inventory will be reduced any time soon.

"There are sound reasons why prices will be stable, if not rising over the next few months," Bottfeld said. "The argument that current prices are the result of psychological euphoria similar to the one preceding the stock market crash of 2000 is balderdash as well."

National analysts focus too much on inventory and not enough on demand, he said.

analyst: inventory Hurts Vegas Home Mkt

© 2006 The Associated Press

NEW YORK — The Las Vegas housing market, the nation's ninth largest, will be flat or slightly lower in 2006 because of a rising inventory of homes for sale, Merrill Lynch said Tuesday.
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Existing home sales in Las Vegas are down 36 percent year over year.

"We do not expect selling conditions to improve until existing home listings approach their 2-year average of 18,800 units from their current level of 25,200," Kenneth Zener, an analyst at Merrill, wrote in a research note.

Housing prices grew 17 percent a year over the last five years, Zener wrote. Affordability in the city reached a 22-year low in 2005 and the median price of a house in Las Vegas was $319,000 by the second quarter of 2006.

With homebuilders under increasing pressure, analysts are taking a hard look at specific housing markets to try to divine which direction prices may take. Homebuilders' stocks have been battered as slower sales and concerns about affordability have buffeted the sector.

In 2005, the top builders in Las Vegas were KB Home with a 10 percent market share and Pulte Homes Inc., which had a 9 percent market share. Other homebuilders vastly expanded their work in the area since 2000, with the number of units built by MDC Holdings Inc. growing 45 percent and the number built by DR Horton Inc. growing 29 percent.

Architects leaning toward Strip skies the sky in Las Vegas

July 30, 2006
By Liz Benston
Las Vegas Sun

Towers to serve as CityCenter gateway

In a city of whimsical designs - think pyramid, castle and New York skyline - two leaning, curving high-rise towers seem destined to emerge as an architectural icon in Las Vegas.

All they've got to do now is build them - no slam-dunk because of their unique design .

The towers will house 810 loftlike condominiums, soaring 36 stories above Las Vegas Boulevard and prominently serving as the gateway to MGM Mirage's $7 billion CityCenter.

MGM Mirage revealed the final design of CityCenter a month ago to plenty of murmuring, most of it directed at what some real estate folk were calling "the leaning towers of Las Vegas."

The towers are the creation of German-born architect Helmut Jahn, known for sleek, ultramodern exteriors and unusual shapes. His Murphy/Jahn firm in Chicago built the seven-building Sony Center in Berlin and the United Airlines terminal at Chicago's O'Hare International Airport.

In order to plan CityCenter, the nation's most expensive private construction project and its largest collaboration of name-brand architects, MGM Mirage split the project into three components, with the final piece - the retail and condominium area - coming together more recently.

About a year ago the company initiated an international design competition and selected Jahn's firm to work alongside Studio Libeskind, the creator of the retail center, and Rockwell Group, which is designing the pedestrian areas.

MGM Mirage bought into the leaning tower design to create the kind of bold look the company wanted as a visual gateway into CityCenter.

"The angling creates a sense of motion" as well as more openness and light, said Tony Dennis, executive vice president of CityCenter's residential division.

They appear to stand in parallel fashion from a north-south perspective, with the lean obvious from an east-west perspective. Most passers-by will view the buildings from the skewed perspective.

MGM Mirage asked for the most creative and challenging designs architects could cook up. The company didn't mention leaning towers.

"It wouldn't make sense for us to shoehorn them into a certain look," Dennis said. "These (designers) are the best in their respective fields. These designs are forward-thinking. We are trying to capture the imagination of the city."

The unusual design is just one of several aspects of the project that run counter to conventional Las Vegas rules. The main casino-hotel, for instance, will sit behind the condo towers without the typical Stripfront location or dramatic landscaping of tropical plants, water fountains or statuary. And the hotel tower will be shaped as an elongated S, not the more-efficient Y shape, for dramatic effect.

Pisa, Italy, is the home to the most famous leaning tower - by way of a geological quirk.

The world's first intentionally leaning towers are in Madrid, where a group of architects created twin office buildings that lean toward each other at 15-degree angles. The towers, known as Puerta de Europa, opened in 1996, triggering controversy for their bizarre, ultramodern shape.

The Murphy/Jahn towers may be one of Jahn's more creative efforts, but he's no newcomer to innovative designs.

His firm received the American Institute of Architects' Architecture Firm Award, one of the highest honors in the field. The firm is known for unusual geometric designs driven by collaborations with engineers and scientists.

One example is the pencil-shaped Messeturm office tower in Frankfurt, Germany - a striking combination of a square, circle and pyramid in contrasting materials. The building, about the same height as the TransAmerica building in San Francisco, was Europe's tallest building until 1997.

Jahn is also no stranger to controversy. The 1985 opening of his glass-enclosed State of Illinois Center in Chicago triggered complaints and lawsuits over sweltering indoor temperatures. Critics blamed the building's design; Jahn blamed the building's ventilation system.

Jahn's Las Vegas project is the latest take on a new design trend.

"In the '80s it was all about how you decorate the top of the building," said Ronnette Riley, a New York architect who heads the American Institute of Architects' design committee. "Now architects are pushing the entire form and creating complicated shapes by twisting and turning."

Such designs are possible with the help of computer software that wasn't available 10 or 20 years ago, said Riley, who worked for one of the architects who built the leaning towers in Madrid.

"This is so much more sophisticated," she said of the Las Vegas design. "I'd rather a building make a statement than be in the background. The play on geometry is going to be very exciting."

Las Vegas architect Joel Bergman, who helped design the Mirage, Treasure Island and Paris Las Vegas, among other local resorts, said the towers will make other cutting-edge designs "look tame."

In one sense the towers aren't that far removed from the themed casinos that were popular in years past, Bergman said.

"It's entertainment architecture," he said. "Buildings that twist and bend are a new kind of theme. All the architects are running out to do it to impress each other."

Architecture critic Alan Hess says CityCenter and the arrival of well-known architects like Jahn will elevate the status of Las Vegas among the highbrow world of designers but may miss the mark for the average tourist.

"As skyline icons, the two towers will grab attention for a while, but their abstract shapes won't have the lasting power of the Stardust sign, the Luxor pyramid or Excalibur's castle," said Hess, who writes for the San Jose (Calif.) Mercury News and is the author of an architectural history of Las Vegas. "They don't have any lasting meaning linked to the general culture."

Out-of-town architects don't necessarily understand the dynamic of Las Vegas, which is all about luring customers with fanciful designs, Hess said.

He approved of MGM Mirage's larger strategy, however. The creation of mini-cities with multiple hotels, condos and other attractions "is the next logical step" in Las Vegas' super-sized development, Hess said.

Jahn said he welcomes the chance to ply his trade in a town that encourages the unexpected.

"I don't think we could have done this in Chicago or New York," where urban, residential construction follows a fairly conservative pattern, he said.

Las Vegas has witnessed its share of tricky designs, including the Luxor pyramid with its cantilevered hotel rooms and inclined elevators, and the Stratosphere, the tallest building west of the Mississippi River.

Now on the drawing board: the Lou Ruvo Alzheimer's Institute, a provocative Frank Gehry design playing off building blocks and a crumpled shell of glass-and-steel latticework.

Jahn's leaning towers appear dangerously askew - accentuated because each one will also twist along its vertical axis like a curving parallelogram - but are structurally in equilibrium, with each building's mass equally distributed on either side of its center plumb line.

The design will challenge engineers but benefit residents because their views will be less obstructed than would be in a conventional high rise, he added.

While appearing to be smooth glass from a distance, the building's skin will feature horizontal metal blades that will shade floor-to-ceiling windows from Las Vegas' notorious heat. The illuminated blades will slowly change colors.

The towers, part of nearly 3,000 residential living quarters at CityCenter, are expected to be complete by 2010.

Las Vegas real estate prices dampen merger talk

Mon May 29, 2006 9:12 PM ET
By Paritosh Bansal

NEW YORK (Reuters) - Taking a gamble on Las Vegas is getting expensive these days.

Several casino companies are looking for ways to enter the largest U.S. gambling market, but doing so has become too costly after some pricey deals for Las Vegas properties.

"We were very interested in Las Vegas until the price got so high," Trump Entertainment Resorts Inc. Chief Executive James Perry told Reuters in a recent interview. "We don't see ... having an opportunity there in the short term."

Deals such as the buyout of Aztar Corp. by closely held Columbia Sussex Corp. for more than $1.9 billion and the acquisition of Hard Rock Hotel & Casino by Morgans Hotel Group Co. for $770 million sent shivers down the spines of other companies hoping to enter Las Vegas.

Aztar, which owns 34 acres of land on the Las Vegas Strip, saw a fierce two-month bidding war that involved as many as four suitors.

Columbia won. But it could be paying more than $30 million an acre just for the land, the highest price ever for a parcel of that size in Las Vegas, according to Deutsche Bank analyst Marc Falcone.

"The costs are getting to be prohibitive," Penn National Gaming Inc. Chief Executive Peter Carlino said in a recent interview.

"The numbers are out of control over there," Carlino said, referring to the Hard Rock deal. "They are paying way too much for that for our taste."

REAL ESTATE BOOM

A limited amount of available real estate on the Strip, coupled with the ever increasing popularity of the gambling mecca, is helping boost prices.

"Land is not available in that area," said Peter Dunay, chief investment strategist at Leeb Group. "So it is very competitive and very tough."

Things have gotten worse as private companies with deep pockets turn to the gaming industry, which offers stable cash flows and high returns.

"There's a lot of money around right now ... looking for a place to land, and gaming seems to be one of the places they want to go," Perry said.

When shareholders in companies that own casinos in Las Vegas see other deals, they too want more.

Last month, when casino operator Riviera Holdings Corp. agreed to go private in a $211.5 million buyout, one large shareholder opposed the deal, saying it undervalued the company's land on the Las Vegas Strip.

But there is a limit to how much public companies are willing to pay for a piece of the action.

Pinnacle Entertainment Inc., which started the bidding war over Aztar with an initial offer of $38 per share, bowed out of the contest when Columbia bid $54 per share. Ameristar Casinos Inc., another bidder, quit when offers started pushing $50 per share.

VEGAS BECKONS

Still, the lure of Las Vegas is too powerful for companies to completely ignore.

The city offers a stable regulatory environment and its fame as an entertainment destination is so widespread that it affects competition even in regional markets, Calyon Securities analyst Smedes Rose said.

Harrah's Entertainment Inc., the world's largest gaming operator by revenue, promotes its casinos in smaller markets through offers such as discounts at its Las Vegas properties -- a competitive edge that companies such as Pinnacle want.

Having a casino in Las Vegas also boosts the value of a company's brand, Dunay said. "It's a prestige thing to say that I own a casino on the Strip."

Pinnacle, Trump and Penn National all continue to look for ways to get into Las Vegas.

Trump's Perry said he would be open to talking with Morgans Hotel, which would like a partner to run the casino, as well as any other opportunity that may arise.

Penn's Carlino said his company would also continue to look for a point of entry, such as a joint venture.

But he added, "That's going to be tough."

Mortgage defaults to rise as housing market slows

Sacramento Business Journal - 10:31 AM PST Monday

Declining sales, slower appreciation and higher interest rates will increase mortgage defaults later this year and into 2007, according to a distressed property investment advisory firm in Sacramento.

ForeclosureS.com President Alexis McGee said several one-time fast-rising housing markets are slowing down, especially in the West, and the residential real estate industry is returning to normal.

For example, home prices in Las Vegas and Phoenix markets, two of the nation's best-performing regions in recent years, are dropping, McGee said. And home prices in San Diego and the San Francisco Bay area are declining.

"In San Diego, for example, year-over-year price appreciation has dropped to 6.4%, and sales volume is down throughout our Southland," said McGee, referring to the Southern California market. "There is no crash coming because the excess inventory just isn't there. We're just getting back to normal."

Sales of existing homes last month in the Sacramento area dropped more than 30 percent compared to February 2005, but was up 1.9 percent from January, according to a report last week by the California Association of Realtors. The area's median price jumped 1.6 percent from January to $379,240 -- a 7.8 percent increase from February 2005.

ForeclosureS.com has been tracking housing markets, publishing foreclosure property information since 1992. The company expanded its listing services nationwide in late 2005.

Real estate continues to cool

By Noelle Knox, USA TODAY
After five adrenaline-pumping years of real estate sales, 2006 is already fulfilling predictions of a weaker market.

Sales of existing homes fell in January for the fifth month in a row, the National Association of Realtors (NAR) said Tuesday. The same month, new-home sales slid 5%, the government said Monday. Builders are seeing more orders canceled. Meanwhile, the number of homeowners who are late paying their mortgages has been creeping up. (Related: Home loan applications fall again)

Even so, prices are expected to rise about 5% this year despite the cooler market.

"January's weak existing- and new-home sales numbers are the strongest evidence yet that after five remarkable, record-setting years, the housing market is in decline," says Patrick Newport, the U.S. economist for Global Insight.

The drop in home sales defied unseasonably warm weather and cash and give-away incentives from builders that had raised hopes for a brighter showing.

"Imagine if the weather had been terrible," said Phillip Neuhart, economic analyst for Wachovia.

No one needs to tell that to Fran Floyd. She took her Houston townhome off the market Saturday after nearly six months — even though she was willing to sell it for $3,400 less than she paid in 2002.

"It's just sad," said Floyd, 81. "I've got to sell. I don't know what I'm going to do. What I'm thinking about and praying about is renting it for a year, hoping the real estate market gets better."

Unfortunately for her, the NAR projects a 5% decline in existing-home sales this year, to what would still be historically high levels. Home sales have been a huge engine for the economy as buyers spend to refurbish existing homes and sellers spend their proceeds on new homes or consumer goods.

In January, existing-home sales dipped 2.8%, to a seasonally adjusted pace of 6.56 million, down 5.2% from January last year. At the same time, the number of single-family homes for sale rose to the highest since 1986 — and 34% higher than a year ago, according to Insight Economics. That's a sign would-be buyers aren't so quick now to take the plunge.

"We've just got tons of inventory," and prices are coming down in Grand Rapids, Mich., said Pat Vredevoogd of AJS Realty.

One in five builders said they are seeing more cancellations of new-home orders than they did six months ago, according to the National Association of Home Builders, with 4% saying the problem is significant. To entice home shoppers, many builders are offering free TVs, swimming pools, landscaping and other incentives.

That's good news for buyers. But it's bad news for sellers such as Kent Anderson. Kimball Hill, the developer of his Las Vegas community, is now offering home buyers so many incentives — including free granite countertops and stainless steel kitchen appliances — that Anderson had to cut his asking price on the home he bought from Kimball Hill less than a year ago.

"As builders close out a community, those last homes are pure profit" for them, says Bruce Hiatt, Anderson's Realtor. "It really changes the comparable sales in the area."

Regionally, the only bright spot in January was in the South. Sales there rose 2.6% from December's pace. Home sales suffered most in the Northeast, falling 10%. That was followed by a 7.7% drop in the Midwest and a 3.5% dip in the West. January's declines are even sharper when compared with January of last year.

One key reason fewer people are buying: They can't afford to. The median price — half cost more, half less — was unchanged from December at $211,000 but was 11.6% higher than in January 2005.

It's clear that some homeowners are having trouble paying their mortgages. The number of homeowners who are 90 days or more behind on their primary mortgages rose to 3.6% in December, up from 3% last March, according to Loan Performance.

For subprime borrowers — those with impaired credit who carry higher-interest loans — the number of delinquent loans has jumped to nearly 10%.

Las Vegas boom deals some a losing hand

High home costs, low-wage jobs accompany spurt

By Brian MacQuarrie, Globe Staff | December 12, 2005

LAS VEGAS -- Céline Dion is waxing romantic at Caesars Palace. Wayne Newton is warbling at the Flamingo. George Carlin is cracking jokes at the Stardust.

And outside the crowded shows, and up and down the fabled Strip, luxury condominium towers are sprouting like mushrooms.

At first glance, Las Vegas has never had it so good.

In fact, this desert valley of almost 2 million people is the fastest-growing in the country.

Las Vegas, in fact, leads the nation in job creation, and it has a white-hot housing market.

''It's going phenomenally well," said Mayor Oscar Goodman, a former lawyer for mobsters.

But as bright as the present appears, there are signs that Las Vegas is becoming polarized. Prices have pushed home purchases beyond the reach of many families. Crime is on the rise. And activists report problems in recruiting teachers, nurses, and police to serve a population growing by 6,000 a month.

As the city moves from municipal adolescence to adulthood, Las Vegas is only beginning to address its growing pains, said John Restrepo, an economic consultant here. ''If we don't," Restrepo said, ''we'll be facing significant challenges in the next few years."

Founded in 1905 as a sun-baked railroad depot, the city of Las Vegas has faced challenges and remakes galore.

From the Depression-era construction of the Hoover Dam to the mob's financing of its casino persona to its transformation as a family-friendly resort, Vegas has always been a survivor.

But now, the affordability of a city that relies on armies of low-wage workers to run its casinos, hotels, and restaurants is a glaring concern. Since 2000, the median price of a new home here, excluding condo conversions, has soared to $335,091 from $161,893, Restrepo said. Median household income in that time has increased to $47,741 from $41,657.

The Las Vegas metropolitan area, which ranks 153d in household income, is now put as the 33d most expensive housing market in the country.

In Greater Boston, by comparison, the median price of a single-family house is $430,900, according to the National Association of Realtors; the median household income is $63,521.

Despite all its visible opulence, the poverty rate in Clark County, which includes Las Vegas, increased to 12.7 percent in 2004, compared with 11.6 percent in 2003. Child poverty stood at almost 19 percent.

Nationwide, the child poverty rate was 17.8 percent in 2004, according to the National Poverty Center.

''There's plenty of jobs in Las Vegas, but the town is basically made up of minimum-wage workers. I just don't know who can afford these homes," said Mark Bradley, 47, a bartender and a native of West Roxbury, Mass., who has lived here for 13 years.

''When we first got out here, I was used to East Coast prices," said Bradley, who bought a 2,200-square-foot, four-bedroom house for $130,000 in 1994.

''I sold that in 2000 for only $170,000," Bradley recalled. ''Now, all of a sudden, that same house is going for $350,000."

For Nicole Dye, a 31-year-old maid at the Bellagio Hotel and Casino, the work is steady, but the living is nearly paycheck to paycheck. Dye, who makes $12.50 an hour, is raising five children here after moving from Muskegon, Mich., two years ago when she was laid off from an $18-an-hour job at General Motors.

Now, rather than pay $675 a month for a three-bedroom rental in Muskegon, she puts down $1,200 to rent similar bed space. ''That's high for me," Dye said, ''but people tell me it's reasonable for Vegas."

But for tourists and retirees, the allure of the ''new" Las Vegas has reached giddy heights. A total of 93 luxury condominium projects, with 194 towers and 51,000 housing units, have been proposed or are being built, said Brian Gordon of Applied Analysis, a real-estate and economic research firm in Las Vegas.

One of those projects, a high-rise condo hotel by Donald Trump, is three years from completion; all the units are sold.

A typical furnished studio there costs about $650,000, Gordon said.

Underneath the glitz and glamor, the concern that Las Vegas could fall victim to a housing bubble never seems far from the surface. It's a fear that real-estate agents and even unabashed city boosters acknowledge, including Mayor Goodman.

Goodman conceded that housing is a problem for longtime renters being forced from homes near the Strip, where developers are paying about $6 million to $10 million per acre. But, the mayor said, he's not ready to ask developers for set-asides to help construct affordable housing.

''Right now, I'm giving everybody the candy store," Goodman said of his dealings with builders. ''You can't grow too fast. Growth is wonderful."

When asked where displaced Las Vegans will move, Goodman replied, ''I don't have the answer to that one yet." Later, he added, ''I don't want a tent city, that's for sure."

Georgia James, a real estate agent who has sold and resold property in one of the city's poorest neighborhoods, shook her head as she drove a bronze Cadillac past pimps, drug dealers, and the unemployed who loiter near condemned apartment buildings two to three blocks off the Strip.

''These people will have no place to go," said James, 65, who has worked an area called Naked City for 11 years. When other agents and developers were reluctant to invest in the area, James said, she saw its potential. Now, a motley collection of property is on the market for $8.5 m