Why you can’t buy a house in Vegas

Jennifer Shubinski

Sunday, Oct. 2, 2005 | 1:55 a.m.

Housing Facts

Rising cost of housing

See how housing prices have risen:

http://www.lasvegassun.com/pdf/prices.pdf

The story of Las Vegas Valley real estate has turned from the amazing boom that made headlines across the nation to one of compromises and missed opportunities for many residents.

"There are quite a few people that are on the edge of desperation," said Realtor David Berg, who teaches a class for first-time homebuyers.

The change from an affordable housing haven to one of the most difficult housing markets in the nation comes at no small price.

It's not just teachers and nurses who cannot afford to buy a house in the Las Vegas Valley. It's also single people, families with one income and white-collar workers -- all of whom could easily afford to purchase a house here just five years ago.

Herb Gonzalez and his wife, Luz, moved to Las Vegas in 2001 from Texas, hoping to find good jobs and have the opportunity to buy a house.

Houses that they looked at then were about $180,000, but at that time they couldn't afford to purchase one, Gonzalez said.

"So we decided to wait so I could improve my skills so I could get a better paying job," he said. "I was able to do that, and now I'm in a better position, but I can't afford a home. I'm in the same situation."

Gonzalez, 44, who works as a systems engineer with Bally Gaming and Systems, said he has been told he qualifies for a mortgage. But Gonzalez also wants a traditional mortgage that is affordable.

"I've been told my payment would be around $1,900 (a month). That's a lot," he said.

The other option is that Luz Gonzalez, who worked as an accountant in her home country of Columbia, finds work -- but then the couple would have to arrange and pay for day care.

The family of four rents a house.

"We've talked about moving back to Texas, but the pay there is not as comparable as it is to here," Herb Gonzalez said. "You'd have to give up something to get something."

Berg tells his students who are just shy of being able to afford a home to work two jobs to qualify for and pay the mortgage.

"I tell them in the class I was working as a (blackjack) dealer and I could buy a house, no problem," he said. "Now you need two incomes; I don't see any other way."

When Berg moved to Las Vegas in 1968 he earned about $15,000 a year as a blackjack dealer. At that time he bought a new home for $27,000.

"It's never going to get any better," he said. "Those prices aren't going to come down."

The numbers seems to support that. Despite talk of a Las Vegas housing bubble and worries that prices will soon deflate or become stagnant, none of that has happened.

Except for one month this year, the median price of resale and new homes has increased. While prices have not increased at the same extreme rates as last year, they continued to go up despite an increase in resale inventory.

"Our prices can't come down," said Dennis Smith, president of the research firm Home Builders Research Inc.

Smith said the availability of land is shrinking. Another factor is that the majority of area builders are publicly traded companies which answer to shareholders who want larger profits quarter after quarter.

"It all starts with the price of the land. Show me another market that is selling land for $700,000 an acre that's not looking at the ocean," Smith said. "We don't have enough, and it's priced too high."

In five years the median price of a resale house has soared from $131,000 to $282,000 -- a 115 percent increase. The median price of a new house also more than doubled from $153,920 to $321,550 -- a 109 percent increase, according to Home Builders Research. The calculations are based on home prices from August 2000 to last August.

During that time, the rate of homeownership in Clark County has remained flat. Last year the homeownership rate was 59.8 percent -- far below the national rate of 69.2 percent.

"Las Vegas will never again be viewed as an affordable housing market by the 'working class' as it was just five years ago," Smith wrote in his monthly newsletter.

John Restrepo, principal of Restrepo Consulting Group LLC, said the issue of affordable housing in the Las Vegas Valley is one of the biggest issues facing the area.

"Our concern is that incomes are not keeping up with home price increases and that the impact on our workforce and economic diversification efforts could be significant over the next three to five years," he said.

One way Restrepo tracks affordability is the relationship between median new home prices and median household income.

Restrepo found that in July the ratio reached 5.62, which means that the median new housing price was nearly six times the median family income of $56,550. By comparison, the ratio was 3.19 in 2000 for a family median income of $50,700.

"The increase from 3.19 to 5.62 represents an increase of 76 percent in six years (and is) very dramatic," he said. "In contrast, median household income has only grown by 12 percent during the period."

Daniel Spath and his wife, Arlene, have toyed with buying a house for years.

The couple graduated from UNLV in 2003 and wanted to stay in Las Vegas to work and raise a family. They had looked into buying a house before graduating, but decided to wait.

After graduating, the Spaths again casually house shopped, and figured at the time they would easily be able to afford a nice house for around $180,000. But when the couple felt ready to actually buy, houses similar to ones they had looked at had jumped to around $230,000.

Thinking the market had spiked for a short time, the Spaths decided to sit back for a few months. In June 2004, they hit the open-house circuit again, only to find that the price of homes similar to ones they had previously looked at had risen to $280,000 to $300,000.

Now those same houses are priced around $340,000, said Spath, a purchasing analyst for Station Casinos.

Spath said he does not want to get a second job and his wife has chosen to stay home to care for their 9-month-old son.

"I really want us to get a house, but it's important that Arlene stays home. Five years ago we could have bought a really nice house," Spath said. "We keep kicking ourselves -- well actually it's me. She (Arlene) said we should buy."

Smith said the choices facing young families such as the Spaths include leaving the city because they can't afford a house, asking other family members to pitch in to help with the down payment or monthly mortgage, or remaining in rental housing.

For those already here, some are looking at any way to buy a home.

"I felt a sense of urgency, like if I don't buy something now, I'll be out of luck," said Mandy Abrams, a spokeswoman for St. Rose Dominican Hospitals -- Siena Campus.

Abrams wanted a house, but wasn't able to afford one. She found a condo that she could afford, but after six months of working with the builder picking out upgrades, putting down money and signing the contract, she got a call that the deal was suddenly off.

"When he told me I broke out in tears -- it was heartbreaking," she said. "By then housing prices had gone up immensely."

Abrams was later driving though a neighborhood she liked when a sign caught her eye: rent to own.

She now is now renting a 1,188-square-foot house that she hopes she'll be able to buy in two years. Her contract says that she gets to lock in the price of around $200,000, but she can buy the home only if she doesn't violate any of the many stipulations.

"It's like you're chasing this unreachable goal," she said. "The more you save, the more housing goes up."

Jennifer Shubinski is a business writer for the Sun and its sister newspaper, In Business Las Vegas. She can be reached at (702) 259-8832 or by e-mail at js@lasvegassun.com.

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