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August 20, 2014

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Expensive commuting not holding the charm

Gas price spike could bode ill for an outlying place like Coyote Springs

Two years ago, at a news conference in the middle of one of Nevada’s loneliest stretches of desert 60 miles northeast of Las Vegas, U.S. Sen. Harry Reid and developer Harvey Whittemore heralded the “birth of a city” — Coyote Springs, 43,000 acres of desert with water rights that over 40 years would give rise to more than 150,000 homes.

“People said I was crazy,” Whittemore said. “I think people are a little bit jealous ... I am the luckiest guy in America.”

Today, with gas prices topping $4.25 a gallon and still headed north, Whittemore may be feeling a lot of things, but luck perhaps isn’t one of them.

If, as some expect, gas tops $5 a gallon by the end of the year, the pain at the pump could make some rethink buying a home in “exurbs” distant from their region’s major hub — something happening in Southern California and elsewhere across the nation.

“We are just beginning to see for the first time since World War II a decline in the quarterly vehicle miles driven,” said Christopher Leinberger of the Brookings Institution, a Washington think tank. “Hitting $4 seems to be the point where the price elasticity is breaking.”

For decades, far-flung communities on the fringes of major metropolitan regions have lured buyers willing to endure long commutes as trade-offs for owning bigger, better houses than they could afford closer to the core of major cities such as Las Vegas.

Soaring gas prices, however, have altered that equation, forcing home buyers and homeowners to increasingly consider commuting costs in deciding where to live — more precisely, how far to live from their jobs.

Although Coyote Springs is to be a self-contained community that blends residential and recreational areas with nearby job opportunities, at least some of its future residents will look to Las Vegas for work and play. And that means they’ll be keeping a close eye on gas prices.

“The whole big story was you’re able to live out there and not pay the big prices,” said Mark Stark, chief executive and owner of Prudential Americana Group Realtors. “Places like Mesquite and Coyote Springs could give a better dollar value. Now with gas prices it isn’t true. That story doesn’t exist anymore.”

Last month, Pardee Homes, Coyote Springs’ residential builder, announced an 18-month delay, pushing back the construction of model homes to September 2009. To perhaps understate the obvious, gas prices clearly are not an incentive to speed up the project.

Residents in Pahrump and Mesquite, two communities with explosive growth over the past decade thanks in part to their relatively cheap homes and the still-commuter-friendly price of gas, are feeling the pressures of a $4-a-gallon world.

Henry Amaya, who drives 63 miles over a mountain range twice daily from Pahrump to his job at a gypsum plant off Nellis Boulevard has to sock away $300 every two weeks just to pay for gas.

“Oh my God, it’s gone up so much,” said Amaya, 45, who has a house in Pahrump with his wife and 14-year-old son. “I have to do something, either get a motorcycle or something.”

Pahrump grew 43 percent, to 37,928 residents, from 2001 to mid-2007, according to the Nye County Economic Development Authority. About 85 percent of all Nye County residents live in Pahrump, and one in five of its residents in “high-wage occupations” commutes to Clark County for work.

Amaya said he has not considered moving to Las Vegas, even with its home prices dropping.

Home values also are dropping in Pahrump, a skid that high gas prices are doing nothing to halt. The median home sale price in Pahrump this year has been $200,000, down from $240,037 in 2007 — a 17 percent drop slightly above the 15 percent decline seen in Las Vegas, where median prices went from $299,990 to $256,016.

For now, Mark Smith, editor of the Pahrump Valley Times, said he hasn’t heard of people quitting their Las Vegas jobs because the commute is too expensive.

“There are a lot fewer jobs here,” he said. “There is some stress, definitely, though.”

Farther away but via a much flatter drive, Mesquite is 82 miles north of Las Vegas on the way to St. George, Utah. It, too, has commuters who work in Vegas, but not many, Mayor Susan Holecheck said.

“We’re weathering the storm pretty well,” she said.

Bolstered by the construction of a planned community for retirees — many of whom might drive to Las Vegas for occasional recreation — Holecheck doesn’t foresee a huge growth impact on Mesquite from rising gas prices.

“We still have single-family permits” being issued for new homes — 163 from January to May — “and this is a small community, so there’s not a lot of gas guzzling going on,” she said.

Mesquite’s median home price, however, also has dropped — though not as severely as Pahrump’s — falling 6 percent this year from $275,063 to $258,815.

The city also has noted another difference this year. In March, average daily traffic on Interstate 15, which runs through Mesquite from Las Vegas to St. George, fell 3.9 percent compared with the same month last year.

“That might be more of an indication that people who commute from St. George (122 miles north) are cutting back,” Holecheck said.

“We used to say ‘30,000 people by 2010,’ ” added Holecheck, whose community is currently at about 20,000. “We’ve stepped back a bit from that. Now we’re saying 30,000 by 2012.”

•••

Bankers tend to have a cautious, often conservative view of the future. That’s particularly true now that the economy has taken such a huge hit and Nevada shifts between the No. 1 and No. 2 rankings in foreclosures nationally.

Bill Martin, a longtime banker formerly with Nevada State Bank and now vice chairman of the board and chief executive of Service 1st Bank, said that for many years, “the sure thing around here was real estate ... There was a lot of data and we were all willing to believe what we were reading.

“And that’s where Coyote Springs came from, and all these high-rise condos came from, and all the houses came from, and that’s where these hotel-resorts came from.”

Now, taking a purely horse-sense view of things, Martin said: “It’s pretty obvious that gas and distances are a big factor ... and this time, prices aren’t coming back down. We are not getting cheap gas again.”

He pauses.

“And I bought an SUV a few months ago that gets 12.2 miles per gallon!”

John Restrepo, whose Restrepo Consulting Group is used by local communities, developers and others to analyze what they all want to see — the future — agreed that at least for the near term, “satellite communities are going to be impacted by the cost of commuting.”

Homes were much less expensive three years ago outside of Las Vegas, but prices here have plummeted. So people thinking about living in a bedroom community will have to ask themselves a tough question.

“Why do you want to live in Pahrump?” Restrepo said. “The homes are still more affordable than Las Vegas, but the pricing pressures here are off.”

•••

The drive 60 miles northwest to the unconstructed mega-outpost of Coyote Springs takes you, once you exit Interstate 15 onto U.S. 93, west for mile upon mile without passing another car.

Starved for any glimpse of civilization, drivers face what seems an eternity to reach the crests of foothills that themselves stretch on for miles.

But that was part of the selling point a decade ago when Whittemore bought the land. Coyote Springs would be a sustainable community far from the 24/7 bright lights and pace of Las Vegas, a place “where the din of city life quickly fades into a star-speckled sky,” according to the development’s marketing pitch.

What’s missing today are those 150,000-plus homes — and people.

Whittemore did not return a call for comment.

Despite the 18-month delay in model homes’ construction, Jeremy Aguero, principal analyst with Applied Analysis and a consultant for the Coyote Springs project, thinks the development will do well. Part of its saving grace will be that it won’t be a simple outpost — it will be an entire city.

“This is not a bedroom community,” Aguero stressed. “By the time it’s built, it’s the size of Henderson. It’s going to be a self-contained community in itself (with) not just residential, but business.”

He admitted that “bedroom communities are going to have issues” as gas prices rise, but anticipates technological advances, forced by the high cost of fuel, will lead to vehicles that get many more miles per gallon of gas.

Pahrump, on the other hand, is far enough away that two weeks ago, a couple of smart businesspeople resurrected a long-dead bus line between the town and Las Vegas. The fare: $10 one way or $18 round trip.

The Pahrump Express left and returned to Pahrump four times a day, seven days a week, said Deborah Poulter, general manager.

On its first day of operation, June 6, it had one customer. Five days later, more than 40 people were aboard, Poulter said.

“A lot of people out here have big vehicles, trucks and SUVs,” she said. “I have one, too. I wish I didn’t. But what can I do?”

Well, one option is out, at least for now.

A week after the Pahrump Express opened for business, the state shut it down. A company spokesman said the bus service is required to get a new state permit, which will take two to three months.

By then, the first digit in gas prices could be — gasp — a 5.

Sun reporters Alex Richards and Mike Trask contributed to this story.

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