One Man’s View:

Buying a home might be risk worth taking

Wednesday, April 8, 2009 | 12:22 p.m.

Tim O'Callaghan

More of Tim O'Callaghan's One Man's View.

Have a little cash? Buy a home in foreclosure, for goodness' sake.

First-time home buyers may be keeping Las Vegas alive as they swoop in on the distressed housing market. There are deals to be had in Las Vegas.

The question of the day is, will they have a job tomorrow to keep up with the mortgage payments?

Last week, I met with a community organizer from Tucson, Ariz., and our conversation quickly turned to the economy — specifically the Las Vegas economy.

He asked when I thought things would turn around for Las Vegas. Whenever I'm asked that or a similar question, I give my stock answer, "Not very soon." As I have written before, the mortgage dilemma will continue for another four years if the government doesn't step in to assist. I'm not suggesting the government get involved, but rather stating my opinion on the situation.

The reason I say Las Vegas won't recover very soon is the same reason the Big Three auto companies won't recover anytime soon — or at all for that matter.

As I told my visitor, there is little money left for Americans to spend. If you happen to be wondering where all the money is, I'll tell you what I told him. As I pointed my finger out my office window in a wide sweep across the Strip, I said, "The money is out there in all those hotels — and not just those hotels, but also hotels in New York, Atlanta, Miami, Chicago, Los Angeles and many more cities across this country."

The money is in millions of cars and SUVs that are being repossessed by banks and finance companies. The money is in exotic vacation spots around the world.

The money is in colleges and universities, spent by hopeful parents so that their children might have a greater opportunity than themselves. Many of those hopes have been dashed by deflating investments and 401(k)s.

Get it? The money is spent! Those buildings and dreams were built on the backs of many American mortgages, and when the equities dried up, the building stopped. Jobs were lost, homes sales tanked, and the economic tsunami was put into a full roll.

In Las Vegas, gaming companies gambled in a big way or never really thought about where the prosperity was coming from. How many gaming companies leveraged themselves? The answer is most of them.

It's hard to believe the decision-makers couldn't see this coming. Didn't CEOs see what was happening in their personal finances? Did they think the boom would never go bust?

As long as tourists were doing their own kind of leveraging with credit cards and home equity lines, the facade — or house of cards, as I've been calling it — would hold up. Everyone just had to keep playing.

Now, it is what it is.

I, like many people, made good personal financial decisions by not leveraging everything we own into oblivion. Who is going to bail us out as we are affected economically by the carelessness of others? The answer is no one.

More than 140,000 people are jobless today in Southern Nevada alone. Millions are across this nation. Is there any hope for them? Not immediately.

The reality is no one will get through this recession unscathed. But I'm willing to bet there will be more new small businesses spawned in the coming years than ever before in our history.

That's a bet worth taking. The final question is, will you be willing to bet on America? If you have a secure job, have never owned a home and plan on sticking around, you should invest in a home.

This is probably a good time for first-time buyers to snatch up a deal, according to the National Association of Realtors. Lawrence Yun, the group's chief economist, said first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges.

"Because entry-level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February," he said. "Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price."

It may be drawing down median prices, but it's the only action out there right now.

What are you waiting for?

Tim O’Callaghan, co-publisher of the Home News, can be reached at 990-2656 or tim.oc@vegas.com. He writes a regular blog at tocomv.blogspot.com.

Discussion: 10 comments so far…

By Whispering_Dress

4/8/09 at 2:25 p.m.

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I really enjoyed this article. I fall into the category of having a good job and have never purchased a home. My husband and I have rented in LV for 6 years now. One of the things that is stopping us is who really knows if we've hit bottom? Like many of you I'm waiting for the other shoe to drop. What if tomorrow there really are no more jobs to go to. We'll all have to go back to hunting and gathering and waiting in soup kitchen lines like they did in 1929. Is this really that far fetched? Or, are we all just too proud to admit how close our country has come to a depression?
By rittergirl44

4/8/09 at 6:22 p.m.

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Nonen of us are going to have anything. The world knows we are falling apart and Obama is going around apologizing for the United States. We are being sold out by our own president that we mistakenly elected. How can anyone have trust that we will recover when Obama makes it sound as though we do not deserve to. That man is the downfall of this country.
By Stupendous

4/9/09 at 8:47 a.m.

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Rittergirl

You should be punished by act of treason. j/k

Obama has a big mess to clean up, I would expect it to take some time. We all make our own future.
By Tim O'Callaghan (Staff)

4/10/09 at 11:38 a.m.

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Whispering,
Yes, things are seriously bad right now, however, try to keep calm, because I think things will come back around. I don't think we will have to return to hunting and gathering to survive. I do think most of us will need to rethink how we entertain ourselves, perhaps, spending more time playing games on Friday nights with family and friends.
This crisis may also bring back the concept of the nuclear family, where households will consist of multiple generations such as the Walton's.
We're already seeing sign's of this in Las Vegas where siblings are moving into siblings homes in order to rent their homes to avoid foreclosure.
These are tough times indeed.
Best,
Tim
By jfnance32

4/10/09 at 11:53 a.m.

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One should not buy a home in LV for investment only reasons.

One should not buy a home in LV to rent out.

One should not buy a home in LV if you not planning to live and stay in LV for at least 10 years.

You should have solid income and strong confidence of not being laidoff. It is most likely that layoffs will continue in LV and across the nation for at least until fall 2010. Hopefully, the rate of layoffs will go down soon.

Interest rates will start to climb soon because the FED is printing a gigantic amount of cash and will eventually have to flood the market with Federal bonds to fund the $15 to $17 trillion that Obama wants to borrow over the next decade.

Within the next decade, interest rates might even return back to the highs of mid teens that occurred during the Jimmy Carter years.

So if you have solid income, rent and good credit and plan to stay in LV for 10 years then you should buy a home this year or next year.
By Tim O'Callaghan (Staff)

4/10/09 at 12:05 p.m.

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Rittergirl44,

As we fall apart, so is the rest of the world. With that said, You can't blame the President for this crisis that has been brewing since 2003 or earlier with the deregulation of the banking industry.

There is plenty of blame to go around no matter what your political leanings may be. Keep in mind the United States in still the greatest country on earth, no matter how scorched this land may appear today, most Americans will rise from the ashes as something newer and greater.

More small business will be developed in the coming years setting new benchmarks for growth.

Finally, the President hasn't been in office long enough to be the downfall of this country.

The American public should seek common ground instead of political strife.

That's just One Man's View.

Best,

Tim
By Tim O'Callaghan (Staff)

4/10/09 at 12:41 p.m.

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Whoa, Mr. Nance,

Calm down a bit, your salient points get lost when you rant.

I'm not suggesting just anyone go out and buy a home, however, if you have money and you are a "First time home buyer" there is opportunity out there.

As always,
Best,
Tim
By Nick

4/10/09 at 2:16 p.m.

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You had me until you quoted the National Association of Realtors. Could they be biased? Didn't they call bottom in 2007 and 2008?

Remember Realtors are not educated people.

I do like the rest of your letter
By Harley

4/10/09 at 2:27 p.m.

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Buying a tent seems more realistic.

LOL
By rumrunner

4/11/09 at 1:24 a.m.

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I dont think its hit anyone yet. What about all those people that did buy and went bankrupt? There credit score went from great, to tank! The banks HAVE to lighten up! Where all in this boat together and its gonna keep going round and round until we keep ours heads!