CityCenter completion might spur home foreclosures

By Buck Wargo

Friday, Nov. 27, 2009 | 3 a.m.

Although some are touting CityCenter’s opening as a boon to the local economy, a mortgage expert says it will also signal the beginning of another wave of home foreclosures.

Ian Hirsch, Fortress Credit Services director of operations, says he is concerned about thousands of construction workers who will lose their jobs with the completion of CityCenter. Although the project will create more than 12,000 jobs in travel and tourism, construction workers have limited job opportunities once they are done with CityCenter, he says.

“The completion of construction means construction workers will hit the street with essentially zero opportunity for new jobs, and that could drive a new bite into the local housing market that has only recently begun to see a slight turnaround from this historic slump,” Hirsch says. “Union construction workers are well paid, and most of them have mortgages and car payments. I fear the completion will be the beginning of a huge wave of foreclosures and will have a massive impact on local home values across the board.”

Commercial real estate

Restrepo Consulting Group says it will take a number of years to absorb vacant space before rates return to levels before the recession.

Restrepo suggests it will take six years to absorb the 8.9 million square feet of vacant space in the office market; five years to absorb 15.1 million square feet of industrial space; and three years to absorb 3.9 million square feet in anchored retail space.

The estimates are based on vacancy, projects under construction and absorption rate over the past five years, Restrepo says.

Vacancy rates need to fall under 10 percent before a resurgence of lending and development occurs, it says.

Marcus & Millichap, in its fourth-quarter report, says the demand for office space will wane through the end of the year. Office-using employers will have cut 7,400 jobs for the entire year, and the vacancy rate will increase to 24.2 percent, up 5 percentage points for the year. Asking rents will have fallen 5 percent by the end of the year to $24.75 per square foot, while effective rents will have fallen 8.6 percent to $18.88 per square foot.

Housing

In its report detailing the Las Vegas housing market in October, SalesTraq says prices of existing homes were steady and closings exceeded 4,000 a month. The median price of homes sold in October was $123,000, $500 less than September.

Buyers acquired 4,417 homes in October, 99 more than September. More than 4,000 homes have closed each month since March.

In the new-home market, builders sold 486 homes in October, the most this year. Prices fell $6,000 from September to $205,000 in October. SalesTraq reported 2.07 sales per subdivision in October, the most since September 2008.

The new-home market remains weak, however, with only 332 building permits issued in October, the fewest since 298 were issued in May.

SalesTraq reports a 2.5-month supply of homes on the market.

Dennis Smith of Home Builders Research reports 471 new-home sales in October, including 23 high-rise units and seven apartment conversions. Sales are down 56 percent compared with the first 10 months of 2008. The median price was $205,000, he says.

Smith reports 357 building permits were issued, bringing the yearly total to 3,210, an annual decrease of 45 percent. The 357 permits accounted for 475 units because 118 condos were in the total, Smith says.

In October 4,254 existing homes sold to bring the yearly total to 36,843, an increase of 47 percent over 2008. The median price was $125,000, the fifth consecutive month at that level, he says.

In other news

• Marcus & Millichap Real Estate Investment Services has announced the sale of 1.006 acres for $665,425 on St. Rose Parkway in Henderson to Cox Communications.

• Kenneth Lowman, broker/owner of Luxury Homes of Las Vegas, says there are rumblings of a recovery in the luxury home market. He says September was a decent month with $39 million in sales of homes in Las Vegas in the $750,000 and above market. October, however, wasn’t as strong with $24 million worth in inventory sold as of Oct. 27, he says. Less than 200 new and existing homes sold through the first three quarters of 2009, according to SalesTraq, with more than 1,000 sales in 2005 to 2007 and nearly 500 sales in 2008.

• First American Core Logic, a real estate information company, reports foreclosure rates in Las Vegas were 7.93 percent in September, an increase of 4.38 percentage points over September 2008. Foreclosure activity in Las Vegas is higher than the national rate, which was 2.93 percent in September. The delinquency rate has also increased in Las Vegas. It reports 18.69 percent of mortgage loans were 90 days or more delinquent compared with 9.68 percent in September 2008.

Brian Wargo covers real estate and law for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at [email protected].