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December 17, 2014

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Plummeting home prices entice first-time homebuyers

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Steve Marcus

Jody, left, and Taya Compeau are shown in the living room of their new home Sunday, Dec. 4, 2011. With the couple are their dogs Dozer, a 2-year-old Bullmastiff, and Nina, a 1-year-old Chihuahua-Pomeranian mix.

The worst housing market in 70 years has created a recession-flavored version of the American dream for first-time home buyers in Las Vegas.

Attracted by home prices that have plummeted to a fraction of what they were during the peak of the housing boom in Las Vegas, new buyers have helped drive the healthiest home resale market in Southern Nevada since the bubble popped. Economic pain for sellers is translating to hope and opportunity for people shopping for their first home.

Along with investors and others seeking real estate bargains, first-timers spurred sales of 40,033 existing homes in the Las Vegas Valley from January to October — the highest figure since a record 50,009 resales during the first 10 months of 2005. The median price of an existing home was $110,000 last month, almost a third of what it was at the height of the bubble.

“In terms of the numbers, it’s a fantastic year for resales. Think of how many sales we’d have if it wasn’t like that,” said Homebuilders Research President Dennis Smith. “Why is demand there? Look at the prices. So long as we have these low prices, we’re going to have demand. We’ve got plenty of investors. Vegas is not dead and blowing away.”

Although prices have plummeted, getting into the market isn’t always easy. Among homebuyers seeking to tap into bargain-priced properties with conventional mortgages rather than the 50 percent down, cash approach of investors, a significant number bemoan a climate of lender delays, miscommunication and reluctant appraisers who are skittish about doing their jobs amid the price plunge and the uncertainty it has spawned.

Cost-conscious banks are understaffed and often unable to handle the volume of mortgage applications, Smith says, adding that many bank employees lack the training to handle the complexities of short sales, in which homes sell for less than the mortgages that were obtained to purchase them. He says home appraisers are low-balling their appraisals as they struggle to assess the value of so many homes.

“The banks and appraisers are covering their behinds, and the pendulum has swung way past what would make the most sense,” he said.

So what’s the environment like for first-time buyers? Here, some of the newest homeowners in Southern Nevada share their stories:

Taya and Jody Compeau

The Compeaus had multiple deals of the verge of closing, so close that Jody, Taya and their two young boys were prepared to move into their new home. But then the purchases fell through, derailed by bank financing that never came through. Loan processors needed more paperwork, paycheck stubs, records of tax filings. The process took so long that multiple 30-year fixed loans fizzled.

“They told us we had everything, and then we didn’t,” Taya Compeau said, frustration readily evident in her voice. “It felt like we were just getting the runaround.”

She’s a food server at the Golden Nugget, and tips make up a significant portion of her annual earnings, complicating the paperwork process as lenders attempted to gauge her yearly pay. You might assume that mortgage lenders would be accustomed to working with tip earners, who make up a large portion of Southern Nevada’s working population, but that wasn’t the case for her.

“We put in for several different houses and we didn’t get a loan. My husband wanted to give up after the second month,” she said of the couple’s nearly nine-month financial adventure. “The problem with these lenders is they don’t look at everything. They say you’re approved when you’re not. Then it falls through, and you have to start over.”

Jody is a manager and driver for PODS moving storage. The couple’s joint monthly pre-tax income is $6,500, enough to qualify them for a loan to pay $161,500 for a 2,600-square-foot home in northwest Las Vegas. The previous owners paid $400,000 for the home six years ago but lost it to foreclosure earlier this year, according to the Clark County assessor’s website. It’s a classic Las Vegas Valley tale in the midst of the Great Recession: One couple’s loss is another’s very affordable opportunity.

The Compeaus, both in their early 30s, finally closed the sale on Nov. 9.

It’s been a revelation: the sense of homeownership, the comfort of sending their kids to newer elementary and middle schools, no longer having to pay rent.

“It makes me sick to think how much we threw money away toward rent,” Taya Compeau said. “This is a lot nicer neighborhood than what we were in, and I’m happy we found this area in the valley to move to.”

She doesn’t hesitate when asked what advice she’d give potential homebuyers: “It is not a quick process. You have to be patient — very, very patient. If it doesn’t happen the first time, get out there and keep trying.”

Allison Cordova

While others are out partying, running up big bar tabs at local clubs, Cordova, 26, is focused on saving her money and planning for the future. Her background working with Nevada Hand Inc., a nonprofit developer of affordable housing, has made Cordova especially sensitive to the challenges of purchasing a home in a housing market that finds investors dropping 50 percent cash down payments to snatch up houses at bargain-basement prices.

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Allison Cordova poses outside of her home Monday, Dec. 5, 2011. Cordova, who closed on the home in October, said homeownership seemed to make sense when mortgage payments rivaled rental rates.

She has run the group’s Neighborhood Stabilization Program, which links low-income individuals with federal dollars that help them purchase previously foreclosed homes. She understand the complexities of today’s housing market.

“Being in the shoes of a buyer, it’s still very daunting and overwhelming,” she said. “It’s such a huge step buying a house, given the current state of the economy and the market, it took a lot of thought on my part. You wonder, do I really want to make that investment? Is it the right time or not to buy?”

Cordova worked with a Realtor to find a 1,780-square-foot Las Vegas home in foreclosure, one that was held by Fannie Mae. Her annual income is in the mid-$40,000 range. She’s single with some college and credit card debt and a car loan on a year-old Mazda SUV. Her FICO, that vital measure of an individual’s credit rating, is in the mid-700s, a particularly good score on a scale that tops out at 850, and she bought a home for $163,500 with a 30-year fixed loan from a small private lender rather than one of the major banks. Her monthly payment: $964.

“I don’t want to bad-mouth them, but in my eyes because they’re such institutions, there’s miscommunication (with banks),” said the University of San Diego journalism graduate. “The underwriter might be here and the loan officer might be in another state. You’re having to resend documents. There are underwriting problems, delays and quality-control issues — where are the files? Just a lot of delays, a lot of miscommunication. They’re not very responsive and as a buyer you always have to be following up with them. You have to be an assertive buyer and know what you’re getting yourself into.”

Cordova offers advice for someone considering whether to purchase a home: “If you have some money saved up and if you are looking to make an investment in this town, I think it’s work looking into. It’s not a bad time to buy. There’s a lot of inventory out there. There are options out there. Go the extra mile and do a little research.”

Sarah and Richard Sturman

The Sturmans were tantalizingly close to buying a two-story, five-bedroom, 3.5-bathroom house with an asking price of $220,000, a virtual steal when you consider that similar-size 3,000-square-foot homes were going for nearly triple that amount five years ago. In foreclosure for more than a year, the home had first and second mortgages, and the lender on the first had signed off on the couple’s offer, but the holders of the second note turned it down and refused to budge. They wanted more money.

The Sturmans and the lenders went back and forth trying to reach an agreement, but the second lender declined their offers. The delays forced them to go through underwriting three times. Their lender was slow about getting back to them, and the process dragged. “It was really horrible because you’ve got your hopes up,” Sarah recalled. “We lived near the house in an apartment. We would watch it, then found out the bank wasn’t getting enough money and we were going to lose out on the dream. After seven months we just gave up because we knew it wasn’t going to work out.”

They made offers on other homes but lost out on three other short sales, the purchasers getting the homes for just a few thousand dollars more. Frustrated, the Sturmans decided to save more money so they’d have a larger down payment than the $11,000 they had in the bank, but they gave it one more shot and turned to another foreclosed home in their desired neighborhood near Durango Drive and El Capitan Way. It’s dotted with distressed homes, a virtual shopper’s paradise if you can only get the noteholders to sign off on the offers.

Their new target home was slightly smaller than their first, at 2,100 square feet, with four bedrooms, 2.5 bathrooms and an asking price of $209,000.

“This time around, we had better luck,” Sarah Sturman said. “The first time around we were told, ‘It will be another month. It will be another month.’ ”

Now they’re closing on the purchase.

The couple moved to Las Vegas two years ago from suburban Toledo, Ohio. Sarah, 35, is an administrative assistant with Aetna and works from home. Richard, 37, is a radiation technology specialist and works at the Nevada National Security Site. They have a 6-year-old, and like any youngster that age he needs his space, but their apartment is small for a young family.

Their lender arranged a 30-year fixed mortgage, and the couple are paying a monthly mortgage of $1,100, prompting Sarah to ponder what it all means for the Sturmans, the home’s previous buyer and the broader community.

“I feel bad for the people that it happened to,” she said. “I feel bad for the people who had to struggle through it or are struggling through the (housing collapse), but I think we are getting a good bargain.”

She paused for a moment to consider the starts and stops of the nearly yearlong process she and her husband just completed.

“Everyone told us when we moved out to Vegas, ‘Oh, my goodness, you’re going to get a great deal on a home,’ ” Sarah recalled. “That’s well and good if you can get someone to accept your offer.”

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  1. Congratulations to all those in this story who have persevered and achieved their goal of buying their first home. The first one will always make you the proudest.

    Also, you all should be commended for resisting the temptation you must have felt a few years ago (when anybody could get a loan) to purchase a house you could not have afforded. I'm sure you all had family and friends buying homes and suggesting you do the same. By resisting the temptation of "Keeping Up With The Jones'" you have found yourself in a great position in regards to your new homes.

  2. "Plummeting home prices entice first-time homebuyers". I guess that's true if you are paying cash. Banks still aren't doing loans.

  3. 2100 sq ft at $209,000? At $100 a foot, that is a sign of stabilization at least. At 3% historical annual appreciation rate for Las Vegas, we should be about $158 a foot today, based on prices of $125 a foot in 2002.

    Banks are doing loans. I've personally watched two first-time homeowners close on homes in the past two months, both with bank loans.

  4. Mr. Davis,

    Banks are loaning with no problem to responsible people in this valley. Have seen many first time and others buy in the last year.

    Trick is you have to pay your bills and not be over your head in other debt.

    Believe it or not, a large part of the people in this valley did not fall into the traps and bury their self in debt and are doing just fine.

  5. "The previous owners paid $400,000 for the home six years ago but lost it to foreclosure earlier this year, according to the Clark County assessor's website. It's a classic Las Vegas Valley tale in the midst of the Great Recession: One couple's loss is another's very affordable opportunity."

    How sweet for the Compeaus. It may not be for long. They're likely to find out how good their title insurance is since they're running the risk of the "previous owners" reclaiming the home. Our AG is in the process of nullifying thousands of foreclosures. Have a look @ http://www.vegasinc.com/news/2011/dec/05...

    "If you're going to take my house away from me, you better own the note." -- Joe Lents (who hasn't made a payment on his $1.5 million mortgage since 2002) in Bloomberg's 2/22/08 "Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish"

  6. now they can take a HELOC out and buy a pool, boat and SUV!!!

  7. The Banks were bailed out to the tune of 7.7 Trillion(Bloomberg News) of our tax dollars while homeowners received around 2 Billion in mortgage modifications.

    These Bank Foreclosures are going to get very messy since many of them had loans that Wells Fargo called "Ghetto Loans" and mortgage bankers made up to seven times commission on these loans.
    I think the Attorney Generals have a point that these were fraudulent loans made by the banks.

    So far not a Single Banker has gone to jail for crashing the economy, just don't protest against them or you will. Excellent story on 60 Minutes last Sunday.

  8. "The Banks were bailed out to the tune of 7.7 Trillion(Bloomberg News) of our tax dollars while homeowners received around 2 Billion in mortgage modifications."

    newnvres -- the problem hardly anyone talks about is how many of those loan mods were made by banks without any proof whatsoever they actually owned the notes those "loans" were based on. Many new mods had the undesirable result of just transferring billions more into their pockets and in the process replaced lost notes with fresh new ones.

    "Why don't the banks want us to see the paperwork on all these mortgages? Because the documents represent a death sentence for them..... in America, it's far more shameful to owe money than it is to steal it." -- an article from the November 25, 2010 issue of Rolling Stone by Matt Taibbi "Courts Helping Banks Screw Over Homeowners"

  9. newnvres - you have it wrong. Some bankers did go to jail. People involved in mtg fraud have been prosecuted - http://en.wikipedia.org/wiki/Taylor,_Bea...

    banks bail out consisted of them selling assets at basement discounts to the government (taxpayers). The government made a nice profit off those assets as they rose in value.

    Too many people have very little grasp of what happened in the housing bust. Read a few books then post. Banks were a part of it, but you can also blame home buyers, mtg brokers, investors, regulators and rating agencies. Those last 3 were important. Without them, your still paying 20 points to FAMCO.

  10. The question that keeps coming to mind, especially for the two married couples: What if one spouse loses their job with the result being their income drops significantly and they can't pay their mortgage? For the Compeau's - she is a food server at a casino. For the Sturman's - she is an administrative assistant with an insurance company (his job looks pretty secure and most likely pays good money). BOTH the ladies' jobs are not rock solid. Both jobs are expendable and both jobs could be cut tomorrow. The economy is still in the crapper and more layoffs could be in the future - both these ladies could lose their jobs, and possibly their husbands losing their jobs as well. Then what? The houses go into foreclosure - again? Job security would weigh heavily on my mind before deciding to buy a house.

    Unless one could pay for a house in cash or put down one hefty down payment to keep the mortgage payments manageable in case of job loss, one should not depend on their job to pay the mortgage, especially in Las Vegas. I realize it is like that everywhere, but in Vegas, it just seems more risky.

  11. for vegaslee: You are either sell real estate salesmen or a banker. You can dish up better self serving propaganda than what you've done here.