Strategic defaults contagious in Las Vegas neighborhoods

By Buck Wargo

Monday, Feb. 7, 2011 | 3 a.m.

The Nevada Association of Realtors reported last week results of a survey that said nearly one quarter of people losing their homes to foreclosure walked away even though they could afford their mortgages.

That’s a scary statistic for the future of the Las Vegas housing market when some national firms are calling for continuing price declines in 2011 and 2012.

Experts say those who pursue a strategic default are influenced by what others do, and that it’s a trend that could worsen during the next two years. The Federal Reserve reports that the median borrower doesn’t strategically default until equity falls to 62 percent of the home’s value.

The biggest percentage of those who walked away, at more than 30 percent, were 65 and older, according to the survey of more than 500 people. Participants between the ages of 18 to 34 comprised about 25 percent of walkaways, along with those ages 45 to 54.

Nearly half of those who walked away had a household income of at least $4,000 a month. More than 20 percent had more than $8,000 a month in income.

The numbers aren’t a surprise to Richard Plaster, founder of Signature Homes, who has been encouraging people to get out from under their debt.

“I think it was inevitable because people have to do what’s in their best interest,” Plaster said. “People are so far under that they will never see the light of day.”

The banks have been taken care of with the federal bailout, and they recover money lost from insurance when they take over a home from its owner, Plaster said.

The decision by many to walk away is influencing their neighbors to do the same, Plaster said.

“I think you’re going to see high rates of foreclosure continue here,” Plaster said. “Las Vegas needs this. If you care about this town, then you should get out from under the loan so we can get this place to come back. We have got to hit bottom and we haven’t hit the bottom yet.”

Economic outlook for Southern Nevada

The index measuring the Las Vegas economy dropped in January, and the prospect of a quick recovery remains dim, according to a report released by UNLV economists.

The Southern Nevada Index of Leading Economic Indicators fell 0.31 percent in January after jumping 0.48 percent in December, said Bob Potts, the assistant director of the Center for Business and Economic Research at UNLV.

Potts said there’s “little reason to see substantive improvement in the job picture during the first half of 2011.”

The index, which measures economic activity through November, is intended to serve as a six-month forecast of the economy.

The index fell because of declines in convention attendance and visitor volume in excess of 11 percent and a 5.5 percent decline in gross gaming revenue. Taxable sales fell by 1.35 percent and residential construction also declined. Only commercial construction picked up from the December index.

In other news:

• Realty One Group said it’s ranked No. 1 in transactions in 2010 with 9,337 deals valued at $1.42 billion. That’s followed by Prudential Americana Group with 7,863 transactions valued at $1.29 billion. Other brokerages rounding out the top 10 are Coldwell Banker Premier, 3,215; Realty Executives of Nevada, 2,605; Century 21 Moneyworld, 2,007; Keller Williams Realty Las Vegas, 1,644; Elite Realty, 1,603; Keller Williams Market Place, 1,552; Keller Williams Southern Nevada, 1,469; and Re/Max Central, 1,426.

• The Associated General Contractors of America said Nevada leads the nation in percentage of construction job losses with a 19.1 percent drop between December 2008 and December 2009. The state lost 13,500 jobs. Idaho ranked second by losing 11.7 percent. Arizona lost only 0.6 percent of its construction jobs.

• The Safety Consultation and Training Section of the state’s Division of Industrial Relations has given the PENTA Building Group in Las Vegas its Safe Partner Award for creating a safe, healthy work environment.

• Constellation Asset Advisors Inc. has established its corporate headquarters in Las Vegas at the Hughes Center. Constellation is an equity markets consulting firm.

• A court-appointed receiver has chosen Insight Realty Associates to market and lease Tropicana Centre, a retail center at the southwest corner of Tropicana Avenue and Pecos Road.

• California-based MIG Real Estate, previously known Stoneridge Capital Partners, has acquired Vista Commons, a 99,000 square-foot neighborhood retail center anchored by a 56,000 square-foot Albertsons. Terms of the sale weren’t disclosed. The center is located on Charleston Boulevard, west of the Las Vegas Beltway.

• The Nevada Contractors Association named Las Vegas Paving Corp. as the 2010 Contractor of the Year for completing the $242 million widening of I-15 six months ahead of schedule. Aggregate Industries won the Heavy Highway/Civil Project of the Year for the $67 million McCarran/Galleria Drive interchange project. M.J. Dean Construction received Building Project of the Year for a $760 million expansion of the Hard Rock Hotel and Casino. Other award winners included Wells Fargo Construction as subcontractor of the year; ECCO Equipment Corp., associate of the year; APCO Equipment, supplier of the year; Sietten Construction, safest contractor of the year; and Rick Ewing of Las Vegas Paving Corp. as recruiter of the year.

• The Nevada Contractors Association named Sean Stewart of Aggregate Industries as 2011 chairman. Brent Conrad of Werdco B.C. is vice chairman and Travis Burton of Perini Building Co. is secretary-treasurer.