LAS VEGAS – Renee and Dwaine McCuistion, who lost their Las Vegas home after defaulting in 2010, are feeling lucky again. They bought another property last month for $475,000, 42 percent less than what the previous owner paid.
It’s like we won the lottery, said Renee, sitting on the patio of the four-bedroom house at Red Rock Country Club beside Dwaine, her police officer husband. With everything so low, we felt it was imperative to start building equity again.
Las Vegas, the center of the U.S. housing speculation and collapse that sparked a global financial meltdown, is again enticing buyers after a 62 percent price drop, the steepest of any American city.
Demand has intensified among investors such as Blackstone Group, the world’s largest private-equity firm, as well as families like the McCuistions who are climbing back up the property ladder as Nevada’s supply of bank-owned property tumbled the most of any state, CoreLogic Inc. data shows.
Las Vegas home prices rose 1.4 percent in September from the previous month, tied with San Diego for the biggest gain among the 20 cities tracked in the S&P/Case-Shiller index. Las Vegas jumped 3.8 percent annually, compared with the 3 percent rise in the composite measure, as the U.S. housing recovery benefited from record low mortgage rates and affordability.
In the last six months, people have gotten their money together and realized that prices overcorrected, John Burns, a housing consultant, said in a telephone interview, referring to bargain-hunters seeking deep discounts amid confidence that a floor has been reached. Las Vegas homes are a tremendous value.
The revival in the desert city that pioneered casino gambling, and fed dreams of homeownership with little money down and a speculative road to riches, follows the wreckage of the nation’s worst foreclosure crisis. Nevada led the U.S. housing boom with an estimated 275,000 new homes built from 2000 to 2007, the biggest increase of any state, according to the Census Bureau, before its spectacular demise.
When you bring an act into this town, you want to bring it in heavy, Hunter S. Thompson wrote in his 1971 book, Fear and Loathing in Las Vegas: A Savage Journey to the Heart of the American Dream. Don’t waste any time with cheap shucks and misdemeanors. Go straight for the jugular.
Las Vegas had the highest rate of foreclosure filings per household for 22 consecutive months from December 2009 to September 2011, according to data provider RealtyTrac Inc.
About 70 percent of mortgage holders in the city still owe more than their homes are worth, and $80 billion in home equity has been wiped out, said Jeremy Aguero, principal at Applied Analysis, a research and advisory firm in Las Vegas.
Now, a feverish demand for property has again taken hold, he said. The number of listed homes for sale has dropped to a 1.5-month supply, down from a typical four-month stock of available properties, in a squeeze recalling the boom, he said.
Around the peak in 2007, the McCuistions were like many Las Vegas residents betting on bigger loans for bigger homes.
With a 17-year-old son living at home, and both on second marriages, the couple had a $175,000 joint income, with Renee, 49, earning the bulk as manager of a credit-card processing center and Dwaine, 45, bringing in a cop’s salary.
They bought a $679,000 four-bedroom in a golf development in the northwest part of town, taking out a 30-year jumbo loan for $611,000 with a fixed 7 percent interest rate, as well as a $57,000 second mortgage. A third mortgage for a condominium they rented out, plus mortgage insurance because of a low down payment, made for $6,000 of monthly housing costs.
You could see the lights of the city twinkling at night, said Dwaine. We overlooked three fairways.
Then an old back injury worsened for Dwaine, and 60-hour weeks at the payment center caught up with Renee, and she began experiencing headaches and neck pain.
By early 2010, both were on their way to spinal surgeries, medical leaves and severe loss of income, with Las Vegas prices already in free fall from the August 2006 peak.
The couple defaulted on the jumbo loan in December, and moved out of the house when it sold for $349,900 in March 2011 in an all-cash short sale, where a lender agrees to accept less than the amount owed on the property.
It was humiliating, Renee said. We were raised to be emphatic about our finances and credit, and we lost control.
There was nothing unusual about their situation in a city filled with bad bets. Even now, Las Vegas prices are below 2000 levels on average, according to the S&P/Case-Shiller Index.
Everybody who bought between 2002 and 2010 has lost money on their investment, said Burns, chief executive officer of Irvine, Calif.-based John Burns Real Estate Consulting.
Still, the revival has just begun – the first or second inning, he said.