After an historic housing crisis, the Fronteras Desk asks: is it time to reconsider the way we’ve built the Southwest? This is part three of the special Fronteras Desk four-part series, Beyond Sprawl, airing December 12-15 on NPR 89.1FM/1550AM.
Story by Jude Joffe-Block
LAS VEGAS — The unending rash of foreclosures and falling home prices in Las Vegas continues to cause despair.
But the same housing crisis is causing some investors to see opportunity. Home prices have dropped to 1990s levels, and many homes in the area are selling for below the amount it would cost to build them.
In fact, these Las Vegas homes are getting noticed from buyers all over the world.
Kevin Chu recently toured Las Vegas for the first time to check on his investment firm’s properties.
In the last 18 months, his firm, The Creations Group, which has offices in both Hong Kong and Melbourne, has bought up distressed homes all over the U.S. – including 13 in Las Vegas – at fire sale prices.
“I’m very excited,” said Chu in heavily accented English.
He joined his local property manager, Tracy Bennett, to visit one of the firm’s properties that had just been renovated. While Chu has dealt with the firm’s Las Vegas properties on the phone, he had never seen any of them in person, until now.
The newly renovated house was in an on older, working class part of North Las Vegas.
“The houses are going to be a bit smaller here,” commented Bennett as they drove up. “And we have arrived, now this is your house right here.”
Bennett pointed to a disaster of a house that was clearly vacant. Blue graffiti covered the garage. Trash was piled in the yard.
Before anyone could say anything, she laughed.
“I’m kidding,” Bennett said, giggling, and Chu and his associate also laughed.
But the blighted house is a reminder of the bleak housing reality in Las Vegas: Foreclosure rates that are more than three times the national average have led to thousands of bank-owned properties that sit empty.
Thankfully, for Chu, his firm’s house – just down the block – was in much better shape.
It was a modest, one-story home with a carport. There was fresh paint inside, and a fairly well maintained pool in back. The house seemed ready for a tenant.
“It looks very good,” Chu said. “Much better than I expected.”
And the U.S. housing market as a whole looks very good, better than expected--to Chu’s boss, Danny Lim.
“I think there is nowhere else in the world where you can actually get the bargains that we can get in the U.S. right now,” Lim said.
We reached him by phone in Miami, where he was looking for more properties.
“In some places, the types of prices that we are getting, I think it’s once in a generation,” Lim said. “Perhaps once in a lifetime kind of opportunity.”
Las Vegas realtors hope foreign buyers can rescue their hard-hit housing market, one of the worst in the U.S.The opportunity is there partly because of a strong rental market.
In Las Vegas, a lot of people need to rent because they have lost their homes, or because credit is too tight for them to buy. Rents are sufficiently high and home prices are sufficiently low that some investors figure they can find houses that will pay for themselves in just 10 years.
Assuming demand for rentals holds, that kind of return is hard to beat.
Lim isn’t the only investor to notice. Absentee buyers accounted for 45 percent of Las Vegas homebuyers in September, according to the most recent analysis by the real estate research firm, DataQuick. In contrast, three years ago, absentee buyers bought just a quarter of the homes for sale.
Now some locals are hoping to convince more international buyers that there are deals to be had in Las Vegas.
“So what we are doing actually is advertising in the Asian newspapers,” said Andy Chu, a local realtor. “We let them know: Hey, look, U.S. is a good place to invest.”
A quarter of Chu’s agency’s clients are from Asia already. But he wants more. They are good customers because they often will buy several properties and pay in cash. Which means he doesn’t have to spend months waiting for financing to be approved.
“From a business perspective, you can get paid in four days or get paid in six months,” Chu said. “It’s sort of lucrative if you think about it.”
The 2012 strategy for the Las Vegas branch of the Asian Real Estate Association of America is to help local realtors get international business through new Web-based tools and networking opportunities.
“If you are a homegrown product, how do you network with someone in Canada? How do you work with someone in China, Vietnam or Taiwan? It's very hard,” said Joseph Lai, the president of the local chapter of the Asian Real Estate Association. “That's the reason why our association is trying to bridge that gap.”
Last year, buyers from abroad were most active in Sunbelt states like Florida, Texas, Arizona and California, according to the National Association of Realtors. In each of the last three years, purchases by foreign buyers have remained steady at an estimated $40 billion worth of American homes.
Lai said more international activity in Las Vegas could help revive a local housing market plagued by too many vacant houses.
“International investors, we see them as absorbing a lot of the inventory,” Lai said. “They are going to come in, make them income-producing properties. And then they are going to fix them up, get them into livable shape, get them rented out.”
And with a backlog of tens of thousands of foreclosures expected to roll onto the Las Vegas market in the coming months, buyers from anywhere in the world will be in demand to soak up a lot more inventory.
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