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From NPR News, this is All Things Considered. I'm Robert Siegel. One of the driest parts of the country is also the most underwater - in mortgage terms, that is. In Las Vegas, half of the homes are underwater. That means they're worth less than the loans taken out to pay for them. Vegas was the country's fastest growing city. Home prices soared, only to come crashing down. And now the city's foreclosure rate is more than seven times the national average. We have a two-part series about Las Vegas today and tomorrow from NPR's Yuki Noguchi. And today, Yuki explores what the collapse of the housing market has done to the city's sprawling neighborhoods.

YUKI NOGUCHI: Long-time Las Vegas resident Brian Burns has won some and lost some, but never have things gone as upside-down as they have now. When the graphics designer bought his home, he got it with no money down for just over $300,000.

Mr. BRIAN BURNS (Graphic Designer): It was ridiculous. People were waiting in line. People were camping outside of sales offices just to get on the list to buy a house that wouldn't be built for a year.

NOGUCHI: Fast forward three years. The day before we met him, a real estate agent came to appraise it.

Mr. BURNS: She said, you really want to know how much your house is worth? And I said, yeah. She said $145,000.

NOGUCHI: That's less than half what he paid. In Las Vegas, hundreds of thousands of people are sinking in the same boat. The day we met Burns, there were 15,000 properties on the market in foreclosure or close to it. The brief version of what happened here was a combination of rapid population growth, freewheeling financing, and lots of speculators buying homes, all of which fueled massive building. Now every piece of that is unraveling. Overstating the foreclosure crisis here is practically impossible.

I'm standing at an overpass on Highway 215. I can see thousands, maybe tens of thousands, of similar-looking homes. It's just the same brown-tiled rooftops, stretching all the way to the horizon. If there's one place that characterizes the housing bust, it's right here.

Mr. DAVE SHAFFER (Real Estate Agent, Shaffer Realty): This is a KitchenAid five-burner stove.

NOGUCHI: Now I'm standing in the kitchen of one of those houses visible from that overpass.

Mr. SHAFFER: My goodness, doesn't look like they even cooked a turkey in there at Thanksgiving.

NOGUCHI: Dave Shaffer is a 30-year real estate veteran. He too owes a third more on his home than its worth.

Mr. SHAFFER: Let's see if there's any furniture marks in the floor. I'm telling you, nobody lived in this house. Never.

NOGUCHI: It's on a block of Helens Pouroff Street where two homes on the same block of this gated community are in foreclosure and a third is on the market at a deep discount. Literally everyone we spoke with is sucked into this housing mess. That includes loan officers and real estate agents who deal with it professionally as well as personally. It's even affecting renters who get displaced when their landlords default. Shaffer's business partner, Patrick Doherty, went from minor real estate mogul worth a million dollars to almost nothing in two years.

Mr. PATRICK DOHERTY (Real Estate Agent, Shaffer Realty): I mean, I had boats, literally three, four cars, waterfront property. I've got a house on an island in North Carolina. I mean, it's - and all of it has been sold.

NOGUCHI: Doherty now lives in a condo his business partner Shaffer bought in September. The condo lost another fifth of its value in just two months. That is how quickly things fall. It's tempting to think that a town that derives so much of its income from gambling simply took more risks than in other parts of the country. But that's not the case, says Jeremy Aguero. Aguero is principal analyst with an economic analysis firm in Las Vegas.

Mr. JEREMY AGUERO (Principal Analyst, Applied Analysis): Well, I don't think that the risks were uniquely different, the loan offerings were somehow different in Las Vegas than they were in California, Arizona, or Florida and Texas. But I do think that the amount of the risk that was placed here was substantially higher just because of - purely because of the loan volume.

NOGUCHI: And housing was indeed a volume business during those peak years. The new developments stretch out for miles and miles all around the basin of Las Vegas. Virginia Cavallaro lives next to the foreclosed homes on Helens Pouroff Street. She and her husband put lots of money down on their house, so they can't just pull up the stakes, though she'd like to.

Ms. VIRGINIA CAVALLARO: It's very difficult to live here and know that, yeah, you know, well, they can just up and move and leave and, you know, you're stuck here with this big upside-down thing that you just basically can't do anything about, and nobody's helping you.

NOGUCHI: Then again, nothing's selling. She's sitting on her patio gesturing toward neighbors who can't even get a nibble from prospective buyers. To her left...

Ms. CAVALLARO: She had her house up for sale for six months, and not one person came to look at her house. Not one.

NOGUCHI: And off the backyard...

Ms. CAVALLARO: Not one person has come to look at this house.

NOGUCHI: Due east a few miles, real estate agent Shari Springer owns three upscale homes. She hoped to rent them for retirement income. A cascade of foreclosures pushed down prices, and now Springer is about $200,000 underwater on each of the homes. Do you think there's something of a domino effect going on here?

Ms. SHARI SPRINGER (Real Estate Agent): Absolutely. Absolutely. Because you don't know if another foreclosure appears in the neighborhood what the bank is going to price it at.

NOGUCHI: Just outside her subdivision, there's a new school, a manicured park, tennis courts, and a pile of rubble where a new pool is slated to go in. In short, this does not look like a place that's in serious financial trouble. Springer says prices are deteriorating as banks sell in a race to the bottom.

Ms. SPRINGER: The homeowner is completely out of this at this point. They're all so upside-down that they can't even begin to compete with the prices the banks are putting on the homes. So, one bank is competing with another bank. We're out of it.

NOGUCHI: It's easy to diagnose the problem. Blame lies at everyone's feet - lenders, borrowers, regulators and builders - but no one knows how to stop home prices from collapsing. Some see economic recovery in the continued building of gargantuan casino complexes like MGM Grand's City Center. When gamblers return, so will jobs, and with it the housing sector, the thinking goes. Others, like economic analyst Jeremy Aguero, see promise in the recent uptick in home sales among bargain hunters.

Mr. AGUERO: At a low enough price, there are buyers in this market. And there are plenty of people that are waiting to essentially buy something with blood dripping off of it.

NOGUCHI: But for Brian Burns, the graphics designer we met earlier, the Vegas story ends here.

Mr. BURNS: Twenty years ago, this was my kind of town. But we've both changed a lot. And it's just not the same place that it used to be.

NOGUCHI: He lost his job and tried unsuccessfully to get his loan modified. Having put nothing down, though, he's got little to lose. He plans to pack up his car and simply abandon his home. Everything else is laid out and for sale in the garage.

Mr. BURNS: I've got some of my old graphics, you know, an old computer that I don't use anymore and some printers, basically stuff I don't want to drag up to Portland with me.

NOGUCHI: With poor credit, he won't be able to buy a new place when he gets to Portland, Oregon, and that isn't Brian Burn's only regret.

Mr. BURNS: I feel bad. I feel kind of like I'm not pulling my own weight in this crisis. I feel like someone that, as an investor, takes a bunch of people's money and then skips out on it. I'm from a small town, and we try and do the right thing. But financially this is the only move that I have right now that makes any kind of sense whatsoever.

NOGUCHI: It's a very familiar sentiment here. Finances just don't compute and little makes sense. Yuki Noguchi, NPR News.

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