Over at Time Magazine, Joel Stein has an amusing / troubling article (“Less Vegas: The Casino Town Bets on a Comeback“) about the perils of Las Vegas real estate (ht Anne Canfield).
The juiciest part of the article recounts how real estate agent Brooke Boemio advises clients to exploit the realities of the collapsed housing market:
Boemio specializes in short selling, in a particularly Vegas way. Basically, she finds clients who owe more on their house than the house is worth (and that’s about 60% of homeowners in Las Vegas) and sells them a new house similar to the one they’ve been living in at half the price they paid for their old house. Then she tells them to stop paying the mortgage on their old place until the bank becomes so fed up that it’s willing to let the owner sell the house at a huge loss rather than dragging everyone through foreclosure. Since that takes about nine months, many of the owners even rent out their old house in the interim, pocketing a profit.
In short, homo economicus is again stalking the Vegas housing market.
Stein notes that the renters often suffer from this ploy, since they can be evicted when a foreclosed property finally changes hands. In a nice illustration of how markets work, he then describes how renters are adjusting to this reality:
People are now paying a premium to live [i.e., rent] in apartment buildings, which in Vegas are almost always owned by a corporation.
Klein’s story has lots of other fun anecdotes from the front line of real estate crisis, including this immortal line from casino mogul Sheldon Adelson, whose wealth has reportedly declined by more than $35 billion:
A billion dollars doesn’t buy what it used to. So it’s not as tragic as one would assume.”