In real estate, some see light, others see more gloom ahead

Some real estate professionals see a shaft of light in the real estate market gloom enveloping Southern Nevada, although another analyst says he sees little more than a glimmer.

The optimistic outlook came from Richard Lee, vice president of First American Title Co., and Richard “Rick” Myers, president of the Thomas & Mack Development Group, who spoke today at a meeting of CCIM Southern Nevada at the Rio.

Lee said it appeared to him that most of the attractive finished lots — those ready for construction — in Las Vegas have been purchased by builders. “If they are not gone, they’re not desirable,” he said.

“National builders are back,” Lee said. “That’s the only positive thing I’ve heard in 18 months.”

Myers said his company has sold three subdivisions of residential lots for Nevada State Bank. “Now that the lots are getting grabbed up, people are starting to look at raw land,” he said.

Dennis Smith, president of Home Builders Research, didn’t participate in the panel, and he acknowledged that attractive lots are being sold locally. However, he has a more pessimistic view than Myers and Lee have.

Smith’s company is preparing an updated study on finished lots, and his preliminary results indicate the Las Vegas area has 17,500 lots available to be built on. But some of those are owned by investors waiting for land values to appreciate, rather than home builders, Smith said.

He counted an additional 2,500 lots that are available for sale. “There is a very limited number of finished lots that meet the criteria of the builders that are buying today,” Smith said.

Builders want lots with 4,000 to 6,000 square feet, and they have little interest in 2,500-square-foot lots, he said.

The bigger lots are going for $25,000 to $45,000, Smith said, compared with $100,000 at the peak of the housing boom.

Not all builders are buying, either, Smith said, citing Pulte Homes and Ryland Homes. Pardee Homes is selling its finished lots.

Richmond American Homes, KB Home, D.R. Horton and Harmony Homes are buying, Smith said.

Most builders are closing on about two homes a month, he said.

During the meeting at the Rio, speakers saw little reason for optimism about the real estate market of most interest to the attendees, the commercial real estate market.

Ray Walsh, vice president of repossessed real estate at City National Bank, said banks are braced for a wave of problems in 2011 and 2012 when many loans are due to mature and owners will need to refinance. Walsh predicted it would take five years to work through all the bad commercial real estate loans.

Walsh offered a bit of good news: “Five hundred billion in private equity (money) is sitting on the sidelines waiting to come into this market.”

Larry Singer, a Grubb & Ellis vice president and receiver for properties in default, predicted that most commercial real estate will not sell for five years. Many lenders are leaving receivers in control of commercial property, rather than foreclosing on the property, Singer said.

Bill Martin, chief executive officer of Service1st Bank, was asked why banks are unwilling to make new loans on commercial real estate.

Martin said bank regulators, who were blindsided by the real estate bust, have tightened their regulatory oversight.

“Now they are playing catch-up. They clearly have the message: Don’t mess up again,” he said.

As a result, no banker “is going to do any real estate loan that has the least bit of a speculative part to it,” Martin said.

Service1st would like to make more loans, he said, because it has $70 million in liquid assets earning one-quarter to 1 percent, and those low returns are causing operational losses.

An accounting rule forces banks to write down loans if the borrower is not paying under the original terms and a loan guarantor cannot step forward to assist, Martin said.

Contact reporter John G. Edwards at or 702-383-0420.