Esko Kiuru

Now that the high-rise condominium sector is sort of officially pronounced also soft, this then more or less covers the entire residential real estate spectrum in Las Vegas that has gone mellow, from the single-family house to the condo-hotel. It looked for a while that the luxury end of the condominium offering might avoid any major upheaval, but the hurt seems to be now reaching there, too.

Consider these recent combined stats from GLVAR, Greater Las Vegas Association of Realtors and SalesTraq, a local market research store. The high-rise segment had around 820 units listed for sale during the first week in May while there were only about 20 condos closed in a 30-day period between March and April. Obviously the supply is far ahead of the existing demand. At that pace it'll take a few years to clear the inventory, which points to a market right now just limping along.

Many buyers who contracted to purchase a condominium here two-three years ago, at a time when the sector was turning red hot and everyone and his nephew wanted to get in on it, are now failing to show up for closings. They rather lose the deposits than take possession of units that might be losing value. If they chose to close and then place the condominium at once on the market doesn't appeal to them either, since the resale scene is so flooded with inventory. Parting with the deposit is sometimes the least painful option.

The encouraging aspect of this all is that the high-rise condo market is now ripe for the bargain hunter. Prices have already retreated nicely and the savvy negotiator can possibly shave off some more from it. Moreover, sellers are likely to be in the mood to also offer incentives in a variety of shapes and sizes just to unload a property. This, of course, applies mostly to the owner-occupant and second-home buyer at this point, as the mortgage trade today is very cautious whenever an investor comes calling.

Recent statistics, especially on sales numbers, have instilled some optimism among consumers that the distressed real estate market is about to bottom out in many areas of the country. Maybe it is and that would be a welcome boost for the industry, and also for the beleaguered mortgage lending community. On the other hand, though, perhaps a few more tough months lie straight ahead.

That is what First American CoreLogic, a research shop from California, is indicating in its latest foreclosure report compiled from bank and county sources. Investors in home loans and mortgage lenders together had in their books roughly 660,000 homes by April when the count was 493,000 in January. And in January of 2007 the number was a paltry 231,000. This spring the pace has clearly accelerated and throws a question mark over the hoped-for recovery. At least in some regions.

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The 61-acre Union Park by Newland Communities right off downtown Las Vegas is an ambitious mixed-use development that would transform the forlorn district to resemble in some ways what the Strip presently has to offer. Actually it would have more diversity than the famous entertainment boulevard, as plans call for a lot of office and retail space, a couple of hotels with one of them offering gaming, over 3,000 condominiums, the Smith Center for the Performing Arts and the Lou Ruvo Brain Institute.

Now Newland Communities is seeking permission from the City of Las Vegas to delay basically the entire condominium component by 14 months, which would then put off completion to sometime in 2018. Newland cites a few reasons to the request, but there appear to be two that are readily identifiable.

One is the rather severe overbuilding of high-rise condos here in Southern Nevada that by now has easily outpaced demand. Buildings that were recently completed have a multitude of units for sale by the developers and new property owners who don't want them any more because of lost value. Either way, they are moving slowly. Projects that are under construction are struggling with sluggish pre-sales as the weak national economy is sapping buyer enthusiasm.

The other reason is the skeptical capital market. It looks wearily on the one-time residential real estate hot spots like Las Vegas that is now reeling from past excesses. Lenders have been hammered by massive mortgage-related losses in the last several months and they are very cautious about investing more into a soft marketplace. No matter how sound the plans at Union Park are, the finance community seems to have doubts about its short-term viability. And short-term is the key distinction here.

In a long-term view the project is very realistic. It has a good mix of features and the maturity of the valley and the need for Las Vegas downtown to experience a decent rebirth will offer more than enough support for its successful completion. It's prudent at this point to hold back a little and wait out the market's tremors.

The home loan industry has been dealing with all sorts of problems lately, from a soaring heap of foreclosures to a stagnant real estate market that makes meeting monthly revenue projections difficult. Many companies have been forced to close their doors and a host of others still operating are barely hanging in there. Those record-breaking earnings years of the recent past are long gone. Amid all that distress, now it's forced to battle another challenge.

And this one comes from the investment community. Investors who bought mortgage securities on the secondary market during the boom years are increasingly seeking to force mortgage lenders and banks to take back loans that have failed. A good many are subprime paper, but there are others, too. When these complicated sales contracts are drafted they normally include all sorts of conditions and if they are not met, then the holder can, for instance, return the loan to the originator. A lot, of course, depends on the wording of the agreement.

The terms could stipulate that if a loan goes bad within a short time period, like two years, it can be sent back. Or obvious mistakes discovered later on could violate the contract. And fraud is now coming up frequently as a reason the investor wants to jettison the paper. Under the fraud label one of the leading contenders has been the doctored appraisal, this one likely a no-brainer to avid industry observers.

Countrywide disclosed in a recent securities filing that it expects these types of claims to reach $935 million as of the end of March, while the number was $365 million at the same time last year. That's a heap of money just for this purpose. Other mortgage lenders are now pushed to shore up their reserves, too, putting more pressure on their bottom lines.

A large number of these take-back requests are settled in negotiations, some get done by arbitration and then a decent share winds up in litigation. All the same, these claims use up lenders' resources at a time when they can ill afford it. Hopefully they are taking notes so this kind of meltdown won't happen again.

Nowadays, there's very little to write home about the overall U.S. housing market. True, some areas, including the metropolitan Las Vegas, are showing cautious signs of the slump being at or near the bottom, which is very encouraging. Yet, the recovery to a healthy environment will likely be slow and long and probably infested with a few more bumps.

While the mood here can understandably be fluid, those in Europe and Asia and other far-flung places looking in are seeing a great opportunity. The reasons to that are pretty obvious. Domestic real estate prices have taken a beating in many popular destinations like Florida, California and Las Vegas, so simply put there is great value to be had. To many foreign buyers it's like a one grand sale event and they want to take advantage of it while it lasts.

The U.S. dollar has also seen better days, much better in fact, giving the international investor another incentive to come over and acquire property that a few years ago was clearly out of his reach. Many of them understand how markets work and now two, not just one, key elements here, real estate and currency, are down and this kind of opportunity may not happen again in a long while. As an added bonus, mortgage money continues to be very affordable and widely available with a decent down payment. To the savvy investor from abroad, all the lights should be showing green.

Moreover, in the global family, the U.S. as a marketplace is still viewed as the venue to go to for opportunity and long-term economic health. Nevertheless, it admittedly does get spanked hard every so often for indiscretions, like right now, but time and again it has proven strong bounce-back ability. What comes with that is the confidence factor and it plays a large role in all of this.