Vegas homes teach tough lesson
Los Angeles Times
Kim Kaul bought a house last summer in Las Vegas.
By traditional criteria, Kaul, a 36-year-old San Diego homemaker, was an unlikely player in the real estate investment game. She and her husband, Michael, who worked for his father's auto-wrecking yard, are of modest means, with four young children and a rented apartment.
This was part of the appeal, of course. In San Diego last year, it was hard not to talk about real estate, as prices rose 25 percent. Las Vegas was even more feverish and had the lure of a much lower entry price. So when Kaul saw a posting on the Internet bulletin board Craig's List by a man selling a contract to buy a new Vegas house, she got in touch.
The seller said he had contracted with Pulte Homes in June to buy a three-bedroom house in the suburb of Henderson for $425,000 but that his financing had fallen through. He sold the contract to Kaul in August for $8,500, money she took out of the family's meager savings. Her new investment, which she bought with no money down, was appraised at $460,000. An agent told Kaul she would be able to sell in six months for a $100,000 profit. In a market where prices had gone up by 50 percent in the previous 12 months, that appeared reasonable.
Instead, on Oct. 1, the Vegas market caught a chill. In the face of weakening demand, Pulte cut prices. More than 500 would-be investors fled, abandoning their deposits rather than taking possession of something whose value might decline further.
The speculators' party was over.
For Kaul, whose model could now be had for $335,000, it was too late. She had closed on her purchase. During the fall, she was hopeful or maybe just unwilling to see reality. She found a tenant, who pays $1,250 a month. But her mortgage was $3,000.
When her husband lost his job, the situation became dire. The couple paid the January mortgage with borrowed money, then gave up. Their lender is in the early stages of foreclosure, a process that will ruin their credit rating.
Kaul is chastened but still believes in real estate: "I'm sure the market's going to pick up, but I can't hold out that long. This is kind of a bummer."
