Empty office buildings. Foreclosed homes. Underwater borrowers. Pay cuts.
Las Vegas was almost wiped off the map by these and other financial hurricanes during the recession. But years later, as things improve nationally and in America's gambling mecca, some problems here just won't go away.
The valley has made strides, but it’s bogged down by economic woes that are showing little improvement or remain among the worst in the country.
• The office market, vastly overbuilt during the boom years by speculators, has a glut of empty, ignored properties.
• The housing industry has bounced back, but the rate of underwater homeowners remains one of the highest nationally, and banks still target delinquent borrowers more often here than in most states.
• Many homeowners are skipping mortgage payments — often buying cars and electronics instead — because banks are backed up with paperwork and won’t seize their homes anytime soon. Abandoned houses still blight neighborhoods.
• Locals are going back to work, but Nevada's unemployment rate is still among the highest in the country. Nationally, earnings have been flat since the recession hit, but in Las Vegas, wages have dropped hard in that time, when adjusted for inflation.
“It’s kind of hard to get real excited about some of this stuff,” said John Restrepo, principal of RCG Economics.
To be sure, there are reasons for optimism. Tourism, gambling revenue, home prices and, despite falling this year, new-home sales have climbed from the depths. Abandoned real estate projects have been sold cheap and are being completed. Mass layoffs aren't as common, bankruptcies have slowed and new resorts are planned for the Strip.
Las Vegas won’t soon return to the roaring levels of the go-go years, if ever. That may be a good thing, considering how badly it all ended.
But the valley’s tourist-dependent economy is still far from vibrant and robust.
“When you’re in the gutter and your improvement brings you level with the curb, is that really an improvement?” said Michele Johnson, president and CEO of the Financial Guidance Center.
Las Vegas, unlike such places as Los Angeles, the Bay Area and New York, doesn’t have big companies taking lots of office space in skyscrapers or occupying their own sprawling business parks. The major employers here, casino operators, do have office buildings, but most workers seem to be in resorts — dealing cards, serving drinks, cleaning hotel rooms and the like — not sitting in cubicles.
However, during the boom years last decade, investors, backed by easy financing, developed office buildings here at a torrid pace.
“You couldn’t (build) fast enough,” said Rick Myers, president of Thomas & Mack Development Group. “It was unbelievable.”
The investors in many cases were architects, brokers, doctors, dentists — people with no development experience. What’s more, projects were self-fulfilling prophecies, as many of the tenants also worked in real estate and were part of the same bubble that prompted office construction in the first place.
When the recession hit, buildings around the valley went bankrupt or were seized through foreclosure, and countless emptied out as tenants closed shop.
The market’s vacancy rate was around 7.5 percent in 2006 but ballooned to almost 23 percent in 2011, according to Colliers International. It’s now about 19 percent, Colliers says, and development has largely ground to a halt.
A key reason for the empty space is that during the boom years, developers built small, poorly designed buildings, many of which now sit empty, Myers said.
As he sees it, work crews might as well bulldoze a quarter of the boom-era projects, as prospective renters have no interest in moving there.
“Nobody’s looking at them,” he said.
Jobs are growing in professional services and other office-user fields. But tenants are filling space they already have — left vacant by layoffs — and are “being much more cautious” about spending money to take additional space, according to Brian Gordon, a principal with economic research firm Applied Analysis.
As office landlords struggle, Las Vegas’ retail, warehouse and apartment markets, though far from robust, are picking up as investors buy properties, break ground on projects and sign tenants.
“Office is definitely lagging all the other commercial submarkets,” said Cathy Jones, owner of brokerage firm Sun Commercial Real Estate.
The sector is by no means dead. Call-centers and other companies are taking space, although average asking rents have been stuck at around $1.87 per square foot since late 2012, according to Colliers.
Investors are buying properties, too, but sales volume is sluggish as the valley’s bloated vacancy rate causes many would-be landlords to look elsewhere.
“It does scare them,” said broker Mark Musser, a partner with NAI Vegas.
During the housing bubble, few places were as inflated as Las Vegas.
Banks gave mortgages to practically anyone, subdivisions sprouted everywhere, and prices soared out of control. People from all walks of life — pro athletes, strippers, blackjack dealers — jumped in to make a quick buck flipping houses or selling as brokers.
And when the bubble burst, few places were hit as hard. Sales and prices plunged, foreclosures swept through the valley, construction dried up, and the vast majority of homeowners with mortgages were left underwater.
The market is better today, thanks largely to investors who, after the economy tanked, bought cheap homes in bulk to turn into rentals and pushed up prices at one of the fastest rates nationally. But plenty of weak spots and volatility remain.
“Each week you can make the argument that the market is great or ... that the market’s in turmoil,” RE/MAX Extreme agent Tim Kiernan said.
The rate of upside-down borrowers — people whose mortgage debt outweighs their homes’ value — peaked at 71 percent in early 2012. It’s now 27 percent but still second-highest among major metro areas, according to Zillow.
Banks seized tens of thousands of homes in the valley after the economy collapsed, and Nevada’s foreclosure rate led the nation for years. Lenders aren’t repossessing nearly as many homes anymore, but with the economy sluggish, they still deal with plenty of delinquent borrowers.
Nevada had the third-highest foreclosure rate in the country in October, with one in every 596 homes receiving a foreclosure-related filing, according to RealtyTrac. Nationally, one in every 1,069 homes received a foreclosure filing that month.
After spurring the recovery, investors now are buying fewer homes because of the rising prices they helped create. As a result, listings of previously owned homes increasingly are being ignored, sales volume is dropping and prices aren’t climbing nearly as fast as a year ago.
The pullback is cooling a market that got so heated with spending that insiders feared another bubble was forming. It also gives mom-and-pop buyers — who were squeezed out by investors — a better chance at buying a place.
But it also means the market will rely more on those regular buyers. That could turn the slowdown into a slump, as many locals can’t get a mortgage because of tighter lending requirements and past bankruptcies, foreclosures or short sales.
“We’re not in a healthy situation,” Restrepo said.
Meanwhile, local officials still grapple with abandoned homes, one of the more visible side effects of the recession.
Southern Nevada cities set up mandatory foreclosure registries the past few years to prevent homes from falling into disrepair. By early November, about 6,300 properties had been registered with Las Vegas and 3,600 with North Las Vegas. Henderson launched its registry Nov. 3.
At the same time, a large number of people live in their homes mortgage-free.
Whether they can’t afford to pay or just don’t bother to, residents are skipping payments without consequences because banks, under closer scrutiny from government officials, have been waiting years before seizing homes from delinquent borrowers. In many cases, homeowners are spending that money on cars and other consumer goods, said Johnson, the financial counselor.
A man who recently visited the Financial Guidance Center hadn’t made a mortgage payment in more than seven years. Johnson’s group meets daily with others who haven’t paid in three or four years.
“It is not an exception,” she said.
Tourism, gambling, resort construction, retail sales, homebuilding — all were booming last decade. But much of the growth, maybe all of it, was made possible by Wall Street’s easy financing.
When the bubble burst, companies laid people off en masse, real estate projects were halted mid-construction, and casino action fell sharply. As a result, Las Vegas’ unemployment rate, which hovered in the 4-5 percent range from 2003-07, shot up to 14 percent in 2010.
In October, Nevada’s unemployment rate was down to 7.1 percent — an improvement, but nonetheless tied for sixth highest in the country. The rate nationally was 5.8 percent, according to the U.S. Bureau of Labor Statistics.
Locally, about 60 percent of the jobs lost to the recession have been recovered, according to data compiled by RCG Economics. But overall, employers aren’t expanding much, giving employees more hours or raising pay, even to keep pace with inflation.
In fall 2007, the average Las Vegas worker logged 37 hours a week on the job and earned $740 weekly. In October this year, they were on the job for 33.2 hours a week and earned about $694, according to RCG.
Adjusted for inflation to 2007 dollars, wages have dropped even more, to about $609 per week.
One local bartender, who declined to give her name, said she worked at a tavern for 10 years until it closed in spring 2013, leaving her unemployed for eight months. She worked at least 40 hours a week at that job but only gets 32 hours a week at her new bar, which she did not want identified.
A co-worker from the shuttered tavern is still unemployed and has moved in with her.
“She didn’t have anywhere to go,” the bartender said.
Laurie, a 48-year-old pizza shop manager, used to manage a gas-station convenience store, earning $15 an hour, but lost her job three years ago. She was unemployed for a year and a half.
Laurie, who declined to give her last name, now makes minimum wage — $8.25 an hour — “and that’s OK,” she said. “I’m surviving.”
The shaky economy and weak wages, however, haven’t stopped people from using savings or credit cards to shop again.
In the year ended June 30, people in Clark County spent almost $5.5 billion at car and auto-parts dealers, furniture and home-furnishings stores and electronics and appliance shops. That’s down 9 percent from 2007 but up 43 percent from 2010, according to the Nevada Department of Taxation.
Locals beefed up their savings at the depths of the recession, but — perhaps lulled into a false sense of security because the worst of the economic carnage is over — “now you can see what they’re doing with their money,” Johnson said.
“We have very short memories,” she said.