In Nevada, begging for a lower home value
One morning in the nation’s foreclosure capital, several dozen property owners filed into the Clark County Government Center, their expressions as dreary as the gray sky outside.
Carrying manila folders thick with documents, they settled into a cavernous room, praying an obscure board would lower the values of their homes.
This might seem counterintuitive. But one odd consequence of the recession is that, in Clark County, more people than ever are trying to drag down their property values, which are already in the dumps.
Moody’s Economy.com has pegged Nevada as the only state stuck in a full-blown recession -- the rest are starting, slowly, to heal. It’s a nexus of a terrible real estate market, a terrible unemployment rate (13%) and, for many people, a terrible feeling about the future.
Last month, President Obama announced a $1.5-billion mortgage program aimed at Nevada, California and three other foreclosure-vexed states.
But many owners -- saddled with home prices that, since 2006, have tumbled nearly 50% -- have given up on prices bouncing back. The swagger that once defined Las Vegas real estate has given way to homeowners begging for smaller valuations and presumed property tax breaks.
Nowhere is this more evident than at the county Board of Equalization, which is charged with answering an increasingly imponderable question:
When prices have fallen so far, so fast, how do you judge the worth of anything?
Before the crash
Don Knight bought his three-bedroom home for about $180,000 in 2003, when Las Vegas’ sprawl was barreling toward the nearby mountains.
But Knight, a salt-of-the-earth fellow, had little use for master-planned communities. His 1975 house sat on more than half an acre, where he and his wife, Janet, raised horses, chickens, geese and guinea hens.
Janet worked at a lumber supplier. Don left a job at Lowe’s for a company that sold windows and doors. Home prices soared. “Anybody in construction knew they were inflated,” Janet said.Around 2007, when the Knights considered moving to California, their home’s value had nearly doubled, to $350,000.
Then came the foreclosure crisis.
In early 2008, the lumber supplier closed. Janet was out of work. She couldn’t even land a job as a gas station cashier. A few months later, Don got laid off. He is 67, she 59.
By last year, the value of the Knights’ home had dwindled to about $177,000. They were on the verge of joining the two-thirds of Las Vegas homeowners who are “underwater,” meaning their mortgage debt would outstrip their home’s worth.
A number of folks endured short sales -- when a home is sold for less than the remaining mortgage -- or simply walked away. The Knights’ ZIP code, 89108, tallied the second-most foreclosures in the Las Vegas region last year, according to SalesTraq. Eventually, the Knights did go underwater.
Although sales volume in Las Vegas has regained some strength recently, home prices are expected to remain listless, possibly for years. So when the Knights got this year’s property value notice, they gasped: about $153,000. It couldn’t be worth that much, they thought. One home similar to theirs, but with a swimming pool, had recently sold for $132,000.
And this is why the Knights were now before the board. Last year their property tax was about $1,500, a tough amount with two people unemployed. They contended their home was worth $125,000.
Since 2005, Nevada law has capped annual property tax increases, somewhat similar to California’s Proposition 13. That hasn’t diminished complaints to the Board of Equalization.
When the market was scorching, owners griped that homes got too pricey, too fast. When it cooled, they griped that home values -- and corresponding tax bills -- didn’t drop quickly enough.
This year, whiplashed property owners tried to regain some feeling of control. The board will hear a record 8,300 commercial and residential appeals, about six times more than in 2008.
Don had fidgeted through a dozen or so appeals, and things did not look good. Some homeowners did not get their property values lowered at all.
One woman complained, to horrified laughter, that the assessor had factored in her built-in microwave. She got a reprieve. Don had no such cause for outrage.
Don came to the lectern and leaned into the microphone, a resolute, if rumpled, man with thick white hair, a Col. Sanders mustache and glasses.
“Before we came down here,” he told board members, whose faces were mostly hidden behind computers, “we drove around. There are 10 foreclosures within a mile of my house!”
Don mentioned the home that sold for $132,000. Board member Tio DiFederico, a commercial appraiser, had some questions: Was that a bank sale?
“OK, it probably wasn’t in very good shape.”
“Actually, I was in that house. It was in fairly decent shape.”
DiFederico wasn’t swayed. “We’ve discussed this before -- these bank sales sell for about 25% less than owner-occupied homes. They need to get rid of them faster.” He suggested the Knights’ home was worth $140,000.
In the audience, Janet grimaced. Still too high.
“The problem with short sales and foreclosures is they always go submarket,” said board Chairman James Howard, in a somewhat conciliatory way. “And if you try to set your values based on those short sales and foreclosures, you’ll always be a little bit low.”
The Knights lost on a 4-to-1 vote. The house’s value was set at $140,000.
“I’m sorry we weren’t able to help you today, sir,” Howard said.
‘Roll of the dice’
In the gallery, Sharon Moret hoped for a more palatable result.
Moret bought a house in 2001 off Hacienda Avenue for $485,000 to surprise her partner, Ronald Spiegel. She showed him the master bedroom’s fireplace, the Jacuzzi, the pool with a swim-in cave. Close your eyes, she told him, and tucked the keys into his hand. He beamed.
Spiegel, who had lymphatic cancer, died weeks after the couple moved in. Moret tried to brighten up the place, but cheering the walls with yellows and pinks couldn’t shake her sadness. She listed the home in 2004 for about $875,000, but a sale never panned out. Its 2009 value: $439,000.
“Vegas is a crapshoot,” she said in an interview, smiling wanly at the casino metaphor. “It was a roll of the dice when I came here. I rolled well for the first 10 years. Then -- " Her hand mimicked a roller coaster’s descent.
Moret, 68, owns three more properties, two of them inexpensive rentals. Her own home, 4,323 square feet of stucco in a gated community, went on the market last year. Price: $1.2 million. Not one showing.
The unoccupied Hacienda home hasn’t drummed up interest either. “But I wouldn’t walk away,” Moret said. “I’d probably kill myself first. My parents brought me up to be responsible. If you owe a debt, you pay it.”
Last year the property tax was about $4,000, so a lower value would make the tax bill more bearable. She hoped the board would reduce the house’s value to $245,000.
‘It just scares me’
Moret gripped the lectern and described her worries in a cigarette-rasped voice. She held up a local newspaper’s business section and read a headline: “Pending sales plunge!”
“It just scares me,” she said, “that the values in 2010 are going to drop even further than they are now.”
“And you’ll probably come back next year when they do drop,” replied board member Jared Shafer. “We’re not dealing with the newspapers.”
“We’re not dealing with the future. We’re dealing with now and what’s sold since July 1 through today. That’s what sets your value.”
Moret tried again:
“I like to pay my taxes. I can’t sell my house for what it is assessed at. My life savings are in my investment properties and my current home. I am going to have to wait out the market and see what it does.”
It’s unclear whether the speech moved the board members, but they quickly -- and unanimously -- approved cutting the Hacienda home’s value, to about $322,000.
That day, Moret was one of the few property owners who walked away pleased.