Closures, layoffs cloud future for some Las Vegas homebuyers
James Probst and Stepfanie Tyler are buying their first home together, a place being built from scratch with plenty of upgrades and space one day for a small pool and an outdoor kitchen.
They already spent around $36,000 in deposits on the Las Vegas house. But their income plunged when the coronavirus pandemic shut down much of the economy virtually overnight — and canceling the sale isn’t so simple.
If they bail on the home purchase, they won’t get their money back.
“We’re in tears about this every week,” Probst said. “It just sucks.”
Across the valley, house hunters who signed sales contracts before the coronavirus outbreak have faced a similar question: Should they cancel the purchase and risk losing their deposit, stick with the sale, or wait to see what the world looks like as their closing deadline nears?
Las Vegas’ housing market is slowly chugging along, but many buyers have canceled amid skyrocketing job losses, and the sales pipeline has shrunk fast.
“It’ll take a while for things to get back to normal,” said Klif Andrews, Las Vegas division president for builder Pardee Homes.
StoryBook Homes, for one, has not seen a surge of cancellations from its buyers. But several lost their jobs, and the builder pushed back closing dates, owner Wayne Laska said.
His buyers-on-hold include a married couple in their 50s, one a maid and the other a porter at MGM Grand, he said.
Both were laid off.
‘A little less freakish’
After starting the year with a surge of sales, Las Vegas’ housing market has been widely expected to get hit by the fallout from the outbreak. The pandemic shut off the valley’s main financial engine, tourism, turning the Strip into a virtual ghost town with boarded-up buildings and barricaded resort entrances.
In the chaotic month of March, when Las Vegas started rapidly shutting down over fears of the virus, a record 208,869 initial unemployment insurance claims were filed in Nevada – up 2,125 percent from March 2019, state data show.
People are still buying houses amid the turmoil, but the market has hit the brakes.
Southern Nevada builders signed 459 sales contracts and had 215 canceled sales in April – compared with more than 1,000 sales each of the prior three months and a monthly average of 149 cancellations in that time, according to data from Home Builders Research President Andrew Smith.
Andrews, of Pardee, said sales volume was “heavily” affected in March, and his company is “working with” buyers who want to delay their closing date.
But, he said, as people adjusted to daily life during the pandemic, sales activity has picked up lately.
“Things are feeling a little less freakish,” Andrews said.
‘Not the right thing to do’
On the resale market, the tally of canceled deals nearly doubled in March from a year earlier to around 2,540, then fell about 11 percent in April to 1,190, according to trade association Las Vegas Realtors.
But overall, sales are falling fast in what’s usually the busy spring buying season. Around 1,970 single-family houses traded hands last month, down 28.5 percent from March and 31.4 percent from April of last year, LVR reported.
In response to the crisis, the association rolled out an addendum that can be attached to sales contracts, if approved by the buyer and seller. It lets deals be postponed or canceled and the deposit returned to the buyers if, for instance, they can’t obtain a mortgage because of a loss of income stemming from the pandemic.
LVR President Tom Blanchard, a broker with Renters Warehouse, said his message for members is this is not the time “to be tough negotiators.” No one should profit from the turmoil by keeping someone’s deposit and not selling the house, he added.
“It’s not the right thing to do … but some will do it,” he said.
New-home buyers Probst, a director of product management at travel site Vegas.com, and Tyler, founder of marketing firm Blackfox Creative, are among those who could lose big if they walk away.
The couple, both in their 30s, married in November and signed a sales contract a few months later with builder Century Communities for a one-story house in the southwest valley.
The purchase price is $517,000, Probst said. They’ve already spent around $31,000 on upgrades, a portion of the total cost for higher-end flooring, countertops, doors and other aspects of the house.
Tyler said they also saved and budgeted for an outdoor kitchen in the courtyard, a small pool in the backyard and modern, desert landscaping.
But after the pandemic hit, their combined income dropped by 50 percent, Probst said. They wanted out.
‘Welcome to the community!’
As seen in emails Tyler provided to the Review-Journal, Probst told a Century Communities sales associate on March 20 that he had been furloughed, they will “barely be able to afford rent” and the vast majority of their cash was tied up in escrow.
On March 31, the sales associate wrote that Century will not refund any deposits to buyers who passed their five-day right of rescission “as noted in the contract documents.”
“If you still would like to cancel at this point in time,” she said, “the builder will not be refunding any money to you.”
Century spokeswoman Alyson Benn told the Review-Journal its commitment to customers “is our highest priority, and during the pandemic, we have been diligently working with buyers on a case-by-case basis.”
She said the builder is “currently engaging” with the Las Vegas couple but does not “publicly disclose details regarding buyers’ contracts.”
The sale is expected to close in July. Probst and Tyler are waiting to decide what to do.
“It feels like given a global pandemic, they could have thrown us a bone here,” Probst said.
Century, meanwhile, has sent “very happy emails” with updates on the house, he said. Sales associates told the couple April 5 that framing had started.
“Once again,” the salespeople wrote, “congratulations on your new home purchase and welcome to the community!”
Contact Eli Segall at esegall@reviewjournal.com or 702-383-0342. Follow @eli_segall on Twitter.
