Las Vegas Sun

September 30, 2016

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Real Estate:

Slow comeback from recession leaves Pahrump with lots of wide open spaces

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Mikayla Whitmore

A look at the current state of Cottage Groves Estates on Cottage Grove Way and Spruce Lane on Friday, Feb. 5, 2016, in Pahrump.

PAHRUMP — Howard Steiger lives in Cottage Grove Estates, a suburban-style enclave here with one-story homes, a roundabout and street names like Spruce Lane and Bristle Cone.

It’s also a partially built leftover from the real estate bubble in this rural town with double-wides, brothels and heavily armed residents — and Steiger likes it just the way it is.

Empty home-sites at Cottage Grove are covered with dirt. Cul-de-sacs are carved from the earth but remain unpaved. Yellow fire hydrants are sprinkled about, serving no one in particular.

Unfinished Neighborhoods in Pahrump

A look at the current state of Burson Ranch in Pahrump, Nev. on Feb. 5, 2016. Launch slideshow »

It's a perfect place for the retired Minnesotan to cruise around on an ATV or let his German shepherds roam about.

“I love it,” Steiger said.

At the other end of town, Bryan and Suzanne Wulfenstein live in Burson Ranch, a subdivision planned for nearly 600 homes but with only a few dozen built. Roads lead to nowhere, curbs and sidewalks line unpaved streets and fire hydrants sit by themselves, surrounded by acres of dirt.

The Wulfensteins, who have four kids, like their house and their neighbors. And, they said, it’s quiet here.

“It just looks like a construction zone to me,” says Bryan Wulfenstein, “but there’s no construction going on.”

Pahrump, an unincorporated town 60 miles west of Las Vegas with libertarian leanings, had a wild housing bubble last decade that mirrored its more-famous neighbor’s. Investors streamed in to buy property here at bloated prices, developers got approval to build thousands of homes and Las Vegas commuters snapped up houses as a cheaper alternative to the valley. All this in a small community that, until about a decade ago, didn’t even have zoning laws.

Pahrump was pummeled when the bubble burst, in some ways worse than Las Vegas, one of the hardest-hit major cities in America. And today, like Las Vegas, the town’s economy is on the mend.

But, overall, the homebuilding industry remains noticeably slower across the Nye County border than it is in Las Vegas.

“What do you consider a lot of construction? This isn’t Vegas,” Pahrump contractor and property manager Debra Strickland said.

Builders pulled 79 permits for single-family home construction in Pahrump last year. That’s up three-fold from just 23 permits in 2010, but far below the 1,014 pulled in 2005 during the bubble, according to Pahrump Building and Safety.

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By comparison, builders in Clark County pulled nearly 7,600 new-home permits last year. That’s more than double the record-low of about 3,700 in 2011, but well below the roughly 32,900 pulled in 2004, says Las Vegas-based Home Builders Research.

Clark County permit totals are about 77 percent below the peak, but in Pahrump, they’re down about 92 percent.

Construction is slow-going for several reasons, industry pros say.

Builders and buyers alike here struggle to obtain loans, and with home prices in Las Vegas more affordable now, masses of workers don’t have to put up with an hour commute anymore to find cheaper housing. Pahrump still has an ample supply of resales, including bank-owned homes, steering buyers away from often-pricier new digs. And with few major employers here, the town seems to draw more retirees than young families, limiting the pool of buyers.

Las Vegas’ homebuilding market is dominated almost entirely by out-of-state, publicly traded companies that sell houses nationwide and can afford to buy big swaths of land and develop several communities at once. Pahrump Valley builders, however, are almost all local, independent groups that mostly build custom houses, not subdivisions.

The only heavyweight builder here is Newport Beach, Calif.-based William Lyon Homes, which is developing the Mountain Falls golf-course community on the south edge of town. It’s selling dozens of homes annually in the subdivision, Nye County planning director L. Darrell Lacy said, and accounts for the majority of action in town.

Mountain Falls “is still hot,” but “as far as the rest of the valley is concerned — not so much,” says broker Norma Jean Opatik, owner of Realty Executives in Action.

C.R. Homes, for instance, built five custom homes last year, up from just one in 2011 but far below the roughly 50 a year it built during the boom last decade, owner Charlene Pasqualetto said.

Buyers are showing “more interest in Pahrump than we have (seen) in quite a few years,” she said, but financing is tight for new houses and cheaper options abound.

“You can still buy a foreclosed home out here for less than what I can build,” Pasqualetto said.

Builders also are wary of building speculative homes, or breaking ground without a buyer lined up first, as they’re harder to sell. Strickland, president of Strickland Construction Co., is building only two spec houses.

“That’s all that the market will bear,” she said.

New-home buyers paid $150 to $170 per square foot during the bubble — which meant a 2,000-square-foot house cost $300,000 to $340,000 — but they now pay about $110 per square foot, says broker Cathy Slaughterback, owner of All Star Real Estate.

Land prices also have dropped sharply. Plenty of people bought half-acre lots for more than $100,000 during the boom years, she said, but “they’re worth less than $20,000 today.”

Overall, Pahrump’s housing market is “back to normal now,” she said. It’s not as bleak as it was during the recession, when builders abandoned projects and the town’s jobless rate was nearly double the national average. But it’s not nearly as robust as it was a decade ago, when this former farming and ranching outpost with legal bordellos became a hot investment spot.

“It was unbelievable,” Slaughterback said of the bubble, “and I wish I knew then what I know now.”

***

As easy credit fueled America’s real estate boom, Las Vegas led the way as developers flooded the valley with housing tracts, condo buildings, strip malls and other projects.

An hour’s drive away, Pahrump already was a popular place to retire, with one of the fastest-growing populations of seniors nationally in the 1990s. It’s a quiet, mountain-framed town with warm weather and plenty of land for residents to spread out — not far from a world-famous casino hub, no less.

The town’s population was just 7,400 in 1990 but shot up to 24,600 by 2000. By that time, 21 percent of residents here were age 65 or older, compared to 12 percent nationwide, federal data show.

But when Las Vegas, which had been growing fast for decades, began to grow even faster, the frenzy spilled over. The region’s outlying towns, including Mesquite and the Laughlin area, also grew rapidly last decade. But it seems few got as crazed as Pahrump, named by the Wall Street Journal in 2004 as the second-fastest growing “micropolitan” area in the country.

Buyers, often from outside Nevada, gobbled up houses, sometimes four or five at a time. Listings got multiple offers as soon as they hit the market. Hundreds of real estate agents were trying to sell property. Homebuilders put customers on waiting lists, homebuyers went from one sales office to another looking for property, and more than 15,000 commuters drove to and from Las Vegas every day, according to real estate executives.

The population soared to 36,400 by 2010, and in an eight-year span last decade, developers received approval to build more than 17,000 homes, Nye County records show. One project called for 3,200 homes, another for 5,160 and yet another for 6,200.

“It was absolutely insane,” Slaughterback said.

***

The town, however, wasn’t equipped to handle it all.

For one thing, Pahrump didn’t have zoning laws until 2003, planning director Lacy said, which meant people could essentially build whatever they wanted, wherever they wanted. Its main commercial corridor, Highway 160, has a jumble of offices, retail plazas, medical buildings and casinos, with little sense of organization.

“We’re under a huge building boom,” a Nye County planning official said in 2003. “Quite frankly, it’s frightening because we have no standards.”

The town also has limited utility service. Pahrump still has no natural-gas service and residents must get water from private companies, not a government agency that serves the town. Thousands of households get sewage service from those companies, while thousands of other homes use septic tanks, Lacy said.

Pahrump also didn’t have its own hospital until 2006 — “easily the most-needed service in a community of 34,000 with 24-hour emergency health care 55 miles away,” the Pahrump Valley Times reported.

Moreover, the road connecting Pahrump to Las Vegas, Highway 160, became “Nevada’s poster child for traffic fatalities and the problems caused by urban sprawl,” the Las Vegas Sun wrote in a 2006 editorial.

All told, as one columnist wrote that year: “Pahrump is not prepared for this.”

***

The bubble quickly burst, as the worst recession in decades wrecked the U.S. economy. Southern Nevada was hit harder than most regions — and Pahrump took one of the worst beatings of any community in the area.

Construction ground to a halt, property values plunged, subdivisions became ghost towns, homes were seized through foreclosure, builders went out of business, real estate agents left and job losses mounted.

The Pahrump area’s unemployment rate, just 4.9 percent in late 2005, ballooned to 18 percent by summer 2010 — far above the U.S. peak of about 10.5 percent in early 2010, according to non-seasonally adjusted federal data.

Some 2.2 percent of U.S. homes were hit with foreclosure filings in 2010, the highest rate nationally during the recession. That same year, however, nearly 14 percent of Pahrump homes were slapped with filings, according to RealtyTrac.

The housing industry had become “a morgue,” Slaughterback said.

“Everything was dead," she said. "It stopped as fast as it started."

Opatik, of Realty Executives, said she spent all of her retirement money to keep her business afloat.

“It was very difficult to survive as a real estate agent,” she said.

The town got a much-needed boost of commerce in fall 2010, when a privately owned detention center for federal inmates opened. The Nevada Southern Detention Center, operated by Nashville, Tenn.-based Corrections Corporation of America, can hold nearly 1,100 inmates.

It also employs more than 200 people, Lacy said.

“That’s the biggest job creator we’ve had in quite a few years,” he said.

***

Nowadays, it seems no one here expects a return to the roaring boom days. But the housing market is slowly coming back to life.

The median sales price of single-family homes in Pahrump plunged to nearly $113,000 in 2011 from about $277,000 in 2006. As in Las Vegas, resale prices remain well below their peak but have recouped some of their post-bubble losses; last year, the median sales price here was $171,000, according to the Greater Las Vegas Association of Realtors.

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Sales volume remains volatile, though buyers picked up 414 homes last year, up 9 percent from 2014, according to data from the GLVAR’s resale-heavy listing service.

For homebuilders, “it’s still a little bit iffy” to construct spec homes, but overall, demand for new houses “is picking up,” AVCO Builders owner Scott West said.

West said he has contracts to build five homes and that he aims to land five more this year. He noted it was common for builders in recent years to construct just one or two annually.

“I would like to be pleasantly surprised by more," he said. "But I’ll be happy with 10."

It appears unlikely that anyone except William Lyon Homes would build sprawling subdivisions anytime soon, but at least one developer hasn’t given up on his boom-era plans.

Larry Canarelli, founder of Las Vegas-based American West Homes, obtained approval in 2005 to build a 1,340-acre, 5,160-home project on the south edge of Pahrump, Nye County records show. His development agreement allowed for the construction of restaurants, grocery stores, casinos and RV parks, among other things.

Canarelli said he didn’t build any homes but put about $30 million of work into the property near Mountain Falls. He still planned to develop the now 4,400-home community, he said, and aims to open model homes here by spring 2018.

Pahrump offers larger properties at cheaper prices, he said, ideal for, say, young families or first-time homeowners.

He said his target market is Las Vegas commuters, noting that new-home prices there are approaching pre-recession levels.

Still, as in Las Vegas, neither the housing market nor the broader economy in Pahrump has fully healed from the recession.

The Pahrump area’s unemployment rate was 7.8 percent in December, well above the U.S. rate of 4.8 percent that month. It also outweighed Las Vegas’ rate of 6.2 percent, itself the highest among large metro areas, federal data show.

Nearly 3 percent of Pahrump homes received a foreclosure-related filing last year, far above the U.S. rate of 0.82 percent and Nevada’s 1.4 percent, itself the fourth-highest among all states, according to RealtyTrac.

The Wulfensteins, from Burson Ranch, are trying to sell their roughly 3,200-square-foot home, but are having difficulty. Nearby foreclosures have pushed prices down, and Burson’s developer, Beazer Homes, shows no concrete signs of restarting the community.

“It’s been difficult because there’s no plan to build anything in here,” said Bryan Wulfenstein, who works for his family’s company Wulfenstein Construction.

Atlanta-based Beazer did not respond to a request for comment.

Despite the ups and downs, at least one thing seems certain: Pahrump is unlikely to lose its status anytime soon as an affordable place for retirees and others to buy an acre, enjoy the town’s solitude and open space — and be locked and loaded.

Opatik, who moved to Pahrump in 2002, figures that most households have a gun, and “the majority of us” have several, often scattered around the house, in case they need to grab one at any moment.

One client, she said, has “an amazing rifle” with no kickback and a laser sighting system — “and he has one in every room of his house.”

She says the town’s heavy weaponry “sounds like the old West,” but given the shootings and home invasions in Las Vegas, “I don’t think it’s stupid at all.”

“I would venture a guess there are very few homes without weapons,” she says. “I would not want to rob a home in Pahrump.”

Staff librarian Rebecca Clifford-Cruz contributed research to this story.

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