Vegas Bets On American Consumption

There’s one group of people who scoff at the idea of the “new normal” and Joel Stein does a marvelous job of profiling them in his article in Time about Las Vegas.

The article is a bit long but fantastic. Stein paints a great picture of the devestation that has been wreaked on the Vegas real estate markets while he recounts the manner in which many are coping.

Just in case you think that Americans have taken to religion when it comes to houses, consider these two vignettes from the article:

Boemio specializes in short selling, in a particularly Vegas way. Basically, she finds clients who owe more on their house than the house is worth (and that’s about 60% of homeowners in Las Vegas) and sells them a new house similar to the one they’ve been living in at half the price they paid for their old house. Then she tells them to stop paying the mortgage on their old place until the bank becomes so fed up that it’s willing to let the owner sell the house at a huge loss rather than dragging everyone through foreclosure. Since that takes about nine months, many of the owners even rent out their old house in the interim, pocketing a profit.

It is lawless right now in the Wild West. There’s even a real estate agent (and the figures and details are slightly changed here to protect him) whose out-of-town investor demanded that the agent find a way to cover some of the losses he was taking on the $60,000 down payment he’d sunk into a house. So the agent created a separate contract, never shown to the bank, that said the new buyer had to purchase a $60,000 Persian carpet from the seller — a check his mortgage company, which was sucking up hundreds of thousands of dollars in losses on the short sale, would never see. When the buyer — who was happy just to get a deal on the house — asked if the Persian carpet was really worth $60,000, the agent looked at him as if he were insane. “I bought it at Wal-Mart,” the agent told him. Now all the friends of the investor who got his $60,000 back are asking the agent to pull the same scam for them. And he’s doing it.

Vegas is all in on a return to the good old days. They scoff at any notion that American’s are going to become thrifty savings oriented people. To them this is all just a bump in the road and, as you can see, they’re quite ingenious as to how they’re dealing with these “temporary” dislocations.

The article really is a must read.

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