Not only was Nevada’s residential real estate market hammered during the foreclosure crisis, but the state’s multifamily market did not fare any better.
Nearly one in every four Nevada apartment complexes is in some state of distress, according to Fitch Ratings. That’s double the national average.
“Improvements in the single family market will negatively impact apartments,” said Fitch’s Britton Costa. “Over time, multifamily REIT demand and operating fundamentals will slow down as rents become less affordable and interest in home ownership rises.”
Consider the Mountain Vista Apartments in Las Vegas, an apartment complex off Boulder Highway near the 515 Beltway in southeast Las Vegas. The apartment complex has defaulted on two Fannie Mae-backed loans — a $42 million loan, that is $880,000 in arrears, and a $28 million loan that is $550,000 in arrears, according to RealtyTrac. Both loans were originated in December 2010.
The financial difficulties of commercial properties like Mountain Vista Apartments are being felt throughout the Valley. The economic slowdown and competition from the residential housing market are taking a toll on apartment owners. Occupancies and rents are down in Las Vegas, especially in older complexes. A weak Las Vegas job market, and price depreciation in the housing market, has diluted demand for apartments. Las Vegas’ jobless rate was 10.2 in January. That’s well above the national jobless rate of 7.7 percent. Apartment complexes are reporting increasing delinquencies and evictions, a trend that isn’t expected to improve this year.
High unemployment and stagnant growth in Las Vegas have reduced the demand for apartments and, therefore, cash flows are down.
Despite the high number of apartment delinquencies, lenders are reluctant to foreclose on Southern Nevada apartment owners. Rents are no longer rising in the greater Las Vegas metro area. As a result, these investments may not bring in as much revenue.