"New American Home" Goes MIA
Each year of its 27-year history, the home building industry's must-attend conference has positioned "The New American Home" as a showcase of the emerging trends in design, construction, efficiency, home products and the shifting lifestyles of Americans. Thousands of professionals typically tour the home during the week-long conference, which is expected to draw 65,000 attendees.
But not this year. Instead of a live walk through, conference attendees will have to settle for a video presentation at the convention center.
The stunning turn of events reflects the tattered state of the building industry. After running out of funds, the home's builder, Domanico Custom Homes, defaulted and construction came to a halt as the company "restructured debt," its managing partner told HousingWatch. The company's owner, Ernie Domanico, was also forced into Chapter 7 bankruptcy with another real estate venture.On the bright side, the 35-year-old family-operated business expects to complete construction by May under new ownership, said Adam Knecht, managing partner of Domanico who spoke to HousingWatch in a phone interview.
The 6,800-square-foot, two-story house, designed by the architecture firm KTGY Group of Irvine, Calif., sits on a half-acre a short drive from the Las Vegas Strip. It features the latest in energy saving technology, such as tankless hot water heaters, hydronic air handlers, "intelligent" fire places, and a new-to-the-U.S. Cupolex aerated flooring system.
The lot and the structure, which is 75 percent complete, were sold at auction in December for $490,000 -- about a quarter of its estimated value, and about the cost the lot alone would have been in 2006.
Domanico has plenty of company: Las Vegas has one of the highest foreclosure rates in the country. Of the 37,124 resales in 2009, 70 percent were foreclosures. Two blocks from Domanico's building site, a 5,000-square-foot foreclosure had recently sold for $600,000. And, down the street, a half-finished foreclosure that a bank had been trying to sell for more than a year burned to the ground in June, reported the Washington Post. Domanico had already built six similarly sized houses on the quiet cul-de-sac.
The only ones buying seem to be speculators. "About 40 percent to 50 percent of existing home sales are to investors, meaning there is a lot of cash sales in the resale segment," Dennis Smith, president of Homebuilders Research Inc., which produces housing reports on the Nevada market, told HousingWatch.
Smith says that underwriters, who pressure appraisers to undervalue homes, are exacerbating the problem. "Low-ball appraisals are costing us -- the whole country -- deals," he said. When potential buyers or lenders get wind of the appraised value, they walk, leaving a slew of homes vacant or uncompleted until some investor comes along and gobbles them up for pennies on the dollar.
"People who are not in Las Vegas think it is a ghost town, but it's not," said Smith. "We closed 44,000 resale transactions in 2009. That's the second highest number ever." It's just values that are down, including on multi-million dollar homes like the uncompleted IBS showcase.
The new owner of The New American Home can expect to spend at least $1 million to finish the house, said Knecht, who is also the son-in-law of Domanico's founder, Ernie Domanico, Sr. Had the house been completed as designed, its value should have been about $3.5 million, Knecht estimated.
The home will be completed under the Domanico name -- it's the only project the builder has right now, Knecht says. Knecht, however, is keeping busy with a new business he started, Red Land Corp., which buys foreclosed properties fixes them up and sells them.