Weekend America

Gated Into Foreclosure

Krissy Clark

DECEMBER 27, 2008

Karen Lewis and her son Cooper

(Krissy Clark)

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This weekend, we're revisiting some of our favorite stories from the last year, to see what's happened to the people we met in them. We start with a story about the collapsing housing market, and the massive wave of foreclosures that has hit many parts of the country this year. Nowhere has been hit harder than Las Vegas. It's had the highest rate of foreclosures for the last 20 months, thanks to a perfect storm over the last few years of booming home construction, lots of housing speculation, and a huge influx of residents to the city. And things are especially dire in the newer parts of the Las Vegas - recently built subdivisions, like the gated community of San Niccolo. Weekend America's Krissy Clark first went behind the gates of this neighborhood last spring. She met some pretty interesting folks there, and she's been bringing us their stories.

---

The first and most obvious fact of life in the suburban Las Vegas gated community of San Niccolo is, of course, the gate. It's an important feature in both a literal sense and a symbolic one.

The gate is the only way into San Niccolo. And to open it, if you're not a homeowner, you have to dial up your host at a call box in front. The gate is also what gives the new Hacienda-style homes inside a sense of security and exclusivity. Just a few years ago, homes here were selling for $500,000 and up.

At least, that's how the gate used to work, on both symbolic and literal levels, until one sultry weekend last summer. "I came home one night, and the gate was broken," recalls resident Karen Lewis.

Lewis, a business consultant, moved into a house behind this gate two years ago with her husband and their son, on a street called Arcata Point. "It was my dream house, in a way," she says. It had high ceilings, a view of the mountains, a private golf course nearby, and well-lit sidewalks for jogs after dark.

But the night that front gate was broken was a kind of turning point for Lewis. Some kids had rammed through the gate to get to a raging party next door to her house. They were racing up and down her block in their cars. And she realized the gated community she'd moved into was changing fast.

"It just wasn't what I expected," Lewis says. "The gate being continuously broken. The party."

And the list goes on. One of Lewis's disgruntled neighbors chimes in: "The break-ins which just occurred, the busted windows, the roommates, the broken-down cars..."

To understand what's been happening in San Niccolo, you need to back up a few years. Back to when people were just moving in. Families like Lewis' were buying new homes for themselves. But investors were also buying the homes, sometimes two and three houses at a time.

"It was like, who needs to be a drug dealer when you can buy real estate in Las Vegas?" says Butch, a hairdresser who lives a few doors down from Lewis. "Not that I sell drugs."

Butch, who didn't want to give his last name, bought three houses in the neighborhood, each with an adjustable rate mortgage. His plan was to "flip" them for a quick profit. He lives in one of the houses now, and shares it with two roommates.

But now that the monthly rate on his loan has ballooned, Butch can't afford the mortgage payments anymore. He stopped making them in January. He says he guesses the bank will get around to seizing his house in another few months.

Butch says he won't miss San Niccolo when he leaves. Frankly, he's gotten a little sick of the gate. "One time I rammed it," he says. "I was drunk."

Twenty-four of the 214 homes in San Niccolo are currently in foreclosure. Many more are vacant. Karen Lewis and her 4-year-old son, Cooper, walk around the neighborhood trying to guess which ones they are.

"There's an empty!" shouts Cooper, pointing at a beige house with a pile of aging phone books on the stoop.

"That's probably a foreclosure," his mom agrees. "The lawn's dead."

A dead lawn is a tell-tale sign of a foreclosed house. Cooper is proud of his find, and starts singing a little song about it. "It's an empty house! I found one! I found one!" he sings.

Crumbling stucco is another sign of a foreclosed house. Lewis points to a gash on the side of one porch. "This has to be willful, because this house is only four years old," she says, explaining that some of her neighbors, forced out by the bank, have taken their frustrations out on their walls. "I wouldn't blame them," she says.

Foreclosures are not the only thing affecting San Niccolo. With the sagging market, investors who have avoided foreclosure still can't sell their vacant houses right now. Instead, they are renting the homes out. Houses designed for single families are being rented to college kids, or multiple families at a time.

"The house on the corner, we believe, is a half-way house," Lewis says. "There are about six cars - seems like a bit of an AA meeting." Lewis says she fully supports Alcoholics Anonymous. "I think it's a wonderful thing. But they don't say 'Hi.'"

Later, I go to the house that Lewis believes is a half-way house. I knock on the door, and a minute later a young girl peeks her head above a window sill to see who's there. I explain through the glass - loudly, so she can hear me - that I'm a reporter doing a story about the neighborhood.

Suddenly, an older woman rushes out to meet me. "Shh!" she whispers. "Everybody sleeping." The woman is Georgina Simmons, and the girl is her 12-year-old granddaughter, Topaz.

"Everybody sleeping," Simmons repeats, in a heavy Mexican accent. "Everybody work in the night time. They are taxi drivers."

"They're graveyard," Topaz explains.

They tell me their family started renting this house a year ago. They moved in, Georgina says, "because we have more rooms here, and we are more together. And we are going to buy the house, probably. We really like the neighborhood."

I ask her how many people live with her. "Nine," her granddaughter volunteers.

"No," Georgina coos, looking intently at the girl.

"Yes," Topaz insists.

"No," Georgina says, more emphatically. "We have seven."

Then she excuses herself, says they need to go finish cooking dinner. And they shut the door.

These days, San Niccolo is about as un-gated-community-like as a gated-community can be. But now that all these people from different backgrounds have found themselves here together, inside this gate, interesting things have begun to happen.

When I ask Lewis how she thinks the real estate crisis has affected her life, she pauses. She doesn't mention the fact that her house was recently reappraised for $115,000 less than she spent on it two years ago. What she mentions is this:

"There are some biases that I had that I didn't realize. You sort of stereotype people - whether they can afford to live in a certain neighborhood or not. Like the family next to me, they have a detailing business, so they actually have their customers come to their house. And they clean the cars, and they have music playing. And they'd be sitting out in their lawn chairs, drinking beer and talking to their friends, in the middle of a Saturday afternoon. I didn't expect to have that kind of traffic in my street.

"But they're awesome neighbors," she adds. "They're the ones that slow down whenever they see a kid in the street."

---

The next time I visit San Niccolo, in late August, news about the real estate market has only gotten worse, and some of it has just arrived in one resident's mail box, in the form of an official letter, written in Spanish, a language she doesn't speak. "I know enough Spanish to read 'URGENTE' and 'FORECLOSURE,'" explains a woman we'll call Veronica Smith, who is holding the contents of an envelope she received in the mail two days ago. Smith didn't want to use her real name, partly because the letter she is reading is not actually addressed to her, and of course it's against the law to read someone else's mail. Smith says she opened the envelope by accident. She was going through the stack of letters in her mailbox and opened one she quickly realized was meant for her landlord. But she'd already read enough to discover that the house her family lives in - the house she's been promptly paying rent on for the last two years - is in foreclosure. Her landlord hadn't told her.

"It was one of those bad dreams where you keep flipping over the envelope, and looking to see, 'Is there a mistake?'" Smith says. She is talking fast, almost out of breath. She looks at the letter again and moans, "I can't believe this is happening to me."

Smith has come over to her neighbor Karen Lewis's house for a little moral support while she reels at the implications of the letter.

Smith is a single mom. She recently got laid off from her job as a project manager for a company that provides retail software for department stores. Now, besides finding a new job, she'll have to find somewhere to live, and fast.

"Worst case, you can come over across the street and stay with me," Lewis offers. Still, Smith is worried that she will have to move out of the neighborhood, and then her kids might have transfer to new schools. She has just started housing two Obama campaign workers in a spare bedroom for the election. What will she tell them?

But shocked as Smith and her neighbor Lewis are by this letter, it only confirms what they already know about the subdivision they live in. A reality that is summarized neatly in the pages Smith has just printed out from a website that tracks foreclosures in Las Vegas. "Look at all of the ones on Arcata Point," Smith says, pointing to the list of foreclosures on her cul-de-sac. She counts them out. Eleven out of the 33 houses are foreclosure or pre-foreclosure.

"We've seen how many families move out now?" Smith wonders, turning to her neighbor.

"Quite a few," Lewis says.

"You see the tell-tale signs," Smith goes on. "Like on garbage day, when you start seeing furniture piled up real high, that's usually a good indication. You can tell people are just pissed, throwing things out. One of the owners on the corner, they literally threw garbage on the ground, and it stayed there for two weeks solid, and then their sprinklers were coming on and it was getting wet. It was so bad."

I ask Smith and Lewis if they ever say goodbye to the neighbors before they leave, or vice versa. "No," Lewis says. "They're just gone."

San Niccolo has been feeling the effects of the real estate crisis for more than a year now. A lot of houses are vacant, post-foreclosure. Others are being rented out to college kids, or multiple families, by investors who'd hoped to flip the properties for a quick profit but couldn't find buyers.

Houses that went for $600,000 a few years ago are now on the market for half that. And the neighbors say the wrought-iron front gate, supposed to symbolize prestige and security, is regularly rammed by tow trucks trying to get in to repossess residents' cars. Vandalism has become a problem in the neighborhood: break-ins, slashed tires, broken windshields.

A few months back, this all worried Smith and Lewis. Now?

"It becomes comical," Smith says. "This is completely laughable. We used to get upset about this. We were a bit appalled and taken aback. We were such good neighbors. And now it's like, 'Oh, whatever.'"

I go on another walk with Lewis, and her four-year-old son Cooper. I go with them to see what's happened to San Niccolo since I was here last spring.

Some things have gotten better, some have gotten worse. The family of taxi-drivers that Lewis thought was a half-way house didn't end up buying the place they rented. One day they just moved out, and now the place is empty. Butch, the guy who compared Las Vegas real estate to drug-dealing, is gone too. The bank started foreclosure proceedings on his house in June, and he moved out in early August. His lawn is dead, and there's garbage strewn all over it. But someone has already bought the house, and is sending a landscaper to replace the lawn.

Still, there's a new batch of houses with signs in front that say "bank owned," and walking around the neighborhood, Cooper is starting to learn words that are not on your typical pre-K vocabulary list. He can more or less define the word "foreclosure."

"Not living in a house," he says. His mom is surprised. "I didn't realize you knew that," she says, looking at him. "I guess when the mommies talk, they do listen."

We pass a house a little further down the street. Lewis is surprised to see that it looks vacant. She sees a guy getting out of a pool maintenance truck in the driveway, and asks him.

"Is this house� do you know what happened to the people here?" she asks.

"They moved," he says. "It's in foreclosure right now."

"It is?" Lewis says. "Oh, jeez."

That's another thing about San Niccolo these days. There is so much turnover that the people who know the place best aren't the residents, but those who serve them. The pool guys, the landscapers, the door-to-door car detailers.

---

When I first flew into Las Vegas, as I was driving out from the rental car place, I saw hand-written signs advertising a phone number to call if you wanted to buy foreclosed houses.

"Hello, and thank you for calling the Foreclosure Hotline!" is how the recording begins when you call the number. The enthusiastic thanks is coming from Alessandro Chiocchetti, a real estate agent and the man behind the Las Vegas Foreclosure Hotline.

"Did you know that nowadays you can buy a house for about 40 percent less than what it was going for just one year ago?" the recording continues. Chiocchetti has put up signs for his service all over Las Vegas. "That's called Italian creativity," he says.

In the soft housing market, it's been hard for realtors like Chiocchetti to make a living. But he's adapted. He's become a specialist in helping clients jump through the many, many hoops involved in buying a bank-owned house. He says half his customers come from outside the U.S. "I have many Canadians. The Canadian dollar is very strong, and honestly they find our prices quite ridiculous."

Chiocchetti drives me around San Niccolo, to give me a buyer's eye view of the neighborhood. "It can be dangerous when you go and show a vacant home," he says, and explains that foreclosed homes aren't for everyone. It takes a special buyer who can stomach the poor condition the places are often in. Many times, the homes have clearly been broken into and stripped. "They try to steal appliances, granite counter tops, whatever is left," Chiocchetti says. "Homeless people, they spend the night over there."

Chiocchetti takes me to the house of Mike Heger. When we ring the doorbell, a little boy - Heger's grandson - opens the door. He looks at us and yells, "They're here to take away our house!" Heger comes to the door and apologizes. He explains that things are a little chaotic. They're in the middle of packing up their house. The Hegers are moving out this weekend.

Boxes are stacked in their foyer. And in the front yard there's a pile of books, pots, old magazines, a pair of slippers. "Just stuff," Heger says, looking down at it with weary eyes. "All the various things we've accumulated through the years."

Heger's house is about to be foreclosed. He says he had to stop making payments about a year ago, when his own real estate business went under. To avoid completely ruining his credit history, he has worked out a deal with the bank to let him short sell the place. That means before the bank takes ownership of the house, he is trying to sell it at a loss. Heger says he got three genuine offers this week, for almost $300,000 less than he paid for the house three years ago. But these offers are still ones that the bank will consider.

He is hoping one will go through. But just in case, he and his family are moving into a rental unit across town this weekend, while their credit is still good enough to get a landlord to lease to them.

"It's a smaller house," he says. "But you know, hey, it's all about having family together. You know, just keep family together."

I ask him how the rest of his family is taking the move. "They're fine," he says, a little unconvincingly. "We tell them hey, you can either look at the bad things or look at the good things."

I ask him what are the good things for him now.

"Tomorrow's another day," he says. "Tomorrow's another day, and I'm very thankful for the time I had in this house." He pauses. "Just don't get cynical over it, you know?"

Mike is moving on. He would say goodbye to his neighbors, but most of them are already gone. Others, like Veronica, the woman who's landlord is being foreclosed on, will be out of the neighborhood soon enough.

The thing that's striking about Veronica, and Mike, and a lot of the people I talked to here, is that as they describe their situations, they are not altogether out of hope. They can even find moments for laughter. Or at least a half a smile, along with a shake of the head.

---

I checked in again with some of the folks I've met in San Niccolo, over the holidays, to see how they're faring now. Mike Heger and his family just celebrated a quiet Christmas in the house they're renting, on the other side of town. He couldn't afford a lot of presents for his kids this year, but he says they understand.

"That's how you've got to look at Christmas anyway," he says. "It's not really about getting gifts all the time; it's about giving. As a matter of fact my daughter, she's given two of her bicycles and two of her big wheels to two of her friends that don't have them. Now that we've down sized, a lot of her friends don't have the nice things that she had."

Mike is still trying to look at the good things as opposed to the bad ones in his situation. And after months of negotiating with his mortgage lenders, in early December, they wrote off his debt and approved a short sale of his house.

"So I don't have a foreclosure on my credit, and I'm able to buy a new house a lot sooner," he says, already looking toward the future, and the plummeting home prices in Las Vegas. "You can either panic with fear, and lose your house, and lose your mind. Or you can do a little research, and work something out, and you can actually thrive." He pauses. "I know might sound like an optimistic fool, but there's always a way."

Last I'd left off with Veronica Smith, she was facing a double whammy of being laid off from her job, and finding out the house she had been renting was in foreclosure, all in the same month.

"Everything had converged at one time," she says, when I called her recently to check in. She tells me she just got a new job, for slightly less pay, as an IT manager for one of the casinos. And, she's still in San Niccolo, renting a new house that her landlord helped her find.

"We moved in to a bigger, better home, so we're really happy. But I'm in that hoarding mode, like many other people, where I just want to hold on to my money, because I don't know what's going to happen," she says.

The rough economy has forced Veronica's neighbor, Karen Lewis, to move to Houston with her son for the last few months on a temporary job assignment. But she doesn't miss San Niccolo. In fact, she tells me with glee in her voice, that she's hoping to put her house on the market in a few weeks.

"I mean I love my house, and I love the community. I love the potential. But I just don't think I can wait for it to happen," she says. And the gate around her community, that was supposed to give a sense of security and prestige - now she says it just makes her feel trapped.

"You think 'I've arrived. I've got this great house in the gated community.'" Lewis says. "But it isn't what it seems, or it isn't what I really want in my life."

Gates and fancy zip codes don't matter so much to Lewis any more, or if her neighbors are real estate moguls or taxi drivers. She just wants them to stay in one place long enough that she and her son can get to know them.

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