Las Vegas property prices have fallen about 60% below their peak in 2006, leaving 70% of homeowners owing more on their mortgage than their homes are worth. The ten cities with the highest foreclosure rates in the country are located in Nevada, Arizona and California, and Las Vegas is a prime example.
The brunt of the housing crisis in Las Vegas is spreading beyond just homeowners. Clark County expects property taxes will decrease by one fifth this year and force the government to reduce staff numbers further. High foreclosure rates and low property values have halted building projects across the region from the casino strip to the outer suburbs, putting construction companies out of business ― just as has occurred in California.
Unlike California, Las Vegas is also losing people ― for the first time in decades, Nevada’s population fell in 2008 as people who have lost their homes or jobs moved. Troubled homeowners, high unemployment rates and a shrinking labor force make for a debilitated community forced to deal with personal sorrows on top of burdensome financial conditions. Complicating resolution, housing has become an emotional issue in partisan politics.
first tuesday take: Cities in California can take a hint from Las Vegas; some Central Valley California cities could teach Vegas a thing or two. California, one of the sand states hit hard by the housing crisis, is very high in delinquent mortgages due to insolvent ownership and foreclosure rates. 2011 does not look promising despite California’s initial rise in jobs and a business recovery underway. [For more information on the foreclosure rates in California for 2011, see the February 2011 first tuesday article, 2010’s defaults and foreclosures.]
California has already seen properties decrease in value, empty neighborhood landscapes deteriorate and families and children experience homelessness, so Vegas isn’t alone in their woes. However unlike Nevada, Californians like the geography of California and others want to live here as we have consistently gained significant increases in population throughout the Great Recession. This is not your 1990s recession with unskilled Boomers fleeing the state. [For more information on rising student homelessness, see the November 2010 first tuesday article, Children devastated by foreclosure crisis.]
Worse, government-sponsored housing assistance programs have failed to aid underwater homeowners. The sole missing element to convert the perverse negative equity phenomena is bankruptcy court authority to cram down mortgage amounts to a home’s present value. Thus California brokers and agents are left with not much to do but wait and hold out for the economy to fuel more jobs and in turn stimulate the housing market once again. [For more information on the housing crisis particular to California, see the February 2011 first tuesday article, The negative equity plague: California’s home insolvency crisis.]
Re: “On a losing streak: The effects of America’s worst property crash go very wide” from The Economist