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Housing: ‘Problem that won’t go away’
Fri, Jun 26, 2009 (3 a.m.)
Sun Topics
Sun Archives
- Home prices drop to 2000 levels (6-26-2009)
- Obama tells Sun: Nevada's housing pain is on my mind (6-25-2009)
- Swelling default, foreclosures figures ominous (6-22-2009)
- Courts prep for wave of foreclosure mediation requests (6-17-2009)
- County, cities hammer out plans for foreclosure funds (6-16-2009)
- Affordable housing topic still relevant despite price drops (6-12-2009)
- Smaller home price drop may drop signal bottom (6-12-2009)
Sun Coverage
Job losses and the recession will take more of a toll on the area’s housing market, which won’t recover until people start moving here again, a UNLV economist said.
Keith Schwer, director of UNLV’s Center for Business and Economic Research, called housing “the problem that won’t go away” because there is not enough demand for the excess on the market. Schwer spoke June 23 at a midyear economic outlook at the Mirage. He repeated forecasts about Southern Nevada’s economy possibly bottoming late this year or early next and modest growth in 2010.
Schwer said it’s hard to get a fix on the local economy because some indicators have been mixed. It’s clear the economy is weak, and there is little relief ahead for the job market, he said.
“At best we are seeing a slowdown in the rate of descent, which, should these observations hold, gives us the beginning of the end of the most difficult period for the area since the Great Depression,” he said.
Schwer said Southern Nevada has been harder hit than the rest of the nation and the local economy will lag behind any national recovery.
That won’t happen until consumers feel more confident and can make more discretionary purchases such as travel, he said. Any recovery in housing will follow, said Schwer, who predicts that to happen in 2011.
The market has more than 15,000 housing units for sale, which are driving down prices, Schwer said. Demand is strong from investors and first-time homebuyers, but prices are edging closer to a median of $100,000. Schwer maintains price reductions have been inadequate to soak up the excess.
“We overbuilt, overborrowed and overlent,” Schwer said. “It is important to correct that.”
By his calculations, Schwer said the population will need to increase by about 40,000 people before the housing market returns to any type of balance. Since 2008 the region’s population, however, has dropped because more than 4,000 adults have been leaving the valley every month, he said.
Expected gains in population from the opening of CityCenter are gone because the rising number of jobless can fill the increasing demand for workers, Schwer said. The lack of new projects of sufficient size to replace those coming to an end will increase unemployment, reduce incomes, reduce total spending and force others to leave the region, Schwer said.
Some other reasons the Las Vegas housing market should remain weak through 2010 are a large number of foreclosures, the high percentage of underwater mortgages and the bleak prospect for the construction industry over the next 18 months, Schwer said.
“Unemployment acts as a drag on recovery and creates more foreclosures,” Schwer said. “Amid the current financial havoc and the housing overhang, you are hard-pressed to come to a conclusion about the movement of housing prices to stability.”
Schwer said Las Vegas and other housing bubble cities will recover more slowly than the rest of the nation. Las Vegas’ prices have fallen more than other bubble cities, and that may enable the region to get through better than other communities where prices adjust more slowly, Schwer said.
The recession in Nevada will last at least through this year.
Tourism can’t be counted on for a recovery because recent resort openings have fallen short of expectations, Schwer said. CityCenter’s opening, which many thought would add to the visitor count, is likely to be less of a draw, he said.
“This implies that there will be greater competition among properties for visitors, resulting in a better value for the consumer and less revenue for properties unable to fill beds,” Schwer said.
This is likely to spark discussion on whether Las Vegas has the right mix of properties and whether the recent expansion was too much on the high end, Schwer said.
“It is clear that consumer spending habits are likely to be more muted,” Schwer said. “People will be more careful in their spending behavior. As a result, we are likely to see a switch of branding Las Vegas from the current theme of ‘what happens here, stays here,’ to a less edgy theme, including the possibility of multiple themes to reflect the breadth of the destination with more than 150,000 rooms and myriad entertainment options.”
The Las Vegas economy won’t be able to turn to the construction industry for help, he said. With projects stopped and others completed or near completion and few new projects coming on line, the industry faces a gloomy future.
Excess housing and a large increase in hotel capacity leave too big a hole for construction to make up for in a declining economy, Schwer said.
The prospect for commercial real estate is bleak, Schwer said. Because real estate and construction comprise a larger share of the region’s economy, that means more difficulty for a recovery, he said. The need for more commercial space depends on jobs, Schwer said. Space requirements follow job growth by a year.
By his calculations, there won’t be a demand for more commercial property until 2010 or 2011, Schwer said. The existing supply will delay further construction, he said.
That means better leasing opportunities through lower rental rates, but also rising vacancies, Schwer said.
Discussion: 23 comments so far…
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I'm in Denver and one of the guys we hired last week just came from Las Vegas. He's 26, he moved here because he said the job market is better than in Las Vegas, kinda hard to believe IMO.
He stopped paying his mortgage on his house in Las Vegas last month. He said he tried to get the lender to work with him but they wouldn't saying he needed to be 90 days past due.. He'll be 90 days past due in August/September but he doesn't really care. He said his house is sitting empty and that four other house on his block were going through forclosure when he left.
I'm wondering how many other 20 somethings are in the same situation?
I imagine when things eventually do start to recover lots of 20 somethings will be heading back to Vegas but I hate to imagine what this will do to peoples credit.
Denver is growing - Las Vegas is not- Denver will be a better buy for housing. Interestingly enough there is a bank on the front range United Western (UWBK) that is selling for less than half its value.
Long term las vegas will recover, but Denver may be near bottom already.
Lets see, we have over 15,000 units on the market and the county and cities are still allowing new units to be added by the same group who overbuilt Clark County in the first place.
Isn't it Del Webb who is advertising "why buy a foreclosed home - when you can buy a brand new one for the same price" ... How long is the public going to support political leaders who can't say no to greedy home builders.
I wonder what the economist Keith Schwer, director of UNLV's Center for Business and Economic Research, would say to a 3 year 'MORATORIUM' ?
How long would the rest of us have to wait for recovery if the builders would stop building for three years so all the homeowners could get healthy first ... and then those that caused these problems could get healthy...
MORATORIUM .... MORATORIUM ... MORATORIUM... it only makes sense to Clark County..
Las Vegas has reinvented itself before. A crucial component missing is a developed community.
Maybe now is the time for LV to take a look at what will bring families(which usually provide stability)to the area and not always depend on the opportunist coming for the bucks. LV has always been about the tourist industry but the lack of infrastructure for the family (e.g. performing arts, affordable entertainment, lack of excellent education, community activities, health care, etc.)often discourage the kind of citizens that will move here and stay.
By reading the comments lately from the articles it is enough to scare anyone away from the state-
Housing is cheap, opportunity for business is great(state hardly requires anything from a business) just shore up the infrastructure and gear it to another market. It won't hurt the gambling market-it would add to the area.
Look who is leaving Nevada ..... when a shop doesn't buy any new products and starts selling off all the product on the shelves for a reduced amount ... letting the sales staff go, while management staff the sales department ... you can be sure they are closing their doors, no matter what the owners tells the public.
I don't see any builders buying new land or keeping their staff ...
It is rather funny watching them say how much they are looking forward to the future growth of Clark County as they pack their bags to leave...
Why are the politicians allowing them to dump more homes into the market while more and more families are loosing value in their homes?
CNEV must be stupid or just so full of himself/herself they don't get it.
WE DONT NEED FAMILIES! They break the system with their kids. $8000 each for education. They take more than they give.
We need people coming here to work and make money. Take the welfare families and send back to Arizona or Cali. We dont want to support them and they wont pay for their needs.
We need single workers and retired couples/singles. Families do NOT give stability they bring money demands and whine about the schools.
happy to be a retired renter who is exploring markets in other cities.
we don't have enough REAL jobs for families to move here.
how are you going to get jeff and cindy from kansas city or denver or memphis to move to vegas?
"move to beautiful las vegas where you can sling drinks, be a stripper, or be a cashier! and as an added bonus your car insurance rates will nearly double and our schools are crap!"
$9 and $10 per hour jobs don't create enough income for a family to buy a home, raise a few kids, send them to college, etc.
so trying to get families here without the creation of REAL jobs is a bad idea.
then what happens when families move here? they start saying "take down that sexy billboard...i don't want my kids seeing that", even though that's the reason the town exists.
if/when they ever finish construction on city center there will be a mass exodus out of this town because those construction workers will need to leave vegas to find work.
that's going to create a huge surplus of rental units, forcing rents down, and then landlords are going to go into foreclosure because they won't be able to rent their places out.
look at the news just in the last week...tahiti village, lake las vegas golf course, greek isles...all shutting down...and there will be 2 or 3 more NEXT week.
we WILL have 25% unemployment in this town before it's all said and done OR such a population decrease we'll be more like laughlin than vegas. you can say "that's crazy", but we never thought we'd have 8%, or 10% either.
Las Vegas is the next Detroit.
MGM and Harrahs are the slumlords.
Everything stevem said is correct. Pretty soon, we'll be a high rise version of Tijuana. No people around for those little guys on the sidewalks to give out the Gary Peck ACLU supported crap for strip clubs and escort services. No people, no problem...
Las Vegas lost 20,000 jobs this year, per Greenspun's In Business publication this week. That's 3% of one month's of the national job loss statistics.
Las Vegas is selling 4,000 homes a month, at the median priced home of $140,000; that is $16,800,000 in commission paid out a month. What's the problem? If you aren't making money in housing here you don't want to work.
If you want to move to Denver, San Diego, Chicago, New York, Miami, etc. Go! We don't need you here.
The only reason this town exists is Gambling & Entertainment. Anything else, is unnecessary. To expect anything else is unrealistic.
Further, we don't need a building moratorium becuase there is self imposed one underway. Home builders will build roughly 2,000 homes this year, or 8% of what was constructed on an annualized basis during the boom.
The market is recovering becuase goverment has left it alone. Let's keep it that way. Want more info on The Las Vegas Zone, goto:
www.MeridiasRealtyGroup.com
I agree with many of the posts above. Las Vegas will pickup once it goes back to a city of entertainment and moves away from trying to be McMansion family suburbs.
The more I think about it too, if many families leave Las Vegas the job market will be much better for those who end up toughing it out and staying.
I don't think a contraction is a bad thing for Las Vegas either. It will bring the city back to it roots and what made it great. Rebuild from there.
Anyone who would claim that families are bad for a city has a misinformed view of every civilization since the beginning of time. Name one civilization in the last 7,000 years that has been able to survived based on immigration rather than birth rate? Just one. I'm waiting.......
A birth rate of 1.7x or more is vital to the survival of every civilization.
Anyone who would fail to realize that the small investment made to educate a child pays off in spades in the long run need not be posting comments on this site or any other. Actually, though, I will admit that I'm impressed that someone with such a micro view of the real world can even read and write so I do applaud you for such.
After reading these posts I never realized how many uneducated, biased and down right idiots live here in Las Vegas.
Jazzman:
You dont get it. We can afford to subsidize these families with kids here. We have no income tax, and they want a first rate education for the kids. Nevermind the fact that most of them are pouring Ice tea refills at a plastic castle. Now suddenly they believe in education. lol.
We need workers and retirees not people with kids complaining as, the goverment is spending 10 times as much on them as they contribute.
Nevadans need to wake up and realize you can attach an endless budget on tourists. You want low taxes, you will have to attract people who contribute not people who are just receiptients.
'we WILL have 25% unemployment in this town before it's all said and done OR such a population decrease we'll be more like laughlin than vegas. you can say "that's crazy", but we never thought we'd have 8%, or 10% either."
That's CRAZY and STUPID.
Brilliant felix28, why don't you demonstrate your knowledge with the rest of the uninformed rather than resorting to ad hominem.
You probably think Las Vegas can sustainably support two million people?
Well lucky for you, you get to be part of the experiment!
***News Flash Jazzman***
Las Vegas isn't a civilization, it's a city in a desert with too many people.
here we go again, logic_should_rule picking out one of my posts to contradict, calling me stupid, yet not providing any opinion or fact to show why i am wrong.
we will have 25% unemployment. it's monday, just watch, by friday we'll have at least 3 businesses announcing they are closing this week.
unless the economy picks up nationwide how can you make any prediction on spending habits of the american consumer; if you had a choice of a flat screen tv or a trip to vegas the tv wins everytime.
Prime Delinquencies Double
http://www.bloomberg.com/apps/news?pid=2...
Comment removed by staff.