During the 2009 housing market "rebound" (a rebound that may or may not prove to be sustainable), there has been one "non-participant" out in the Nevada desert - Las Vegas.
As noted here the other day, while the 19 other cities in the Case-Shiller Home Price Index have posted one or more month-to-month gains, with prices in some areas now more than ten percent higher than the lows seen in late-2008 or early-2009, home prices in Sin City just keep going down.
According to this story in the Las Vegas Sun, it doesn't look like that's about to change.
The sagging economy will weigh on the Las Vegas real estate market and boost foreclosures on residential and commercial properties, according to a panel of local business executives.After flying high a few years back, Las Vegas and Phoenix have been in something of a competitive death spiral (again, see the latest multi-colored chart for details), though the latter seems to be mounting a rebound with three consecutive monthly price gains since May.
The group, composed of a lender, a bankruptcy attorney and a consultant, said the Las Vegas recovery will lag not only the nation but competing markets such as Phoenix.
Michael Shustek, CEO of Vestin Group, a real estate lender and asset manager, said many residential foreclosures have been limited to low-end homes, but a wave of foreclosures at the higher end of the market is coming.
Neither should be proud.
Based on a starting index value of 100 in January of 2000, the Las Vegas index stood at 106 as of August while Phoenix could only muster a 108.
Yes, that would be six percent and eight percent gains, respectively, after almost ten years.
Unfortunately for Las Vegas, the trend is still down.
Home prices in Las Vegas are now down 55 percent from the peak reached in August of 2006.
The key to predicting the real estate market is what’s happening in the economy and in gaming and construction — two industries that were hit hard, said Gregory Garman, an attorney with the law firm Gordon Silver. Las Vegas isn’t Detroit, but it’s in a tough spot when it comes to absorbing real estate, he said.
“We have high unemployment and two industries that are not anywhere close to the verge of recovery and a stagnant if not shrinking population base,” Garman said. “When you look at those things weighing against us, it is going to (take awhile) until some of this (housing) inventory gets absorbed.”
“Look at how many condo towers you are seeing empty,” Shustek said. “I did the lending on Towers 1 and 2 at Panorama. We sold out. Tower 3 has 15 closed units in that whole tower. It is frightening out there.”
Wells said that homebuilders can’t compete with existing homes selling for $70 a square foot and that the lack of job growth will hinder that recovery going forward.
The experts predicted that even the addition of 12,000 jobs at CityCenter, slated to open in December, by itself won’t fuel enough additional economic growth or create enough jobs to offset the tens of thousands of jobs Southern Nevada has recently lost.
“We have 180,000 unemployed in the state,” said William Wells, managing director of RSM McGladrey, a business consulting and accounting firm. “That is the part I am concerned about. Where is (job growth) going to be to put more rooftops out there and fill some of these homes.”
Wells predicts the housing market will suffer through what he calls the “W” effect with prices going up, down and back up again. The concern is what happens with the Federal Reserve and need to raise interest rates to keep inflation under control. That will keep a lot of buyers from the market, he said.
“I think the other thing we have to put in perspective is when is the residential market back. How do you define ‘back’?” Wells said. “Back to what, because it is not going to achieve the unreachable numbers we had in 2003 to 2006. I think people are coming to the realization that there is a new baseline. That was something that was unsustainable, and going forward you will have to manage your life a little differently.”
It wouldn't be surprising if 2006 prices are not seen for another twenty years, maybe longer.
If you think that's far fetched, consider that, from current levels, average annual gains of four percent per year would see a return to those lofty levels in 22 years, whereas, three percent gains would take 29 years...
This post has been republished from Tim Iacono's blog, The Mess That Greenspan Made.
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