Las Vegas Sitting on Huge Housing Inventory; 70% of NV Mortgages Underwater; Massive Wave of Distressed Sales Coming
May 16, 2010 · Posted in General Economics
The New York Times notes Building Is Booming in a City of Empty Houses:
In a plastic tent under a glorious desert sky, Richard Lee preached the gospel of the second chance.
The chance to make money on the next housing boom “is like it’s never been,” Mr. Lee, a real estate promoter, assured a crowd of agents, investors and bankers. “We’re going to come back like you’ve never seen us before.”
Home prices in Las Vegas are down by 60 percent from 2006 in one of the steepest descents in modern times. There are 9,517 spanking new houses sitting empty. An additional 5,600 homes were repossessed by lenders in the first three months of this year and could soon be for sale.
Yet builders here are putting up 1,100 homes, and they are frantically buying lots for even more.
Las Vegas is trying to recover by building what it does not need. It is an unlikely pattern being repeated in many of the areas where the housing crash was most severe.
For now, builders are still able to find demand due to long drawn out short sale processes which are frustrating buyers, according to Calculated Risk.
CR also has a chart that shows the percentage of negative equity homes by state:
While thousands of homes are empty and ghost towns are developing, 70% of homeowners are under water, builders continue to pile on, and agents again try to lure in people for the “next housing boom”. This next housing boom is not going to happen. Not in this decade, and probably not even in our lifetime.
As a result of this insanity, there will be great opportunities to strike ridiculous deals in Sin City at some point. Now is not that time.
This has all to do with what I explained recently:
True Consumption as Percentage of GDP
The true consumption ratio will need to come down significantly before a true alignment of resources in the production structure toward a recovery will be possible.
A close up to the years 2000 through now:
Government stimulus and bailout programs since the beginning of 2008 have fundamentally accomplished one thing: The ratio of the production of consumer goods versus factors of production has been bumped up for a little while.
Road to Recovery?
Contrary what the government says, they have not lead us onto a “path to recovery”. In fact, they have done the exact opposite! They have used all means at their disposal and all the force and dedication in the world to pull people in precisely the opposite direction.
This is the outcome of all the corporate bailouts, the cash for clunkers program, the 10,000 tax credit for homebuyers and what have you. Instead of abstaining from producing overproduced consumer goods and re-aligning toward capital goods, businesses have thus continued to produce excess trash and continued to engage in overly risky activities.
The payback for supporting this nonsense will be a double dip recession, Uncle Sam sends his regards.