March 16, 2011 (Chris Moore)
Nevada once boasted a booming economy and explosive growth in its housing market fueled by tourism and the gaming industry. Not so long ago, Nevada boasted a statewide unemployment rate of just 3.8 percent, now the unemployment rate stands at 14.2 percent. Today nearly one in seven homes in Nevada stands vacant, 167,564 total at the end of last year. Nevada stands out as a glaring example of how fast a boom can go bust.
“We were the hottest market in the nation in terms of the shape of the bubble, how fast it went up,” says Nasser Daneshvary, director of the Lied Institute for Real Estate Studies at the University of Nevada, Las Vegas. “And, of course, when something goes up, it comes down hard, too.”
By the year 2000, Las Vegas was in the middle of a building boom. The expansion of glass towers and sprawling casinos saw workers from all over the country looking for their pot of gold. Unemployment was 3.8 percent and over the next decade, the state would grow by 35 percent, the fastest in the nation.
The state’s residential properties grew fast to satisfy a growing, employed population; by more than 40 percent to 1.17 million homes. The growth in Clark County alone, where Las Vegas is located, saw an average of 10 new schools a year.
From 2000 to 2007, the demand for housing raised the median home price from $150,000 to $300,000 according to a University of Nevada, Las Vegas study.
“It was a new town,” said Dennis Smith, president of Home Builders Research, a Las Vegas real estate firm. “There was money everywhere. Everyone wanted to invest in Vegas.”
But underneath the tremendous growth, the seeds for a looming crisis were being planted as the state’s growth and relaxed lending practices allowed workers with limited incomes to purchase homes.
When unemployment passed 7 percent in 2008, the crash began. The seeds that were planted sprouted, and many of those very same risky borrowers later faced foreclosure. According to a homeowner’s survey published by the Nevada Association of Realtors in January, most Nevadans who lost their homes earned between $24,000 and $72,000. Roughly 60 percent said they lost their jobs first, then their homes
In the aftermath of the bust, the state has consistently had one of the highest foreclosure rates in the country. Delinquent mortgages, meanwhile, are on the rise, with Las Vegas, Reno and Carson City all in the top eight cities per capita in a national real estate study published last month.
The median home price of resale homes dropped to $115,000 in January and last year, Nevada led the nation in distressed home sales (short sales, foreclosures) with a staggering 57 percent share – Arizona and California weren’t far behind, at 49 percent and 44 percent, respectively.
Ironically, nearly 74,000 new homes were built in 2010, according to Census data. Realty companies said there are still buyers who prefer newly-built houses.
You would have almost thought it was a bad “Made in Hollywood” movie. Where’s Charlton Heston when you need him?
Tags: Nevada, booming economy, explosive growth, boom to bust, building boom, risky borrowers, foreclosure rate, delinquent mortgages, distressed home sales
