Las Vegas Sun NewsMore than 20 years until home prices reach pre-bust levels, Moody’s says
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Wednesday
22 June 2011
8:58 a.m.
Housing Market
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KSNV coverage of Moody's Analytics report on Las Vegas housing prices, June 22, 2011.
Las Vegas homeowners will have to wait until 2020 to get back half the value of their home lost during the housing collapse and more than 20 years before getting it all back, according to a Pennsylvania research firm.
The struggle of the housing market, in part, is why Moody’s Analytics forecasts the economic recovery will stay slow in Southern Nevada. Nevada will remain in a recession through summer, and it won’t be until 2015 that jobs pared during the downturn will be restored.
“Las Vegas is getting closer to a recovery, but it’s still in recession,” Moody’s Analytics economist Dan White said. “It means things are still getting worse.”
Moody’s removed Mississippi from its list of states in recession in May, making Nevada the last. Among cities, Reno was removed from the recession list this month, and White said Las Vegas probably won’t be taken off until September despite improvements in visitor volume and gaming revenue.
Moody’s bases much of its analysis on employment. Although Las Vegas added 7,400 jobs in leisure and hospitality over a 12-month period, it lost 6,500 jobs in other sectors, White said.
Visitor levels are rebounding, but the gaming industry isn’t coming back as much because although people are spending money, it’s just not at the gaming tables, White said. But the area’s dismal housing market remains the largest “near-term drag” on any recovery, with a large number of foreclosures, and construction at a standstill, he said.
“All of the gains you have made have been outweighed by the losses in the construction and housing markets,” White said.
Moody’s said Las Vegas’ employment went from 927,900 jobs in 2007 to 801,700 in 2010. That number will grow to 827,900 in 2012, 857,800 in 2013, 891,600 in 2014 and 924,000 in 2015.
“You were (over 15 percent unemployment) and by any metric, that was a very deep hole,” White said. “That’s going to be a problem for a number of years. It’s going to take a long time to dig out of that hole. We aren’t going to enter expansion until you gain all of the jobs you had before.”
By its measurement, Moody’s said median existing-home prices in Las Vegas won’t bottom out until 2012 at $122,900, down from $317,100 in 2006, a decline of 61 percent.
Moody’s projects a 6.4 percent increase in price in 2013 to $130,800. In 2014, the price will increase to $147,300 and by 2015, the price will reach $165,200.
That’s a 34 percent increase from 2012 to 2015, but White said the increases should slow after that.
“We expect the bottom in the housing market in the second half of 2012, and once we hit bottom we think it will build up quickly after that,” White said.
That will include the new-home market because construction has been at a standstill and will be until the foreclosure inventory is absorbed, White said. Once that happens, the demand for new homes will pick up quickly, he said.
“By 2013, we will have had six years without any new construction,” White said.
Moody’s projects personal bankruptcies will peak this year at nearly 40,000 but remain elevated through 2015 when they will fall to about 20,000. There were only 4,200 bankruptcies in 2006.
Moody’s projects personal income growth will be 3.8 percent this year, and that will go to 6.1 percent in 2012, 7.8 percent in 2013, 2.9 percent in 2014 and 6.5 percent in 2015.
Through 2015, Moody’s projects Las Vegas’ population will grow by about 133,000 but the net immigration versus emigration will be much lower. It projects a net gain of fewer than 10,000 people this year and that will grow to 25,500 in 2012, 38,200 in 2013, 47,300 in 2014 and 50,900 in 2015.
White said Reno’s recovery has been helped by its attempts to diversify by becoming more of a transportation and warehousing hub to California because of its less expensive real estate.
Las Vegas is well positioned by its gaming industry and ability to attract tourists, but it has a long way to go with its diversification efforts, White said.
It’s not good enough to hope low taxes lure businesses to Southern Nevada, but a highly educated workforce and quality educational system are important to make that happen, he said.
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Moody's Analytics forecasts can't accurately predict the price next week, let alone years down the road. 100% pure speculation, or a downright lie, depending how you look at things.
All this blah-blah-blah about diversification, it has almost become a religion. I'd be interested where Moody's stood on every other boom-bust-boom cycle in the 110 year history of Las Vegas. They are prognosticating based on factors that work well for traditional cities, but not Las Vegas. Las Vegas has an equal chance of drying up within ten years as it does making a full recovery. Any guessing that applies the rules of other cities to Las Vegas, like Moody's does, is worthless.
Moody's statement is accurate based on existing home prices, the lack of new home sales, the number of people employed, the average wages, and the qualifying procedures for new applicants. Even if the employement rate deceases by 3 to 4 points, this would not help. There are many foreclosures not in the systems yet, plus the defaults numbers are still high.
One solution would be to re-qualify former home owners based on their ability to paid and job stability. It's safe to say many Las Vegans have a foreclosure on their credit report. Let say 6 out of 10 residence are behind on their mortage. Re-Qualify former homeowners based on their current performance in paying other obligations. Such as credit card, revolving loans, utlities, etc.
Twenty years is a long time!
Actually I do agree for the most part with Moody's assesment. Un-employment numbers must go down before a recovery can occur. People need to stabilize in there job and build credit as well as raise credit scores and save money for down payments. Banks must adjust, and that doen't seem likely for awhile. 20 years may be to long but 15 for sure.
Also in 20 years those houses will be junk, they won't hold up all that cheap wiring and pipe will be rotten. Detroit of the WEST
mred has a good point
So the house that I just bought as my first home for $140K will go up to what it sold for pre-bust ($300K) in 20 years? Sweet.
Certifiedpop,
I'm in the same boat as you, and I'm stoked too. I bought a small one for 70k, and it peaked at 260 back in the day. Makes me feel better about my investment/home!
Thank you Wall Street
I'm a little perplexed as to how Mr. Reza and a few other regular posters on this site are of the opinion that diversification and a strong gaming industry are mutually exclusive. You can choose to be a one trick pony forever, or you can chose to have a big pony and some other medium sized ponies. Not sure why this is such a bad idea to some narrow minded people.
Gaming does not have to be the only industry in order for it to thrive. But Vegas will not fully thrive if gaming is the only industry.
These long range forecasts are worthless. What were they saying in early 06? They paint the years looking forward picture with data from last year. The bottom line is jobs are needed before anything is going to recover and we haven't seen the bottom yet. The unemployment will go down as people drop off, move away or just plain give up. Those that can get out of town probably should.
That's got to be the stupidest report ever and a great fear article for media to put onto the uneducated people.
Moody's has no idea what 20, or 40 years will be like. There are so many variables unknown.
Moody's report may be correct if NOTHING changed and we were all still doing the same jobs, not aging, and had the same technology in 20 to 40 years.
Moody's is stupid. People who believe this are retarded.
Moody's and other ratings agencies took bribes to produce favorable ratings for mortgage-backed securities in the run-up to the crash. Just recently, it dawned on them that the US government has a debt problem. Their opinion isn't worth much.
The end of rampant housing speculation is a necessary move towards economic stabilization and diversification in Nevada.
When it comes to predicting housing prices that far down the road, it's a guess. This story has the short term, medium term and long-term outlook. The short term is very optimistic of a 34 percent rebound by 2015. I have been using Moodys since 2006 when I took over as real estate reporter and they were correct in calling for a major correction in Las Vegas.
Whining is for people with a fly-by-night short term, I want it all now mentality whose fat greedy little hands where held out and they were so blinded by greed and the empty promise of a cheap, variable rate mortgage and a quick turnaround on their investment.
Kind of like the construction, real estate, and gaming markets here in town.
Now they are staring down the barrel of the fallout of all their half baked, poorly planned decisions and they are scared and bitter and wanting to be bailed out.
In alot of ways I could care less what the value of my home is. I bought it on the cheap about 10 years ago with a fixed rate. I don't consider myself "underwater," because one way or the other I would be making some kind of monthly payment, but I am not wasting it on rent.
Let the floor fall out some more. All it means to me is lower property taxes and lower escrow payments and/or more escrow account refund checks. And in another 20 years or less I will be mortgage and/or rent free.
If most Las Vegans would start to think and live more for themselves and within their own means vs. trying to live up to everyone elses fake, inflated standards, none of this would be a problem.
Next time you look at your neighbor who has a hummer and a better sports car than you, and a boat, and a bigger house than you, realize there is a good chance that they are a mere few paychecks away from losing it all and they are stressed beyond belief.
And next time you see some idiot on the road with one of those retarded license plate brackets or a sticker with something like "whoever winds up with the most toys wins," give them the old one finger salute and laugh at their next nervous breakdown.
it just isn't worth it...
Cheap housing is a good thing - it means everyone has more money to spend on other things. For those still underwater, take your losses and move on.
For a town built on the service industry we NEED affordable housing -and the service industry is not a bad thing either, where else can a high school drop out make $40k + ???
Wow, that is worse than I thought.
It is a recession when your neighbor loses his job, it is a depression when you lose your job, it is a recovery when Obama loses his job.
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If there is a 34% bump in 3-4 years and you are underwater but not by more then 34% and in some cases as high as 50% loan to value walking away now could be the worst financial move. Housing will catch back up according to this report in the next couple of years and when you are eligable to once again buy after a foreclosure you could be facing higher home prices, higher loan costs and even higher down payment requirements.
The best solution for long term stability and stable growth is to force the 20% down payment that way buyers have financial interest in their home and don't just walk away when times get bad. The zero down and loan gimicks and the people excepting these is what caused the housing crash and the fact that if people stop walking away the housing will turn.
If you walk away now you could lose as you probably waited to long. Now we just need to see if the banks ramp up with lawyers to chase the 35% of people that walked that did it as a 'Strategic Walk' and not for financial hardships. Many took money out, baught toys and then defaulted while keeping all the toys.
I bought a house in Summerlin in 1997 for $139,000 and sold it in August 2004 for $300,000. Moved back east and bought a house for $175,000 which appreciated to $220,000 and fell back to the purchase price I paid for it in 2004. I guess I'm luckier than most. It was so easy to sell a house in Las Vegas in 2004. I didn't use a realtor. Didn't spend a dollar cleaning it. Ran an ad in the RJ and put up a For Sale sign. The price I sold it for was $15-20K below market but it was an all cash sale and I didn't have to pay an commission. The whole transaction took about 10 days. I knew the person who bought it was a speculator. He sold it to some Asian people who were related to my neighbor for about a $20K profit. Sure enough they lost it in a forclosure a year or two down the road. Every person who bought the house since then got burned as the value dropped. Right now I think it valued at about $160,000
Okay I'll ya what I think about this sorta. Diversification is waaay overrated. Let's just stick to sluts and slots and free cheap booze and old moldy motel rooms. It got us this far, right? Why even try to change??
Oh sure, solar energy is abundant, free and available more than 300 days of every year here, but why try to catch those rays and make juice? Or heat the shower water or laundry water or whatever? We got coal imported and nukies waiting to happen. Let's just stick with old reliable stuff, like housing construction and hospitality. People will always need new houses, right?
Why even try to make movies, get high tech or invest in medical research or anything futuristic? Cali is right next door. They can make the movies, do the high tech stuff and have the best economy around in spite of all their shortcomings.
I say the olde way is better than trying new stuff and I still sleep in my car, mow lawns and eat on my food stamps so what is the sense in changing course? Who do we think we are anyway??
Buck sez : "The short term is very optimistic..."
... as it has been since 2008.
The same people who could not predict the crash are now telling us they can see twenty years into the future? They couldn't see 3 years ahead. What a joke. Maybe they should try predicting the end of day prices first. See if that works.
Moodys is far from perfect but its not hard to see there is nothing to be optimistic about for Las Vegas home prices - condos too.
To Joe who said California has the best economy around- have you read a newspaper or looked at a number in the past 5 years?
Its nice to type and tell others but why not try to learn something sometime?