(Mike Chamberlain/The Cranky Hermit) – Las Vegas is rated #3 of the 10 housing markets that will collapse this year. As if things couldn’t get any worse, prices are expected to drop nearly 14% this year and an additional 6% next year.
Las Vegas was one of the center points of the meteoric growth in the first half of the 2000s, only to be followed by a catastrophic fall in the second half. Between 2008 and 2011, home prices in the city dropped by 42.3%, the second greatest decline in the country. Although home values in the city are already more than 58% off their peak, they are projected by Case-Shiller to drop an additional 13.9% by Q1 2012, and then 6.3% more by Q1 2013.
We are still suffering the hangover from the boom of the early- to mid-2000’s.
It’s going to be a rough ride for a while in Las Vegas and the actions of the government and the financial institutions are not helping. The government has enacted programs, such as the homebuyer tax credit, and banks are hanging on to shadow inventory, releasing foreclosures in dribs and drabs.
While each of these entities has its own reasons for pursuing these policies the result has been to support artificially high prices. This has prevented a drastic reduction in prices but it has also prevented the market from clearing and prolonged the agony.
The Band-Aid analogy is apt – pull it off quickly and it hurts more but the pain goes away; pull it off slowly and it may not hurt as much but the pain lingers on.
Unfortunately this may be just another indication we could be a long way from a recovery in the housing market.
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