Boomtown bravado aside – next year will be tough for many homeowners
Las Vegas Review-Journal
Boomtowns have never been good at accepting bad news, and since statehood Nevada has operated like one big boomtown. It’s the nature of its boosters to deny the undeniable until the last moment.
That is part of what has me intrigued about Gov. Jim Gibbons’ call on Thursday (Sept. 20) at a Nevada Development Authority breakfast at the Four Seasons for an Oct. 4 economic summit at the Sawyer Building to focus on the very real foreclosure problems inside Nevada’s much-ballyhooed housing market.
It’s easy for an elected official to tick off the long list of sparkling statistics and attractive attributes of Nevada and Las Vegas. Economically speaking, the state and metro area have been among the nation’s leaders in many categories. It’s quite another thing for a boom-state governor to point to a forbidding trend and make a call to arms.
If Gibbons makes a sincere attempt not only to identify the depth of the foreclosure crisis – that’s something several analysts have already weighed in on – but also to take the steps necessary to help those most hurt by the economic chaos, then it surely will be recorded as a sign of genuine leadership on the governor’s part. Out of adversity comes opportunity – not only for Nevadans feeling a terrible pinch, but for the governor as well.
Stick that in your Gibbons file marked Time Will Tell.
Will the governor bring in banking and mortgage-lending decision-makers capable of helping out residents in dire straits?
Nevada reported 1,470 new foreclosures in August, the highest one-month number in recent history and more than a dozen times higher than August 2006, according to information provided by Applied Analysis.
While some press reports have noted that a large percentage of those foreclosures were for houses held by absentee owners, there’s credible evidence all over the valley that the foreclosure issue is hitting residents hard. The foreclosure totals place Nevada in an unenviable No. 1 position nationally.
Obviously there’s a real problem, but will it have a profound, long-term impact on the community’s economic vitality?
Jeremy Aguero of Applied Analysis is betting that it won’t. Not because the current figures and apparent monthly trends aren’t troubling: They absolutely are.
He remains bullish on Southern Nevada’s future because at least part of that future has already been mapped out and financed: With approximately 40,000 hotel rooms coming on line with the completion of Palazzo, Encore, Fontainebleau, CityCenter, and Echelon, the market simply won’t have an opportunity to decline forever.
Not only will the sagging construction market pick up, but the approximately 200,000 employees who will work in those sparkling new resorts and inter-related occupations will need someplace suitable to call home.
Boomtown bravado aside, the next year figures to be extremely difficult for many Nevada homeowners being gradually eaten alive by adjustable-rate mortgages and the collapse of segments of the subprime-lending market. Aguero says the foreclosure issue is “trending toward the worse side, not getting better,” but he anticipates a positive surge in 2008 when the massive employment call for the new resorts will begin to be answered.
“Really, Southern Nevada is slow only by Southern Nevada standards,” Aguero reminds a skeptic.
Even our 2 percent employment growth (total jobs created) and 5 percent unemployment rate are statistics other regions would envy. But that doesn’t mean today’s crisis hurts homeowners any less.
“Are we seeing some cyclical instability?” he asks. “You bet we are.”
For every 1 percent homes dip in value, Nevada loses approximately $800 million in household wealth, Aguero observes.
But, again, he sees a pattern where others feel the panic. He asks, wasn’t it 18 months ago that affordable housing was the big question?
“It seems to me the debate has turned 180 degrees,” he says.
How much debate will occur at Gov. Gibbons’ Oct. 4 summit remains to be seen, and numbers maven Aguero is likely correct: Over time, our incredible boomtown economic engine will overcome the current foreclosure slump.
That doesn’t mean there won’t be tough decisions in the coming months as more Southern Nevadans face the nightmare of losing the roof over their heads.
• John L. Smith’s column, reprinted from the Las Vegas Review-Journal, appears on Thursdays on the Appeal’s Opinion page. E-mail him at email@example.com or call (702) 383-0295.