A depressing report noted over at Zero Hedge:
Las Vegas led the nation with a 66 percent negative equity share, followed by Stockton (56 percent), Phoenix (55 percent), Modesto (55 percent) and Reno (54 percent). Outside metropolitan areas in the top 5 negative equity states, the metropolitan markets with the highest negative equity shares include Greeley, CO (38 percent), Boise (36 percent), and Atlanta (35 percent).
To translate from the financial-ese, "negative equity share" means "percentage of mortgages underwater", ie, house is worth less than is owed on it. Two thirds of mortgaged homes in Las Vegas are in this condition.
I was talking with a friend of mine the other day, and older man just a few years away from retirement. His lament is that he bought a house and improved it and made payments on it in the understanding that it would be a large portion of his retirement nest egg. That has now been wiped out. How many more are there like him? Not just in Las Vegas, but around the whole country?
The concept that there is some program of government which can willy-nilly fix all this is just absurd. That hasn't stopped, for instance, the two mayoral candidates in Las Vegas from claiming that they've got such plans. They're going to put Las Vegas back to work! How? What with? Doing what? Its not like we've got a shortage of casinos or hotel rooms right how...and with 66% of our local home mortgages underwater, its not like we're in need of a home construction boom. Only the development of an entirely new economic model for us will rescue us from this disaster. And that can't be done by mayoral candidates making pretend videos of them working in Las Vegas.
And disaster it is, make no mistake about it. Until the national economy really gets rolling there simply will not be sufficient demand in gaming and hospitality to create growth in that sector. There is no sign that the US economy will experience that sort of growth in the next two or three years. What built Las Vegas will not - cannot - rescue it. But without a surge of growth we will find that people are leaving Las Vegas. How can a man or woman with a life to build and/or kids to raise stay here? More and more will drift away to those areas of the country where there is still some work. This, in turn, will further drive down local demand and become a cruel cycle of recession until almost all mortgages are underwater and the foreclosed homes we see mushrooming in our communities becomes the norm.
The good news is that we can fix this - if we just allow the free market to operate. Las Vegas stands at a national crossroads. We have many, major highways that cross our valley. We have an excellent airport and unlike a lot of other municipalities, plenty of room to see it grow. We can refurbish and build up our rail connections with the rest of the country. If we just give busness a reason for coming here, they will come. We were already a relativey low wage area, and we will be more so now that our unemployment is so high. Cut or eliminate the taxes on business and set our regulatory environment to be more friendly to manufacturing, mining and even agrculture (there are areas close by to Las Vegas where farming can be done) and we'll start to see a new Las Vegas economy bloom. It won't be easy and it wouldn't happen overnight, but it can be done...and our city rescued from complete collapse.
All it takes is a little vision and a willingness to tell the casinos and the local unions to go jump in a lake. Gambling is the god that ultimately failed Las Vegas. Sure, it made a patch of desert in to a major city, but how long did anyone expect that gambling would provide a sustained underpinning for the economy? That no one elsewhere would ever figure out how to make a Vegas-style casino? That everyone would forever want to travel out here to blow their paychecks at the table? Gaming will remain a major part of the Las Vegas economy, but it is clear that by placing all our eggs in that basket, we made a huge mistake. Time to start spreading our eggs out among several baskets.
The trouble is that we have no leaders of vision. All we have is people stuck in the groove. Or, more accurately, firmly bribed by gaming and the powers that be to stay in the groove. It will take revolutionary, political change to get things moving again - and I don't see even so much as a spark of that right now.
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