Our North American Housing Price Index registered a 6.46% drop from November, which likely would have been much deeper if we had not seen a sharp uptick on the top of the housing market. The drop from May - when we started the Index - is now 15.86%, representing a massive fall in the North American housing markets, and likely correlated by a similar drop in the valuation of bank mortgage portfolios. On an annualised basis the Index suggests the market is down 27.18%, a truly staggering loss.
That 27.18% drop strongly suggests the stimulus effect of the US Government's tax credit has worn off. Record low rates for conventional mortgages seem to be little help as few applicants qualify for the new, stringent requirements. All in all, we declare that the housing crash appears to have resumed.
Given the huge shadow inventory of foreclosed houses, the impending wave of Alt-A defaults, high unemployment, and falling income across the board, there is essentially no hope the housing market will find 'a bottom' any time in the foreseeable future. Additionally, the 8.9% rise in housing starts reported by Forbes will only add to the pain of existing housing stock, as new - and difficult to move - houses come into the market and further drive down already distressed property.
We expect the bottom, when it comes, will be shockingly low. We boldly predict a real price decline somewhere in the neighbourhood of 90% on average, peak to trough. In some places, such as Las Vegas, we expect a decline of 100% as the whole urban field there becomes indefensible. Attractive urban centres will fare the best, but it will be grim consolation.
Price declines may be obfuscated by inflation, if that should arrive. Given the devastation banking elites would suffer in a true deflation, we suspect the 'powers-that-be' will attempt to engineer a burst of high inflation to save the banks. On the other hand, such efforts may be unsuccessful, as it would be exceedingly difficult to discern the optimum amount of money-printing. As powerful as banking elites are, they may be sacrificed on the altar of the Almighty Dollar.
Showing posts with label las vegas nevada. Show all posts
Showing posts with label las vegas nevada. Show all posts
Wednesday, December 16, 2009
Thursday, May 14, 2009
More about Las Vegas
Foreclosures are up just about everywhere, we suppose, but nowhere more than ... you guessed it - Las Vegas, Nevada. Quite recently The Frugal Scotsman discussed Las Vegas as a bellweather of foreclosure catastrophe. In the post, he surmised basically everyone in Las Vegas with a mortgage is 'underwater' - owing more than their property is worth.
Well, we discovered in this CNNMoney.com article that fully one in fifty-six households in Las Vegas suffered foreclosure process last month alone. Unfortunately, the article does not define household precisely. If it did, we would know if that meant households in general - owners and renters alike - or if it meant households that are owners. If it is the former, since about half of households own with a mortgage, the rate would be approximately one in thirty households with a mortgage...in one month!
At that rate, should it continue, it would take but a few years to achieve complete Real Estate Gotterdammerung - wipe out for every mortgage holder: either walking away, or having a date with some deputies. We do not see this being particularly unlikely.
Even if the article were using a non-standard definition of household to mean homeowner, it would be still approximately one in forty homeowners with mortgages facing losing their houses.
Like the apocryphal lemmings going over the cliff, participants in the Great Las Vegas Housing Bubble seem to have experienced herd behaviour at its worst and are paying the price. Las Vegas is the worst in the USA for now, but only because it represents the non plus ultra of how bad things can get.
We have no doubt that many other cities, and indeed even whole regions, will suffer similar fates. As much as one-third of householders will be removing to rentals, friends, relatives, shelters, or the streets (depending on their resources) in the space of a few years. But this is only a portion of what is shaping up to be the greatest economic calamity in the nation's history. Mass unemployment, underemployment and widespread ruin are developing concurrently.
Well, we discovered in this CNNMoney.com article that fully one in fifty-six households in Las Vegas suffered foreclosure process last month alone. Unfortunately, the article does not define household precisely. If it did, we would know if that meant households in general - owners and renters alike - or if it meant households that are owners. If it is the former, since about half of households own with a mortgage, the rate would be approximately one in thirty households with a mortgage...in one month!
At that rate, should it continue, it would take but a few years to achieve complete Real Estate Gotterdammerung - wipe out for every mortgage holder: either walking away, or having a date with some deputies. We do not see this being particularly unlikely.
Even if the article were using a non-standard definition of household to mean homeowner, it would be still approximately one in forty homeowners with mortgages facing losing their houses.
Like the apocryphal lemmings going over the cliff, participants in the Great Las Vegas Housing Bubble seem to have experienced herd behaviour at its worst and are paying the price. Las Vegas is the worst in the USA for now, but only because it represents the non plus ultra of how bad things can get.
We have no doubt that many other cities, and indeed even whole regions, will suffer similar fates. As much as one-third of householders will be removing to rentals, friends, relatives, shelters, or the streets (depending on their resources) in the space of a few years. But this is only a portion of what is shaping up to be the greatest economic calamity in the nation's history. Mass unemployment, underemployment and widespread ruin are developing concurrently.
Friday, May 8, 2009
Las Vegas, NV: Bellweather of Doom
Our co-writer made a post a while back, laying out a brief case for the collapse of present valuations of American housing stock. He forecasted (and still forecasts) an estimated 87% drop in value for desirable, non-redundant living space, along with almost every mortgaged houseowner ending up 'under water.'
According to the basic number we've seen bandied about, approximately two-thirds of all houseowners have mortgages. We can surmise, without too much imagination required, that if house prices do indeed plummet 87% or so, almost all of these mortgaged houseowners will be 'under water,' and will likely default on their debt. This will of course create an enormous glut on the real estate market, and devastate the debt-addicted banking system of the United States, and indeed the world.
Our co-writer is now partly vindicated, by the original Icon of Sin: Las Vegas, Nevada. In a recent Wall Street Journal article, a study shows that 67.2% of all homes in Las Vegas have "negative equity;" or, in the common tongue, the owners owe more on their mortgage than the house is presently valued. We point out that 67.2% is right around two-thirds of all houses (and thus virtually every owner with a mortgage is 'under water'); Las Vegas is now the bellweather of the United States housing collapse.
It is difficult - if not impossible - to put a time-frame on this collapse, but we are confident that said collapse is both in progress, and cannot be halted in real terms. However, the Federal Reserve's attempts to rekindle inflation will likely succeed, and when that day comes some of these 'under water' houseowners will at least have the succor of having their nominal property values resume an upwards march. That will be a phyrric victory, but we suspect that realisation will take some time to dawn on the average American citizen.
According to the basic number we've seen bandied about, approximately two-thirds of all houseowners have mortgages. We can surmise, without too much imagination required, that if house prices do indeed plummet 87% or so, almost all of these mortgaged houseowners will be 'under water,' and will likely default on their debt. This will of course create an enormous glut on the real estate market, and devastate the debt-addicted banking system of the United States, and indeed the world.
Our co-writer is now partly vindicated, by the original Icon of Sin: Las Vegas, Nevada. In a recent Wall Street Journal article, a study shows that 67.2% of all homes in Las Vegas have "negative equity;" or, in the common tongue, the owners owe more on their mortgage than the house is presently valued. We point out that 67.2% is right around two-thirds of all houses (and thus virtually every owner with a mortgage is 'under water'); Las Vegas is now the bellweather of the United States housing collapse.
It is difficult - if not impossible - to put a time-frame on this collapse, but we are confident that said collapse is both in progress, and cannot be halted in real terms. However, the Federal Reserve's attempts to rekindle inflation will likely succeed, and when that day comes some of these 'under water' houseowners will at least have the succor of having their nominal property values resume an upwards march. That will be a phyrric victory, but we suspect that realisation will take some time to dawn on the average American citizen.
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