Under water in the desert. Sounds like an impossible event at first but there is always a mirage to keep us going until we find that inevitable oasis. But the Las Vegas real estate market is now threatening to be drown in the tidal wave that might turn Vegas into another Atlantis.
http://www.lasvegassun.com/news/2010/nov/11/report-80-percent-las-vegas-homeowners-underwater-/
The cycle of declining home values (click here for full story), continued foreclosures, and more declining prices has affected almost every one with a mortgage in the gambler's Mecca. The Las Vegas Sun reported Thursday 80% of the mortgages in sin city are underwater. What? We knew it was bad here but this is now getting to the absurd. The possibility of an economic recovery here is nil if housing pricing continue to drop.
The usual answer is "well they can't go much lower" but we were saying that two years ago. The catastrophic loss to homeowners will have life time consequences. One of the fastest ways to make people feel less wealthy is to tell them they own more on their mortgage then they will ever be able to get for their house. This is certainly true for the next ten years in Las Vegas. There will be no rebound to vault homes up 150 % in the next several years.
If homes dropped 60 % as an example, a 1,000,000 home is now valued close to 400,000. I know this is simple math but think about how it affects the psyche. Your net worth has dropped 600,000. Add the kicker that you are now responsible to pay that 800000 mortgage back in full plus interest to our friends at the bank and you have cocktail that will knock you off your feet. If that belt doesn't knock you out, you will soon be crying when you consider a 100% appreciation in home prices is needed to just cover your note. But if you really want to get back to even don't forget the extra 20 % -30% you still need to get back to the price back to what you paid.
So the idea of having security in the form of a home; that would be your nest egg, your emergency equity fund, your retirement account and/or your feel good reserve has done a disappearing act. Gone with it, the only viable investment the little guy could use that was not already completed exploited by Wall Street and the investment bankers.
Las Vegas is on the verge of completely sinking under the weight of the housing crisis. There is no way to fuel a recovery when people have nooses around their necks in the from of an under water mortgage.
Charlie Rose - Bear Stearns / Bear Stearns continued / Robin Wright (March 17, 2008)
Harry Reid could put his re election to good use and hold the big banks accountable instead of pandering to them so they will give more campaign money.
The banks have been gifted billions of dollars when they were completely underwater. Has it helped the economy or helped individual home owners? In spite of all the rhetoric being spewed by the banks and their schills in the government, the banks have helped themselves while suffering any consequences for their part in accepting property as collateral which 80% is now underwater. If they want to play that game and hold everyone else accountable then there should have been no bailout. There certainly should not be another one.
I hate to say it though but each month we drop further underwater, the banks balance sheets get worse. There is no way they could be solvent if the 30% of their mortgages are worth more than the collateral. Vegas has nearly trippled that number but the rest of the country could hit 30% underwater very soon, then watch for bailout number 2 and expect to see no relief for years when the banks refuse to use good business sense and negotiate principal write downs to bring mortgages more in line with current values. This is the only chance we have to keep from going completely underwater in Las Vegas.
Las Vegas Housing: 80% of mortgages underwater. Las Vegas Sun