I’m in Las Vegas to study the housing market at an American Action Forum event. Honestly. The U.S. housing market isn’t in great shape, as everyone knows.
However, the Nevada housing markets have experienced a far more dramatic boom and bust than the U.S. as a whole. Over the past year, Nevada markets appear to have accelerated the process of foreclosure and re-sale and reducing the outstanding inventory, although prices have yet to begin to firm. Accordingly, it remains behind the U.S. as a whole in recovering from the housing bubble. (For a more detailed look at the data see here.)
What is to be done? As has been widely documented, the mortgage-foreclosure problem has shifted from being concentrated in non-prime borrowers to being dominated by prime borrowers. And as the less-than-stellar recovery has elongated, default and foreclosure have been concentrated more heavily in areas where prices are falling and unemployment is high.
The solution is better growth. Jobs and higher incomes will translate the demographic demand for housing — roughly a million new households have formed in the past three years — into a genuine economic demand for housing. The result will be stabilizing and then increasing prices, reduced cash-flow pressures that lead to defaults, and benefits from the reinforcing effects of a housing construction recovery.
At the same time, the administration should simply acknowledge that its array of small-bore housing programs failed at the outset and have outlived their usefulness. It is time to cease and desist further meddling and let the markets clear as fast as possible.
A comparison of Phoenix and Las Vegas makes this point. Phoenix has benefitted from a more rapid clearing of its excess inventory and more rapid economic growth. That’s a lesson from Las Vegas for the nation as a whole.