More than 20 years until home prices reach pre-bust levels, Moody’s says

A foreclosed home is seen on Thursday, April 28, 2011.

Housing Market

Housing Market

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KSNV coverage of Moody's Analytics report on Las Vegas housing prices, June 22, 2011.

Las Vegas homeowners will have to wait until 2020 to get back half the value of their home lost during the housing collapse and more than 20 years before getting it all back, according to a Pennsylvania research firm.

The struggle of the housing market, in part, is why Moody’s Analytics forecasts the economic recovery will stay slow in Southern Nevada. Nevada will remain in a recession through summer, and it won’t be until 2015 that jobs pared during the downturn will be restored.

“Las Vegas is getting closer to a recovery, but it’s still in recession,” Moody’s Analytics economist Dan White said. “It means things are still getting worse.”

Moody’s removed Mississippi from its list of states in recession in May, making Nevada the last. Among cities, Reno was removed from the recession list this month, and White said Las Vegas probably won’t be taken off until September despite improvements in visitor volume and gaming revenue.

Moody’s bases much of its analysis on employment. Although Las Vegas added 7,400 jobs in leisure and hospitality over a 12-month period, it lost 6,500 jobs in other sectors, White said.

Visitor levels are rebounding, but the gaming industry isn’t coming back as much because although people are spending money, it’s just not at the gaming tables, White said. But the area’s dismal housing market remains the largest “near-term drag” on any recovery, with a large number of foreclosures, and construction at a standstill, he said.

“All of the gains you have made have been outweighed by the losses in the construction and housing markets,” White said.

Moody’s said Las Vegas’ employment went from 927,900 jobs in 2007 to 801,700 in 2010. That number will grow to 827,900 in 2012, 857,800 in 2013, 891,600 in 2014 and 924,000 in 2015.

“You were (over 15 percent unemployment) and by any metric, that was a very deep hole,” White said. “That’s going to be a problem for a number of years. It’s going to take a long time to dig out of that hole. We aren’t going to enter expansion until you gain all of the jobs you had before.”

By its measurement, Moody’s said median existing-home prices in Las Vegas won’t bottom out until 2012 at $122,900, down from $317,100 in 2006, a decline of 61 percent.

Moody’s projects a 6.4 percent increase in price in 2013 to $130,800. In 2014, the price will increase to $147,300 and by 2015, the price will reach $165,200.

That’s a 34 percent increase from 2012 to 2015, but White said the increases should slow after that.

“We expect the bottom in the housing market in the second half of 2012, and once we hit bottom we think it will build up quickly after that,” White said.

That will include the new-home market because construction has been at a standstill and will be until the foreclosure inventory is absorbed, White said. Once that happens, the demand for new homes will pick up quickly, he said.

“By 2013, we will have had six years without any new construction,” White said.

Moody’s projects personal bankruptcies will peak this year at nearly 40,000 but remain elevated through 2015 when they will fall to about 20,000. There were only 4,200 bankruptcies in 2006.

Moody’s projects personal income growth will be 3.8 percent this year, and that will go to 6.1 percent in 2012, 7.8 percent in 2013, 2.9 percent in 2014 and 6.5 percent in 2015.

Through 2015, Moody’s projects Las Vegas’ population will grow by about 133,000 but the net immigration versus emigration will be much lower. It projects a net gain of fewer than 10,000 people this year and that will grow to 25,500 in 2012, 38,200 in 2013, 47,300 in 2014 and 50,900 in 2015.

White said Reno’s recovery has been helped by its attempts to diversify by becoming more of a transportation and warehousing hub to California because of its less expensive real estate.

Las Vegas is well positioned by its gaming industry and ability to attract tourists, but it has a long way to go with its diversification efforts, White said.

It’s not good enough to hope low taxes lure businesses to Southern Nevada, but a highly educated workforce and quality educational system are important to make that happen, he said.



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Discussion 13 comments

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  1. All this blah-blah-blah about diversification, it has almost become a religion. I'd be interested where Moody's stood on every other boom-bust-boom cycle in the 110 year history of Las Vegas. They are prognosticating based on factors that work well for traditional cities, but not Las Vegas. Las Vegas has an equal chance of drying up within ten years as it does making a full recovery. Any guessing that applies the rules of other cities to Las Vegas, like Moody's does, is worthless.

  2. Moody's statement is accurate based on existing home prices, the lack of new home sales, the number of people employed, the average wages, and the qualifying procedures for new applicants. Even if the employement rate deceases by 3 to 4 points, this would not help. There are many foreclosures not in the systems yet, plus the defaults numbers are still high.

    One solution would be to re-qualify former home owners based on their ability to paid and job stability. It's safe to say many Las Vegans have a foreclosure on their credit report. Let say 6 out of 10 residence are behind on their mortage. Re-Qualify former homeowners based on their current performance in paying other obligations. Such as credit card, revolving loans, utlities, etc.

    Twenty years is a long time!









  4. geez, a lot of sore losers when they're showed some bad news. vegas was overbuilt and when you look at how they laid out the subdivisions, the developers really took the buyers to the cleaners. you paid how much for THAT?

  5. Certifiedpop,

    I'm in the same boat as you, and I'm stoked too. I bought a small one for 70k, and it peaked at 260 back in the day. Makes me feel better about my investment/home!

  6. Thank you Wall Street

  7. Moody's and other ratings agencies took bribes to produce favorable ratings for mortgage-backed securities in the run-up to the crash. Just recently, it dawned on them that the US government has a debt problem. Their opinion isn't worth much.

    The end of rampant housing speculation is a necessary move towards economic stabilization and diversification in Nevada.

  8. When it comes to predicting housing prices that far down the road, it's a guess. This story has the short term, medium term and long-term outlook. The short term is very optimistic of a 34 percent rebound by 2015. I have been using Moodys since 2006 when I took over as real estate reporter and they were correct in calling for a major correction in Las Vegas.

  9. Okay I'll ya what I think about this sorta. Diversification is waaay overrated. Let's just stick to sluts and slots and free cheap booze and old moldy motel rooms. It got us this far, right? Why even try to change??

    Oh sure, solar energy is abundant, free and available more than 300 days of every year here, but why try to catch those rays and make juice? Or heat the shower water or laundry water or whatever? We got coal imported and nukies waiting to happen. Let's just stick with old reliable stuff, like housing construction and hospitality. People will always need new houses, right?

    Why even try to make movies, get high tech or invest in medical research or anything futuristic? Cali is right next door. They can make the movies, do the high tech stuff and have the best economy around in spite of all their shortcomings.

    I say the olde way is better than trying new stuff and I still sleep in my car, mow lawns and eat on my food stamps so what is the sense in changing course? Who do we think we are anyway??

  10. joe; HILARIOUS! you ought to frame that, its classic!

  11. The same people who could not predict the crash are now telling us they can see twenty years into the future? They couldn't see 3 years ahead. What a joke. Maybe they should try predicting the end of day prices first. See if that works.

  12. Best prediction service both pre- housing bust and currently is the Case Shiller Index. They predicted the bust and show that a return to historic apreciation levels in the Valley to be another minimum 5 yrs away if you look at previous pre 2001 housing trends for the last 30 yrs. Just as the housing "boom" went over the top in appreciation above historic appreciation trends, the "bust" over compensates on the down side. Never the less we are in a deep hole and it will take at least a decade from the bust that hit in 2006-2007 to recover. Even then we hopefully could be back to the historic mean line and that reflects getting back only back to 2006 home valuations at best.

  13. Moodys is far from perfect but its not hard to see there is nothing to be optimistic about for Las Vegas home prices - condos too.

    To Joe who said California has the best economy around- have you read a newspaper or looked at a number in the past 5 years?
    Its nice to type and tell others but why not try to learn something sometime?