Once-Booming Las Vegas may be Reduced to Ghost City

by Kathy Jones on  October 24, 2010 at 5:49 PM Lifestyle News
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The housing market in Las Vegas is on the slide and many have already left for greener shores.
 Once-Booming Las Vegas may be Reduced to Ghost City
Once-Booming Las Vegas may be Reduced to Ghost City

Earlene Howard is the only person left living in a house on her block in Sin City, and she's not sure how much longer she'll be there as the once booming Las Vegas housing market continues to spiral downwards.

The rest of her neighbors have seen their homes repossessed by lenders, and she's already behind two months on her mortgage after her husband lost his job with a local construction company.

"I think we may need to move back to Denver," said Howard, 42, who uprooted to Las Vegas in 2005 because jobs were plentiful here then. "This city is not in good shape. Not at all."

Howard lives in the epicenter of America's prolonged economic downturn.

The once-booming Las Vegas region has for 44 straight months led the United States in home foreclosures, and 80 percent of houses here are figuratively underwater -- worth less than the debt owed on them.

A staggering 23.6 percent of Nevada mortgages are in some form of delinquency or foreclosure, significantly higher than the national average of 14 percent, according to data from the Mortgage Bankers Association.

It's a confusing, devastating turn of events for a city that for two decades was the sterling example of an American boom town.

With only some brief pauses, this gambling and convention destination has enjoyed continuous visitor increases and population growth since 1989, when the first mega-resort, The Mirage, opened on the Las Vegas Strip.

Nevada's population has since more than doubled to 2.6 million residents and the Vegas casino-hotel sector has exploded to more than 148,000 rooms.

In the middle of the last decade, there was no place in America where real estate speculation ran so rampant and where prices surged so quickly.

Yet the Las Vegas economy is based on tourists coming to spend disposable income, and when the rest of America began feeling the pinch, visits plummeted.

It hit its record at 39.1 million visitors in 2007, but by 2009 the city greeted 36.3 million, a seven percent drop. Gambling revenues fell even more, 19.2 percent in the same span.

"It's the worst experience over the longest period of time," said Alan Feldman, spokesman for MGM Resorts International, which owns 10 casinos on the Strip including the Bellagio and the Aria.

Vegas got a taste of financial difficulty in the weeks and months after the September 11, 2001 attacks when American fears and shaken confidence caused air travel and hotel room demand to shrivel.

"But this is lasting longer and has taken on a different profile," Feldman said of the current downturn.

Indeed, foreclosures and debt problems aren't simply impacting homeowners but also major hotel-resort corporations.

The most obvious and damning example is the Fontainebleau Las Vegas, planned as a five-billion-dollar resort to open this year that instead stands nearly finished but idling on the Strip skyline, at a cost of three million dollars.

The builders ran out of money last year, so the hulking, glass-coated structure was sold to investor Carl Icahn, who earlier this month auctioned off the furnishings intended for the building.

Observers took that as a sign he has no plans to complete the resort.

Amid the boom, home buyers feasted on cheap, complicated mortgages and expected the value of their homes to rise such that they could refinance in the future.

Instead, the values deflated as the national economy kept tourists away, leading to unemployment in Nevada that is now a record 14.7 percent.

"We enjoyed a disproportionate upside, and so we got that much more excess that's got to get rid of," said real estate agent Jack LeVine. "I always counseled people that this couldn't go on forever."

There are some signs of recovery, but they are faint.

Visits to Las Vegas were up in August for the 12th consecutive month, although that also may reflect huge cuts in room rates as well as other promotions.

"The spending is where it's taken longer to recover," said Kevin Bagger, director of market research for the Las Vegas Convention and Visitors Bureau.

"Visitors are not spending as freely when they get here. That has taken longer."

LeVine said he's seeing some improvement, too, at least in terms of the number of homes he's selling. Almost all are bank-owned, however, and the prices are much lower.

"I've had many months of zero homes sold in the last three years," LeVine said.

"I'm not having a problem selling the houses now whatsoever. We're having trouble getting them closed, getting the banks to provide the money. And their values are far below what they once were."

Source: AFP

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