The real estate market in Las Vegas continues its extended slump. S & P has reported yet another 8.5% drop in prices, this time covering a period that spans form October 2010 to October 2011. The Vegas area also has an unemployment rate of 12.5% with tons of underwater mortgages.
On a more positive note, those who have a mortgage owned by Fannie Mae or Freddie Mac may be able to refinance even with an underwater mortgage. You may not get the principal reduced, but you may be able to reduce your monthly payments considerably. See our video below.
Because the current market prices haven’t been seen since the 1990’s, home prices are now cheap from a valuation standpoint. Prices are now in sync with people’s incomes. Record low interest rates allow you to get into a home for a very low monthly payment. Because of low prices and cheap borrowing costs, buying has become attractive. It’s also important to note that this is one of those rare periods in which renting is more expensive.
Going forward, the economy appears to be merely muddling along. There is no strong recovery in sight for the Las Vegas economy. Vegas is still far too dependent on gaming and tourism. It will take years for new businesses to ultimately absorb the excess capacity of workers and grow the economy.
We’re simply not going back to 2007. Other state and local governments are struggling financially also. Many of them will attempt to boost revenues through more lotteries and gaming. This makes them a direct competitor to Las Vegas casinos. We have already seen that gambling revenue is an increasingly smaller share of casino profits. Casinos are forced to offer more in the way of shows, shopping, and dining to keep luring people to travel to Las Vegas.
In the long run, the Las Vegas economy needs diversification. The era of being dependent on a single thing are long over. On a positive note, Nevada is a very business friendly state. Barring any drastic change to the state’s tax system, Nevada should be able to attract many new businesses to the area.