In the New York Times yesterday:
Home prices in Las Vegas are down by 60 percent from 2006 in one of the steepest descents in modern times. There are 9,517 spanking new houses sitting empty. An additional 5,600 homes were repossessed by lenders in the first three months of this year and could soon be for sale. Yet builders here are putting up 1,100 homes, and they are frantically buying lots for even more.
The explanation: Builders are responding to buyers' desire for brand new new houses compared to those five or ten years old, and in particular their distaste for existing developments where many homes are vacant. Some buyers have also learned that it is often a more tedious process to buy a foreclosed home.
The NYT piece sums up the madness perfectly: "Las Vegas is trying to recover by building what it does not need." Shouldn't we sending in the National Guard or FEMA to put a stop to this insanity?
What's happening in Las Vegas may be an extreme example, but the oversupply of homes is a national problem. The Calculated Risk blog estimates an excess of 1.7 million homes, while the U.S. Census reportedly estimates there are 2 million vacant homes currently for sale.
The oversupply is exacerbated by a reduction in household formation due to the recession. As discussed here, the nation has lost an estimated 1.2 million households in recent years.
The Seattle area is no exception to the trend, and 2009 data indicated an oversupply of 24,714 housing units in King County. The unbalanced situation is further elucidated by related data such as this:
One in four homeowners in the Puget Sound area owes more on their house than it’s worth, according to a new report from Zillow.com, a Seattle-based real estate research and listings website.
The home foreclosure crisis in King County is getting worse, due in large part to a backlog of unsold houses that are clogging up the system. Banks with bad mortgages have taken back so many houses in the last year that they don’t want to repossess many more.
To the relief of those leasing apartments, the average monthly rent in the Seattle area dropped 13.8% in 2009, the steepest decline of all U.S. metros...
Meanwhile, over in Dubai:
House prices in Dubai could fall a further 30 percent from current levels and up to 150,000 homes could be lying empty by the end of 2011, UBS has said.
Yes folks, it appears Dubai has even surpassed Las Vegas in the quest to redefine dumb.