It's obviously old news that Las Vegas real estate prices have already taken a major hit and now that the rest of the country is feeling the mortgage crunch, it's important to understand that it was not just because of speculation.
The bill being proposed right now to help the housing crunch seems to reward Banks and New Home Builders more then home owners. Banks had lax lending standards, new home builders built too much and now they get rewarded for bad decisions with taxpayers money. (Let's face it, millions of dollars were made by banks and new home builders during the boom. In Las Vegas, a New home builder could build whatever they wanted to in 2004, put whatever price they wanted to on it and it sold -- due to practically free money being offered by the banks.)
So the government is bailing out banks, is proposing to provide major tax incentives for new home builders and banks to the tune of billions of dollars and setting aside $100,000,000 for counseling services to homeowners facing foreclosure.
On my Las Vegas Real Estate blog, I provided some interesting numbers including some of the CEO compensation packages for the banks, talked about how ineffective the decision makers for the banks have been concerning Las Vegas short sales, and some updates on the proposed bill. The banks could certainly be helping themselves out by speeding up the process and being more responsive to short sales resulting in less foreclosures which makes for a healthier market. (And Las Vegas Home Owners certainly need to explore the options of doing a short sale then just walking away and letting their Las Vegas homes go to foreclosure.)
I also came across these very interesting must read articles from Peter Schiff concerning government policies ---> "Bail Me Out Bennie" and The Assault of the Free Markets. I absolutely love the quote "Robbing Main Street to Pay off Wall Street" because that is exactly what is happening. Cheap money fueled spending which has lined the pockets of major corporations. Homes became ATM machines, earnings for companies skyrocketed and now it's time to pay the piper. The problem is, the American Taxpayer is going to pay the price -- the very same people that lined the pockets of the people that are now lobbying to be saved because they sevened out on a hot roll.
So, while you watch the latest candidates blazing the campaign trail and pandering for votes calling for more government intervention (more taxpayers money) to solve problems that the Fed created, keep this study in mind on how Government Intervention Extended the Great Depression.
Support measures that create a false sense of security that will actually prolong the pain may not be the best solution. The warning signs were there a couple of years ago and it should have been caught when short term interest rates for ARMS were higher then long term fixed rates which were an indication of higher risk in the short term. For an understanding of this you can read this --> Yield Curves and more specifically, the section on Inverted Yield Curves.
For a state that is in a recession according to Moody's, at least Nevada is looking for ways to cut spending and not looking for ways to increase taxes such as other states.
All I'm suggesting is that before you jump on a bandwagon cheering policies that you might think are beneficial, you need to understand who it really benefits and the long term effects. Where will the line be drawn for all of the businesses that have lost money? Should real estate agents, Brokerages, construction companies, etc... be given a helping hand? Counseling services?
Las Vegas real estate has certainly been hit and we've gone through a lot of pain, but understanding what happened in the first place is the key to understanding what needs to be done to correct it. There certainly are reasons to help the banking industry (primarily to keep it from collapsing) but you really have to question if new bills should be providing tax incentives for the new home building industry which are ultimately paid for by taxpayers dollars.
Paul Francis, ABR,CRS | Coldwell Banker Premier | Las Vegas Home Values | 702.592.3058
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