It was the worst of times and it was even worse than that. A recent Case-Shiller housing report finally showed some hopeful signs recently. The report showed that housing prices for the second quarter of this year were up for the first time in three years for 18 of the 20 markets that were tracked. The two that were down? Detroit and Las Vegas.
The two markets were very much the same, yet so different. The same in that they are still showing price declines but the future outlook for each is like night and day.
People are well aware of the problems facing the auto industry. With so much of the industry based in the Detroit area, is it any wonder that they are so severely impacted by this recession? The unemployment figures for July show that Detroit suffers the nation’s highest rate of joblessness at a whopping 28.9%. What happens when there is no work? People move in search of better opportunities. There is such an oversupply of available housing due to the lack of demand that prices had to fall.
The economic outlook is bleak for the region. Couple that with high taxes and cold weather. There is no reason for people to move to Detroit, which means that demand can’t be expected to rise anytime soon.
Las Vegas is suffering from an oversupply of housing as well. This was caused primarily by speculation, which led to overbuilding. The unemployment rate for Las Vegas stands at 13.1%, significantly higher than the national average. Construction was the number two industry in the area and it has pretty much dried up. Tourism is the primary driver of the economy and that is down significantly due to the slumping economy.
The prospects for recovery in Las Vegas are far better than Detroit for one major reason – people want to live there. Las Vegas has a much better climate, a favorable tax structure including no state income tax, and a multitude of entertainment options. Home prices have reached a point where they are affordable again and the sales activity reflects that.
To be sure there is a long way to go yet. Until the employment picture improves you will not see a true recovery in Las Vegas, Detroit, or anywhere else. However, Las Vegas is a significantly better real estate bet than Detroit.
A study of economics usually reveals that the best time to buy anything is last year. – Marty Allen