Economist: Las Vegas housing recovery could take decades

Sileshi Kassa is nothing if not persistent.

The 61-year-old Ethiopian immigrant slogged through a bureaucratic bog for two years so that he could save his family’s Las Vegas-area house from foreclosure.

"That is our culture, a house is our identity," said Kassa, a cabdriver who viewed the house he purchased in 2006 as his family’s foothold in the community.

When he bought the house in the southwest Las Vegas valley for $322,000, it looked like a great deal for his family, which includes two daughters he sent to the University of Nevada, Las Vegas.

"It was a good time," he said. "I worked six days, I made good money."

But the global recession arrived like a tsunami in 2008 and swamped Kassa, and more than 150,000 others. Driving a cab was no longer enough to maintain the mortgage.

"The cab business was going down because of the tourists; that was the problem," he said.

Starting in 2010, Kassa arranged a loan modification that fell through, a short sale that was subsequently canceled and, most recently, a new modification that could reduce his payment to less than $900 and shave more than $200,000 from his principal balance, if approved.

"He has handled it very well," said Christine Miller, an attorney from Legal Aid of Southern Nevada who helped Kassa. "Some people come in and are very upset if you tell them something they don’t want to hear. He never really complained, he just kind of hung in there."

Hopefully there is something left in the well where Kassa found his patience and optimism because the rest of Southern Nevada is going to need it if data from a foreclosure workshop Monday in Las Vegas City Hall are any indication.

Despite a slowdown in foreclosures and signs of an uptick in prices, the overall housing market has fundamental problems that could take decades to undo.

Corporate and government help has been unable to drain the economic and bureaucratic swamp that has left 59 percent of mortgages here underwater.

Those were two of the underlying messages at the Housing Stabilization Roundtable hosted by Mayor Carolyn Goodman.

The event was a chance for local officials, social service providers and analysts to update one another on the fallout from a housing crash that is going on 5 years old and discuss plans about what to do about it.

"It has just been a snowball effect," said Goodman, who has watched the crisis hit the city in the form of empty, dilapidated houses, falling property tax revenue and strained city services. "This housing problem has affected every aspect of this city."

RECOVERY ‘TO BE MEASURED IN DECADES’

The most troubling portion of the event was a presentation by Jeremy Aguero of the economics research firm Applied Analysis.

According to data that Aguero compiled, there are ominous signs on the horizon for the Southern Nevada housing market.

Full recovery from the crash that sapped $20 billion in equity from the region, Aguero said, "is not going to be measured in years, it is going to be measured in decades."

Among the numbers indicating that recovery will be a rocky path is the percentage of adjustable rate mortgages, ARMs, in the state. According to Aguero’s presentation, 18.2 percent of Nevada mortgages are ARMs compared with 12.1 percent nationwide.

That is a problem because it makes Nevada, and Las Vegas in particular, especially vulnerable to the machinations of national and international monetary policy.

"If the interest rates start ticking up, this would create a whole new problem," Aguero said.

With the high percentage of ARMs, the 9.9 percent of loans in Nevada with past-due installments is above the national rate of 7.4 percent and higher than all but two other states, Georgia and Mississippi.

And when it comes to loans considered seriously delinquent, Nevada’s rate is 12.4 percent compared with a national rate of 7.3 percent.

Also of note, banks own nearly 13,000 housing units in the area already and will control supply for the foreseeable future, Aguero said.

‘FORECLOSURE FATIGUE’

The ongoing dysfunction in the housing market overwhelms efforts to find solutions, according to meeting participants.

And "foreclosure fatigue," a phrase former Assembly Speaker Barbara Buckley used at the meeting, has frustrated homeowners who have simply given up on the idea of paying for their houses.

"There has been a lot of talk about ‘strategic squatting.’ That is not what I see at all," said Buckley, who is also executive director of the Legal Aid Center of Southern Nevada. "I see people who love their homes, love their neighborhoods, love their kids. They lose their job, they lose their savings, and they don’t know what to do."

While officials at the stabilization meeting were frustrated by the scope of the housing market woes, they were hopeful they could connect more homeowners with programs to help them.

A $25 billion settlement among 49 states, the federal government and five major banks includes $17 billion in potential principal reduction and other relief nationally.

The settlement also includes billions more in payments to the states for foreclosure prevention, legal aid, fraud investigation and other relief, of which $57 million will come to Nevada. That is in addition to $30 million for Nevada from a settlement with Bank of America.

The settlement gave participants new hope they will finally be able to make good on the promise of relief for homeowners.

"We have to be able to deliver," Goodman said. "That has been the problem all these years, we have not delivered in the end."

Contact reporter Benjamin Spillman at bspillman@ reviewjournal.com or 702-383-0285.

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