America has plenty of single-industry cities that know housing blight.
Gary. Pittsburgh. Cleveland.
But those Rust Belt dinosaurs look vibrant next to Las Vegas, the Web site of a national business magazine says.
A new report from Forbes.com found that for sheer volume of abandoned apartments and homes, Las Vegas beats all national comers. Detroit ranked second.
That Las Vegas would surpass Detroit is especially noteworthy, considering Detroit has served as the nation’s prime example of urban blight for, oh, roughly three decades now — ever since foreign automakers began challenging the Big Three U.S. carmakers for global market share. That battle culminated in 2008, with the federal government bailing out two of the Big Three and Toyota unseating General Motors at the top of the worldwide annual-sales heap. Even the Lions, Detroit’s football team, fared poorly in 2008, posting the National Football League’s first-ever 0-16 season.
Despite all that, Las Vegas is still the nation’s biggest loser, according to Forbes.com’s "emptiest cities" list.
Forbes.com evaluated fourth-quarter data from the U.S. Census Bureau to determine which city ranks as the country’s most-abandoned market. In Las Vegas, the Web site’s editors found a rental vacancy rate of 16 percent and a home vacancy rate of 4.7 percent. Detroit had rental vacancy of 19.9 percent and home vacancy of 4 percent. A formula combining those factors ranked Las Vegas ahead of Detroit for overall vacancy.
Las Vegas has roughly twice the number of residents as Detroit claims, so it has more households. That’s why it can have a lower percentage of vacancies but still have more empty homes than Detroit.
The national rental vacancy rate was 10.1 percent in the fourth quarter, Forbes.com said. That’s up from 9.6 percent a year earlier. Homeowner vacancy rose from 2.8 percent to 2.9 percent in the same period.
Local economists and analysts said they don’t buy Forbes.com’s conclusion.
Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas, said his third-quarter statistics show the local market has 31,000 empty apartments and homes, and roughly 730,000 households. That’s a vacancy rate of a little more than 4 percent.
"I think this is a case of their having difficulty selling magazines," Schwer said. "I think part of the story is that Las Vegas is an easy target."
That’s not to say builders in Las Vegas didn’t build a few too many homes in the go-go days between 2003 and 2006, Schwer said. Builders back then were churning out 30,000 to 40,000 new units a year. Investors scooped up a sizable share of those homes; today, many of them are back on the market, counting among the 22,000 or so resales Las Vegas has claimed for the better part of two years.
But the irrational exuberance that yielded the construction boom is what separates Las Vegas and Detroit. Las Vegas is comparatively empty today thanks to expectations it would keep growing, a promise it couldn’t fulfill amid a global credit freeze. Detroit is empty because, well, it hasn’t grown since the 1970s. For Las Vegas, today’s malaise results from acute economic conditions: a housing bust that crippled consumer spending, a recession that reined in travel.
Las Vegas also enjoyed some of the nation’s strongest housing demand and price increases in 2004 and 2005, said Brian Gordon, a principal in the economic-research firm Applied Analysis. The higher market peak meant a steeper tumble when the bubble finally burst, Gordon said.
"If you look at the amount of housing demand that took place, we were constructing more homes than net population growth required," he said. "We were artificially inflating end-user demand, and today, that has us holding the bag with thousands of vacant homes."
Though Detroit and Las Vegas share interesting parallels — most importantly, they’re both single-industry towns — they should experience different fates, experts said.
If Forbes.com conducts the same study in three to five years, Schwer said, Detroit probably will be in the top five. Las Vegas probably will have recovered enough to abandon the "abandoned" label.
Even if the Big Three survive, Detroit just won’t ever again need the number of workers it required in its heyday, Schwer said. Plus, unlike their counterparts in the auto industry, local casino owners understand innovation and competition, Schwer said. They built resorts and business models that flourished even as gaming moved into most other states, and they’ve even competed with themselves by opening operations overseas, Schwer said.
"I have every reason to believe when we come out of this recession, there will still be people on the Strip trying to outdo each other, and they will continue to compete," he said.
Las Vegas has historically been a growth market, he said, and with home prices correcting locally, more people can afford homes here. What’s more, once the national economy cycles out of the recession, travel should pick up and boost the city’s fortunes. New home-building is "essentially at a standstill," Gordon said, so market conditions are already well into correction mode.
"Certainly, we’ve never seen this type of environment in Southern Nevada, but we would expect it will weather the storm," Gordon said. "The question remains how long the downturn will last."
Other markets among the top five emptiest cities include Atlanta, Dayton, Ohio, and Greensboro/High Point, N.C., which is home to the main rival to downtown’s World Market Center furniture mart.
Contact reporter Jennifer Robison at jrobi firstname.lastname@example.org or 702-380-4512.TOP FIVE EMPTIEST CITIES
1. Las Vegas
4. Greensboro, N.C.
5. Dayton, Ohio