Saturday, Sept. 11, 2010 | 2:05 a.m.
- Walking away from a mortgage comes with risks (9-3-2010)
- Analysts disagree on falling house prices (8-6-2010)
- From building boom to recessionary bust, local real estate market was a wild ride that went south (6-11-2010)
- Tax credit’s effect peters out, pointing to a lull in housing sales (5-13-2010)
- Bank foreclosures, delinquent mortgages continue to rise (5-12-2010)
- Tax credit’s end fails to help Las Vegas home sales (5-10-2010)
- Housing market awaits impact of tax credit’s expiration (5-7-2010)
- Las Vegas has more than its share of troubled properties (5-7-2010)
- Las Vegas posts nation’s highest metropolitan foreclosure rate (4-28-2010)
- Report: Decline in Las Vegas home prices slows (4-27-2010)
The Las Vegas housing market remains vulnerable because of the weakness in the economy, but it has shown signs that it’s starting to stabilize, according to U.S. Department of Housing and Urban Development Secretary Shaun Donovan.
Donovan appeared in Las Vegas on Friday to highlight $35 million in additional federal funds for the department’s Neighborhood Stabilization Program in which local governments redevelop abandoned and foreclosed homes.
His visit to Las Vegas comes as home sales have started to slow since the expiration of a federal tax credit in April while home prices have remained fairly steady for about 16 months.
“Las Vegas is by no means out of the woods. It has the highest foreclosure rate in the country, but it is better compared to where we were,” said Donovan, who spoke to the Las Vegas Sun editorial board.
“Housing prices dropped for 30 straight months before President Obama was sworn in, and foreclosures have begun to decline and foreclosure starts are down. It is a dramatic change from what we saw before, and the broad range of things we have done has created a fragile recovery at this point,” he said.
The $35 million for local governments and a combined $43 million for the state as a whole is from $1 billion included in the financial reform legislation, Donovan said.
Previously, the state received $72 million out of a $4 billion national package for the program that establishes financing mechanisms to help qualifying homeowners purchase a foreclosed home and rehabilitates abandoned or foreclosed homes.
If the same funding formula was used, Nevada would have received a third as much money, but it was important to target hard-hit housing markets like Nevada this time, he said.
As of March, less than one-third of the previous allocations had been spent, but with guidance from HUD, nearly all of the $30 million for Clark County and North Las Vegas, $14.8 million for Las Vegas and $3.2 million for Henderson has been spent, he said.
The goal of the program is to stem the tide of foreclosures in neighborhoods that can cause other property values to decline. It’s one of several efforts by the federal government to tackle the housing crisis, including one started this month to help underwater homeowners get their loans refinanced.
There have been other loan modification programs and an effort to spur lenders to facilitate short sales with homeowners — sales in which the owner of the home is allowed to sell it for less than is owed on the mortgage.
The federal programs have come under criticism for being ineffective and not doing enough to deal with foreclosures and falling prices.
Donovan admits nothing that has been done is a “silver bullet” to solve the housing crisis.
“We have a whole lot to dig out of,” Donovan said. “If you look at the scale of what has been done. Is it perfect? No. It is going to turn us around in six months or year. No. But it clearly has contributed. One of John McCain’s former advisors said if we had not intervened in the market, it would be dramatically worse. There is no question we moved the needle, but the needle has a long way to go to get back where we were when we started this crisis.”
Donovan said there are no plans to create another federal tax credit because it is believed to have generated as many sales as it could while it was in effect. He said low interest rates remain helpful in spurring sales, but it’s going to take improvement in the job market to further aid the housing recovery.
“The foreclosure problem moved from one of bad loans to unemployment, and we have to get folks back to work to see continued growth in the housing market,” Donovan said.
Donovan said the financial reform legislation will significantly help prevent a future housing bubble and collapse because it will offer consumer protections and prevent people from getting loans they cannot afford to pay.
Donovan stressed the importance of home ownership but said too much emphasis in the past was placed on it at the expense of rentals. Many HUD rental programs were neglected over the last several years, he said.
“But we should not make the mistake and fall into the trap that this problem was about poor people trying to be homeowners and that’s what drove this crisis,” Donovan said.
One of the lessons of the housing crash, however, is that people will look at housing as less of a commodity and ATM machine than as a place to live and grow with their family, he said. It shouldn’t be viewed as a pot of gold at the end of the rainbow, he said.
“There is a lot of blame to go around in this crisis,” Donovan said. “Too often in the polarized world of Washington, people pick particular scapegoats. Are there homeowners who bought homes who shouldn’t? Absolutely. Were there people who bought homes to finance a lifestyle that was unsustainable? Absolutely. This is not just a Las Vegas phenomenon, but there were a lot of folks taken advantage of. I believe and the president believes that if we had a regulatory system set up to protect consumers, that this crisis certainly wouldn’t have been nearly as bad or perhaps could have been avoided all together.”