There's definitely an interesting comparison between Detroit and Vegas - both of whom have housing markets which I think could accurately be described as "languishing."
First, Detroit, courtesy of the WSJ:
Detroit is finally chipping away at a glut of abandoned homes that has been piling up for decades, and intends to take advantage of warm weather and new federal funding to demolish some 3,000 buildings by the end of September.
Mayor Dave Bing has pledged to knock down 10,000 structures in his first term as part of a nascent plan to "right-size" Detroit, or reconfigure the city to reflect its shrinking population.
When it's all over, said Karla Henderson, director of the Detroit Building Department, "There's going to be a lot of empty space."
Mr. Bing hasn't yet fully articulated his ultimate vision for what comes after demolition, but he has said entire areas will have to be rebuilt from the ground up. For now, his plan calls for the tracts to be converted to other uses, such as parks or farms.
Pretty amazing. Not really totally crazy, if you think about it - they'll get Federal funds, and create jobs, to knock down houses no one wants, which will also help values of remaining homes hold steadier. Then, in a few years, they'll (probably - assumption on my part!) get more Federal funds and create more jobs when they rebuild these homes - if the situation recovers. Creation by destruction. Bizarre at the core, perhaps - or maybe bizarre on the surface and totally logical at the core.
Also amazing is the situation in Las Vegas, courtesy of the NY Times:
"The chance to make money on the next housing boom “is like it’s never been,” Mr. Lee, a real estate promoter, assured a crowd of agents, investors and bankers. “We’re going to come back like you’ve never seen us before.”
Home prices in Las Vegas are down by 60 percent from 2006 in one of the steepest descents in modern times. There are 9,517 spanking new houses sitting empty. An additional 5,600 homes were repossessed by lenders in the first three months of this year and could soon be for sale.
Yet builders here are putting up 1,100 homes, and they are frantically buying lots for even more.
Las Vegas is trying to recover by building what it does not need. It is an unlikely pattern being repeated in many of the areas where the housing crash was most severe."
Never mind the talk of "the next housing boom" when you live in one of the worst real estate markets in the country (yeah - SEVENTY percent of Nevada mortgage holders owe more than their homes are worth!)... Contrary to what my friend Yangabanga emailed me, I explained that this was the same plan as Detroit, just in a different order. While Detroit is demolishing unwanted inventory now, and will rebuild in the future, Vegas is doing the rebuilding without first disposing of the excess inventory, and they'll have to get rid of the excess inventory later - barring a miracle recovery to peak bubble levels. I'm surprised, as I'd think that the Detroit model would be easier to pull off, logistically.
A Vegas builder elborated on the phenomenon in the NYT article:
“We’re building them because we’re selling them,” Mr. Anderson said. “Our customers wouldn’t care if there were 50 homes in an established neighborhood of 1980 or 1990 vintage, all foreclosed, empty and for sale at $10,000 less. They want new. And what are we going to do, let someone else build it?”
So Vegas simultaneously has a surplus of supply and a surplus of demand. Again, amazing.