The Las Vegas Housing Market Crash of 2006

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Las Vegas Housing Market Crash of 2006, who is to blame?


Tina Beach

In the United States, the lending industry’s lack of aggressive monitoring was a big part of the housing market crash of 2006. The Las Vegas housing market, once a booming industry in 2003 to 2005, is now one of the top 3 cities in foreclosure properties. I sat with Suzanne Pashnick to get her take on what happened, who is to be blamed and what can be done for the city to recover. Suzanne has been in the real estate field since 1995 and began her career in Michigan. In 2005, she moved to Las Vegas and continued her career in real estate and is currently an agent for CENTURY 21 MoneyWorld and remains licensed in Nevada. Las Vegas during the boom of 2003-2005 got too big too fast. What goes up eventually comes down. And when it came down, it came down with consequences. No one ever imagined that the housing market in Las Vegas would go down; they only thought the market would either go up as it had been or at least stabilize. Speculators and exotic loans pushed home prices in this gambling Mecca dramatically higher during the first half of the previous decade. But after peaking in 2006, the real estate market's crash cleaned out investors and submerged an alarming portion of area homeowners. “Through the fourth quarter of 2009, more than 81 percent of single-family home mortgages in Las Vegas were underwater.”According to Hubble Smith of the Las Vegas Review Journal, he said “The existing home market in Las Vegas has applied the brakes, slowing to 7.7 percent growth in median price and 2.4 percent in monthly sales, local research firm SalesTraq reported.” It started with the lending industry. They made the process of getting the money to purchase a home so accessible, so easy, and so convenient. They created programs that got people who couldn’t qualify, wouldn’t qualify on a normal basis, for a home loan… a mortgage. There were programs where the income wasn’t an issue. As a result of this, the lending industry is now forced to become stricter in their lending techniques. However, if you think about it, are they really stricter? No, not really. The banks have always been this strict with their criteria to lend out money, they just got greedy. The fear of losing business to another company forced lenders to push a loan through when clearly they knew that the application should have never been filled out. As the housing market started its downward spiral and people were losing their homes because the adjustable rate mortgages {ARMs}were coming to an end, the government stepped in to bail most if not all the banks out. Now, the banks are verifying income, verifying whether or not the buyer has a sufficient amount of a down payment, etc. “ARMs generally permit borrowers to lower their initial payments if they are willing to assume the risk of interest rate changes. In many countries, banks or similar financial institutions are the primary originators of mortgages.” “In fact, there were warning signs. In the decade preceding the collapse, there were many signs that housing prices were inflated, that lending practices had spun out of control, that too many homeowners were taking on mortgages and debt they could ill afford, and that risks to the financial system were growing unchecked. Alarm bells were clanging inside financial institutions, regulatory offices, consumer service organizations, state law enforcement agencies, and corporations throughout America, as well as in neighborhoods across the country. Many knowledgeable executives saw trouble and managed to avoid the train wreck. While countless Americans joined in the financial euphoria that seized the nation, many others were shouting to government officials in Washington and within state legislatures, pointing to what would become a human disaster, not just an economic debacle.” This probably doesn’t make the real estate agent very happy, but had they followed the rules,...
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