Gambling Capital Is Flush With Empty Houses

In major cities across the country, there was an average drop in home prices of nearly 18 percent from August 2007 to August 2008, according to a Standard & Poor's/Case-Schiller Home Price Index study released Tuesday. But the pain isn't distributed equally. Phoenix's 30.7 percent drop edged out Las Vegas, at 30.6 percent, for the most precipitous drop in prices. Miami came in third with a 28.1 percent decline, just ahead of San Francisco at 27.3 percent.

Economists say it's essential for housing prices to stabilize. Right now the trend line looks as though it's falling off a cliff.

"When we hit the bottom is the question. But momentum is still definitely downward," said David Seiders, economist for the National Association of Home Builders.

All those empty houses aren't helping.

"We've got to get through it, clear the inventory," said Nicholas Retsinas, director of Harvard University's Joint Center for Housing Studies.

Complicating matters further is the economic recession. Fewer jobs, lower salaries, a depressed stock market: These things don't inspire people to buy houses. It may be 2012 before the housing industry is once again operating at a normal, sustainable pace of about 1.5 million new homes a year, said Robert Denk, another economist with the builders association.

But lower prices do juice the market. In that sense, the problem of declining home values is also part of the solution. Mark Zandi, chief economist at Moody's Economy.com, said that housing prices probably need to drop an additional 10 percent nationwide before the market will become stable.

"Prices need to come down further so that housing becomes affordable again so that it makes sense to buy rather than rent," he said.

A Flooded Market

The entire country has been affected by the housing crunch, but there has been particular carnage in the once-scorching real estate markets of South Florida, Southern California, Phoenix and here in Las Vegas. And of all these places, Vegas may be the one where the disaster is most visible.

In 2006, with prices peaking, builders plastered together a startling 36,000 new homes. Speculators waved cash and bought several houses at a time, figuring they could flip them just months later. It was a can't-miss game, like playing craps on the Strip with loaded dice.

The joke was that every valet parker and stripper in Vegas had a real estate license. About 20,000 people were trying to sell property. Buyers swarmed the valley, many of them from California or overseas.

"These people weren't required to have any significant money down, were not required to verify their income, and they were allowed to buy four or five at a time," said Cooper, of the Realtors association.