You would have to be blind not to notice all of the Commercial Real Estate vacancies here in Las Vegas. Driving through town with every turn and on almost every block we see vacancies for offices, retail and specialty stores.

What amazes me is that there is still new construction taking place on commercial property.

As we see more and more businesses closing every week the vacancy rate continues to climb. I can’t be the only one that sees this.

This will defiantly be the next big hit on the economy here locally. Why do the banks continue to loan for new commercial projects with such a high vacancy rate? Do they just assume that the Tax Payers will bail them out again?

Perhaps it is time to use some common sense and consider a moratorium on new construction permits. As much as I appall Government intervention into the private sector someone needs to display some leadership. I much prefer the idea of a moratorium on new construction permits than I do another round of bank bailouts.

I am not suggesting a moratorium on casino construction. That is an entirely different class of commercial property and I realize that casino operators are taking advantage of reduced building costs.

We have not yet recovered from the busting of the “Housing Bubble” and when the commercial sector implodes it will send shock waves through the economy unlike we have seen yet. The devastation will be compounding as it will cause even more businesses to fail. The difference between the “Housing Bubble” and the “Commercial Real Estate Bubble” is that the commercial sector has the potential of being more destructive to the economy.

Is this treat of the “Commercial Real Estate Bubble” a local phenomenon? No it is not. You can see similar rates of commercial vacancies nationally.

Do I believe a permit moratorium would stop the pending collapse of the commercial real estate market here? No I do not, but at least we could lessen the blow. Las Vegas Foreclosures already leads the nation in home foreclosures. Do we really want to lead the nation in commercial foreclosures too?

It is not a question of “if” the commercial real estate sector will collapse but “when?”.

By his own admission the President has not read the 1,000+ page legislation which has become a Washington DC trend. President Obama also blamed Republicans for attempting to block the bill. Now unless I have missed something the Democrats hold a 2-1 majority in the House of Congress and a 60-40 majority that is filibuster proof in the Senate. The President does not need a single Republican vote to get healthcare reform passed into law. So why more Republican bashing for the President that ran and won the presidency on “a new kind of politics in Washington” and, “change you can believe in”?

According to a July 16, 2009 article on Smart Money, “More than $1 trillion will be needed to pay for the Obama administration’s ambitious health-care reform plan. To come up with the money, the president has pledged to trim fat from the Medicare and Medicaid programs. But when all is said and done, it may be consumers who end up paying the price.”

So why would this information be on a real estate website that sells Las Vegas homes and other property here in the Valley? Simple, healthcare represents 1/6 of our economy and the government wants to take it over. The market for real estate in Las Vegas is just now beginning to see signs of recovery. If we hand over healthcare to our government you will see taxes skyrocket and small businesses forced out of business. Since small business employs 99% of Americans this will send shock waves through the private sector and add to the escalating unemployment rate. This bill will hurt the Las Vegas economy and tank the Las Vegas real estate market if it becomes law.

Michael Steel: Obama Healthcare is a Reckless Experiment

Many so-called industry experts are quick to point the finger at the Bush Administration for failing to stop unrestrained sub-prime lending. What amazes me is that until we recognized what actually led to this economic disaster we have little, if any hope of recovering from it and stand a good chance of repeating it again, in the future.

The simple truth is that President Bush and his administration called for congress to enact stiffer regulations of Freddie Mac and Fannie Mae on multiple occasions dating all the way back to 2001 only to be blunted by stiff opposition from the Democrats. The liberal lending practices of Freddie Mac and Fannie Mae were supported by Democrat leaders in both houses of Congress and were forced upon many legitimate lenders with threats of withholding funds by the Treasury. Freddie Mac and Fannie Mae have long enjoyed the status of the Democrats “sacred cow” and still do, even after their mismanagement and lack of regulation was the catalyst for the Wall Street collapse in 2008.

For those that continue wagging the finger of blame at President Bush I would suggest a refresher course in Civics. Congress holds the purse strings and is responsible for legislation and regulation, not the Executive Branch. In the 2006 election, the Democrats seized control of both houses of Congress. Two years later, Wall Street imploded and Bush got the blame.

Congress continues to shoot the American Tax Payer in the foot with an accelerated liberal agenda. Mammoth legislation is passed without being read in an effort to sneak in legislation that has been on the liberal’s wish list for decades. Billions of dollars from the treasury are being hastily spent on projects such as Acorn and Planned Parenthood in the name of “Economic Stimulus”.

Has an emergency been created to enable the “Left” to enact long desired legislation, further a liberal agenda and feather their supporters nest with billions of tax payer dollars? And they have the nerve to blame Bush? Do they really think that all of us are that naive?

Now, the Obama Administration is stating that they are not ruling out another “Stimulus Bill”. We were told that the first stimulus package was hastily passed to avoid further economic woes and to keep unemployment under 9%. With unemployment now reaching 10% I think we can agree they failed. The $700 billion dollar Tarp Fund, the $787 billion dollar Stimulus Bill and the pork laden $410 billion Omnibus spending bill have seen little to no results in affecting the economy in a positive manner other than the economy of Obama and Democrat supporters. We did not keep GM or Chrysler from going bankrupt and we did not stabilize the housing industry and we did not keep unemployment in check. I have no doubt that a “Stimulus II” would have the same affect.

I also have no doubt that if the same events and actions were taken in the private sector, as we have witnessed from our government, the Attorney General would have launched a full blown investigation and the term “corruption” would flow through the liberal main stream media like a tidal wave. Tony Soprano could take lessons from our Commander in Chief and Congress.

Repairing the Economy

Enough of what hasn’t worked, let’s discuss what will work. It was the housing industry that led to Wall Street’s collapse in 2008. So that is where we need to start the repair work. The sub-prime lending fiasco in the real estate industry is only a small part of the current problem. An article on The Wall Street Journal’s website reiterated what I have stated for some time now, that the largest percentage of foreclosures (51%) are conventional (prime) loans, NOT sub-prime loans, where borrowers have negative equity in their homes and choose to walk away. This negative equity occurred due to home prices plummeting resulting in homeowners owing more on their homes than it currently appraises for.

Economists at the University of Chicago, Northwestern University and the European University Institute state that an estimated “26% of U.S. homeowners who stop paying their mortgage may be doing so intentionally, not because they can’t make the payments but because they don’t want to put money into a house that’s worth less than what they owe.”, according to a Times article.

With all of this said, it is obvious that the Obama administration is on the wrong track attempting to help homeowners afford their mortgage payments. However, last Wednesday’s announcement by Freddie Mac offering loan-to-value ratios on home mortgage refinancing of up to 125 percent for qualified borrowers does have some merit. Many homeowners that have seen their home value drop are unable to seek refinancing primarily due to the home’s inability to appraise for the existing mortgage. By increasing the loan-to-value ratio from 105 percent to 125 percent it will allow some distressed homeowners to reduce their mortgage payments. This will only affect a very small percentage of homeowners however.

California and Nevada are two of the hardest hit states, Las Vegas real estate was especially impacted negatively. Given the resilience of Las Vegas, we have started to see a modest recovery due in most part to the First Time Home Buyers Tax Credit and investors capitalizing on bargains.

What Our Government Can Do

Our Government must be completely honest with it’s’ citizens and let them know that the Calvary is NOT on the way. Let the free market work. If you are making $15 an hour and participated in a “liar loan” and were able to finance a $250,000 home, start packing. The government is not going to bail you out and let you stay in a home that you can not possibly afford. The longer we prolong the inevitable of foreclosures to homeowners that should never have received financing the more we negatively impact the values of homes owned by their neighbors.

Where our government can help is to financially back (insure) 4% – 30 year – Fixed Rate mortgages to qualified buyers. In addition, to housing values plummeting do to a lack of confidence in the economy, it is a simple supply and demand equation. By offering a government backed 4% – 30 year -Fixed Rate loan the supply of unsold homes would disappear virtually overnight and home values would begin to increase again.

Confidence: We must restore confidence in our economy to stop the downward spiral. A good first step is for Congress to act as good stewards of our money and stop spending like a bunch of drunken Sailors. Our government can stop trying to pass idiotic legislation like the Cap And Trade Bill that serves only special interest.

Education: Education is vital. Too many Americans think in short term only. This trend is growing every year. We have seen it with the stock market and the real estate industry. Real estate cycles but most homeowners do not understand this, when they are told they are upside-down in their home equity, they opt for the easy solution, to voluntarily walk away. We witnessed this with California real estate in the ‘90s and Louisiana in the ‘80s. Homeowners abandoned their homes only to see home values escalate well above their mortgages a couple of years later. Homeowners that stuck it out made substantial gains when they did sell in later years and retained their good credit. Homeownership is much like the stock market with its ups and downs. If you buy when the market is high and sell when it is down you will lose. On the other hand if you just hang on prices will eventually rise again. Paper losses are just that paper. And regardless of what the appraiser says about your home, you still need a place to live. Perhaps educational PSAs would be in order.

Summary

These are only a few suggestions to help put the economy back on track. To revitalize the sector that caused the Wall Street collapse in the first place…. Housing. Our government would have you believe that if you have a headache you should put a tourniquet on your leg. Why not treat the illness at the source?

These suggestions would not cost tax payers anything and will work unlike everything else the government has attempted.

A Democratic icon once said “it’s the economy stupid”. I say “it’s the Housing Sector stupid!”, that we need to fix. If we do this, the economy will start to recover faster than you can say “Term Limits”.