The NEWS with Tim O'Callaghan

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Thursday, February 12, 2009

Economic scars will be ever present

This first published February 12, 2009 in the Henderson Home News, a Community Newspapers of Nevada publication.

A few Sundays ago, my bride asked if there was anything I wanted to do that day for my birthday. I told her a bicycle ride on the River Mountain Loop trail at Lake Mead might be fun.

We packed up the bikes and lunch to eat on the way to the trailhead. As we drove past Lake Las Vegas, she noticed the grass was turning brown on the golf course and asked if the course was closing.

I told her I didn’t think the judge had ruled on it yet.

However, according to a story by reporter Jeremy Twitchell, federal Bankruptcy Judge Linda B. Riegle ruled Jan. 15 that Lake Las Vegas can close The Falls golf course at the main entrance of the project.

It sounds as though Lake Las Vegas will let the course dry up and brown out, which would match the rest of the landscape along Lake Mead Parkway. For the record, I don’t think Lake Las Vegas will allow the entrance to lose its luster entirely. I would expect the front of the course, closest to the road, to be kept green.

To my disbelief, however, I noticed how development has encroached upon the desert area heading to the lake, and now that building has stopped, it’s left an unsightly mark.

Developers have scarred the desert mountain landscape east of the entrance toward Lake Mead to an irreparable state.

During the boom of speculation and colossal financial leveraging, developers hacked out giant steps in the hillsides leading down to the entrance of the Lake Mead National Recreation Area, before the economic collapse of 2008.

Now the land stands scarred and undeveloped, ruining the view of the hillsides. The result of unbridled growth and speculation will be around for a while, I’m afraid.

If my memory serves me correctly, our real estate crisis started back in 2002, when the nation was recovering from the terrorist attacks on Sept. 11, 2001.

The spawning of economic recovery through high-leverage financing and interest-only sub-prime loans turned what was just a crisis into economic disaster. Those balloon payments came home to roost, starting the unstoppable domino effect, in 2007.

The housing boom across America created a Pandora’s box for Las Vegas, either unbeknownst or perhaps flatly ignored by most. People were flocking to Vegas either to be entertained or buy real estate.

But how were they able to afford the weekends in Sin City or the purchase of a second or third home in the city where the streets are mythically paved with gold? My guess is they took advantage of those hot mortgage deals and raided the equity in their homes.

The Ponzi schemes people played on themselves in hopes of making a comfortable future for themselves have quickly collapsed — leaving families and businesses financially scarred much like those hills gutted until the next cycle of prosperity hits America.

The real question is, when will that occur? By my account, if we only look at the mortgage crisis, it could be another three to four years if homeowners and leveraged business can’t get refinancing. Sub-prime loans and other risky leveraging were still being transacted in the fourth quarter of 2007. My guess is that we have seen the height of the tsunami but have yet to imagine the carnage when it completely recedes.

Tim O’Callaghan, co-publisher of the Home News, can be reached at 990-2656 or tim.oc@vegas.com. He writes a regular column for the Home News