A lot of money has been thrown at Nevada's housing problem, but only some of it is hitting its mark.
Since 2009, Nevada has been awarded more than $500 million in federal grants and stimulus funds to alleviate the state's housing crisis. Despite federal efforts, most of the money either has not been received or, when it has been received, it comes with strings attached.
"It's a drop in the bucket," said Larry Murphy, president of Sales Traq, a real estate monitoring firm. "I think they need to stop throwing money at a problem they don't know how to fix."
Mike Montandon, former mayor of North Las Vegas and former gubernatorial candidate, said the federal money he received during his time as mayor came with strict rules for use.
"One of the rules was that we [the city] couldn't buy a home until it'd been foreclosed, which meant we weren't helping the family until it was too late," Montandon said. Another rule was that money for the city to buy foreclosed homes required that they be purchased at 85 percent of their market price, driving home prices down 15 percent.
As part of President Obama's stimulus package, Nevada received money allocated toward housing. According to the American Recovery and Reinvestment Act (ARRA), the Nevada Housing Division was awarded $54,502,125. However, based on data from ARRA, the NHD only received $16,382,630, or 30 percent, of the funding.
"The intentions are well but the implementation and effectiveness are not there," said Nasser Daneshvary, director of the Lied Institute for Real Estate Studies at UNLV. "The government cannot find the organization or offices to implement all their efforts."
In addition to ARRA funding, according to USAspending.gov, in fiscal years 2009 and 2010, Nevada received $308,025,023 in federal grant money from the Department of Housing and Urban Development (HUD). Since February, Nevada has been awarded more than $194 million from the federal "Hardest Hit fund" intended to assist unemployed homeowners with mortgage payments, according to Congresswoman Shelley Berkley's office.
The grant money, which includes ARRA funds, ranges from a $1 grant to the Area Health Education Center of Southern Nevada for lead hazard reduction to $29,666,798 to Clark County for a neighborhood stabilization program. According to Lon DeWeese, chief financial officer of the Nevada Housing Division, Treasury approval is needed before any of the Hardest Hit funds can be used.
"Since the U.S. Treasury is just now approving the plan for use of the funds, none have yet to be expended for the Hardest Hit Fund program applicants," DeWeese said in an e-mail response.
According to Montandon, the slew of federal processes compelled him to develop his Foreclosure Avoidance and Stabilization Today, or FAST program, during his gubernatorial campaign earlier this year. The FAST program combined a private mortgage insurance policy with a state government-backed loan to guarantee the portion of a home loan unsecured by the market value. FAST would have been funded by private insurance premiums paid by participants as opposed to taxpayer subsidies.
"A market-driven system where markets analyze risk will provide a better environment," Montandon said. "A state solution will be more effective than a federal one."
The federal government has more than just strings attached to Nevada. According to the U.S. General Services Administration, the federal government owns 84 percent of the land in Nevada. Furthermore, according to Inside Mortgage Finance, government lenders guarantee approximately 90 percent of all newly originated mortgages nationwide. Government sponsored entity (GSE) Fannie Mae has $33 billion in Nevada home loans in its Single Family Guaranty portfolio.
According to data from the Congressional Budget Office, since 2008 when the GSEs were placed in government conservatorship, $145 billion has been spent to keep them afloat. While the GSE debate has reached the national stage, according to Daneshvary, GSE reformation would not solve Nevada's entire housing mess.
"Reform them [GSE's], yes, eliminate them, no," Daneshvary said. "Because they deal with so many homes, a complete overhaul would cost billions of dollars."
According to Daneshvary, excess housing supply and record unemployment are the two biggest factors affecting Nevada's housing market. The recent foreclosure crisis involving shaky bank practices isn't helping either, he said.
"If there are 12 to 13 foreclosures in a half-mile radius of a healthy home, that home's value will decline 40 percent," Daneshvary said. "This creates a spillover effect of toxic neighbors."
However, some economists believe foreclosures are necessary for the housing market to correct itself. Arnold Kling, former senior economist with Freddie Mac, thinks the housing market needs to run its cycle.
"In the current environment, banks are very unpopular," Kling said. "The more you try to put off foreclosures, the longer it will take for the market to correct."
Tom Cargill, professor of economics at the University of Nevada, Reno, agrees that foreclosures are necessary for market stability.
"Nevada, more than any other state, needs to hit bottom," said Cargill. "It's painful, but the only way to reach equilibrium is to clear out the inventory of houses."
Montandon, who was the only gubernatorial candidate to unveil a foreclosure plan on his campaign website, admits there won't be a simple solution for Nevada.
"If there was a magic bullet for fixing it, someone would have fixed it by now," Montandon said.
Dennis Smith, president and CEO of Home Builders Research, a housing research firm in Las Vegas, said jobs, not federal money, will fix Nevada's market.
"Based on history, putting Band-Aids on problems hasn't worked," said Smith. "It's going to take jobs and time."
Despite the housing climate, Daneshvary does see hope in Nevada's future.
"Baby boomers are set to retire within the next 10 to 12 years, and I think we'll pick up some of them," Daneshvary said. "But until employment improves, demand for real estate won't."