Tuesday 23 January 2018

Viva Las Vegas, where mortgage defaulters have a chance to learn from their mistakes and move on

THIS week the column comes to you from Las Vegas. It may not be the ideal place to gauge the pulse of the American recovery but Nevada had one of the most violent boom/bust housing cycles in American history, so it constitutes a ground zero of sorts. The last time I was here in 2009, there were foreclosure tours of cut-price housing. There were buyers at discounted prices.

Prices kept falling until 2012 but since then, they have begun to stabilise and rise modestly. The market has cleared, or at least much of the process of clearing is already behind them.

When you compare Nevada and Ireland, one of the key differences between both housing busts is the non-recourse mortgage. In America, banks can't come after the person and chase them for the rest of their lives for a mistake made in a property boom. The American hands the keys back to the bank, the bank sells the property and the new owner moves in. The bank takes the loss on its balance sheet and everyone moves on, older and hopefully a little wiser.

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