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The Great Recession brought us all down, but these two cities hardest of all—and the last two years have been a shameful morning after for the Sin City, writes MoneyShow editor-at-large Howard R. Gold.

Las Vegas
It was big news five years ago when Macau, the gambling mecca near Hong Kong, surpassed the Las Vegas Strip in gambling revenues.

It’s no longer even close: Macau’s gambling revenues were four times those of the Strip in 2010.

Iconic casino operators, like Las Vegas Sands (LVS) and Wynn Resorts (WYNN), now get the lion’s share of their revenue and operating income from Macau and Asia.

Macau’s gains have come in the years since Las Vegas’s housing and building boom turned to dust.

Home prices here have fallen 58.1% from their 2006 highs, the most in the Standard & Poor’s/Case-Shiller 20-City Composite Home Price index. They’ve even lost 12.6% from the nationwide recession low in April 2009—again, the worst performance of the cities in the index.

The median home sale price in the Las Vegas area at the 2006 peak was $313,500; in 2010, that fell to a stunning $138,100, according to the National Association of Realtors.

Currently more than 70% of the homes in the area are under water, meaning their value is worth less than the amount owed on the mortgage, according to Stephen Miller, chairman of the economics department at the College of Business at the University of Nevada, Las Vegas (UNLV). Nationwide, it’s around 28%.

A recent Forbes survey named Las Vegas the nation’s second worst performing housing market of the past decade.

The worst? Detroit.

A House of Cards, Imported from Detroit
That’s not the only thing Sin City has in common with the Motor City, although on the surface no two metropolises are more different (and I can guarantee that Detroit doesn’t have a hotel as cool as Vegas’s new Cosmopolitan).

Detroit was a manufacturing powerhouse that has been in decline for decades. Las Vegas was the prototypical boomtown: Clark County, in which Las Vegas is located, grew by about 40% in the last decade, pushing its population to nearly 2 million.

Detroit is gritty, Vegas is glitzy. What happens in Vegas stays in Vegas, and what happens in Detroit...well, who cares?

And yet there are striking parallels.

Robert Lang, director of Brookings Mountain West, a think tank affiliated with UNLV, said Las Vegas “has become a modern-day version of Pittsburgh or Detroit, which once relied on one sector for its growth to its detriment,” The Las Vegas Sun reported.
 
He “compared Las Vegas to Midwestern and Northeastern cities with manufacturing plants and steel mills where the middle class had high-paying jobs, only to see those plants disappear.”

The industry that defined Vegas, of course, was gambling.

“We’re a one-horse town, and gaming is driving the economy,” said Professor Miller of UNLV.

Vegas hotels and casinos employed 155,200 people in March, according to the Nevada Department of Employment, Training, and Rehabilitation. That’s almost 20% of total employment.

With an economy so dependent on tourism, it’s no wonder Nevada had the biggest drop in GDP of all states during the recession—6.4%. Two years ago, casinos had rows of empty, silent slot machines, and cabbies sat in long queues, waiting for fares that never came.

But what really clobbered Las Vegas this time was the housing bubble and bust. Las Vegas’s boom was years in the making, but its unraveling happened almost overnight.

Posh new megacasino hotels like the Bellagio, the Venetian, and Wynn Las Vegas made the Strip a hot destination for upscale tourists and conventioneers. Celebrity chefs like Wolfgang Puck, Emeril Lagasse, Charlie Palmer, and Joel Robuchon brought Michelin stars—and mind-boggling tabs—to the land of all-you-can-eat buffets.

The Strip’s boom was a boon for employment as well.

NEXT: The Housing Boom and Bust

Tickers Mentioned: Tickers: LVS, WYNN, MGM