Las Vegas real estate market report

I was very impressed by the New York Times this last week as they presented graphs and a balanced look at the current and historic real estate market in many Major U.S. Cities for the last 20 years.  This is what good balanced reporting is all about which seems to be missing in much of this countries reporting of late.  Please take a look at the video and charts for “Home Prices Across the Nation.” Please notice the light blue bars which shows the Las Vegas market was under preforming from 1996 to 2003 based on the national figures and then soured over the national average through 2005.

What the chart does not show is how extremely low interest rates and very liberal lending practices affected the Las Vegas market.  Because interest rates were so low during this period, payments were acceptable even when purchase prices increased beyond the normal national levels.  This allowed home prices to increase at a very rapid rate, with investors, builders and flippers watching as inventories in our valley began to shrink further driving price inflation. As more and more people started investing in the Las Vegas real estate market we became famous for our real estate appreciation, which in turn fueled more appreciation in the residential real estate sector. 

This chart is also interesting in that you can see the market start to shut down approximately 3 years from when it heated up.  This could have to do with the 3 year adjustable rate mortgages that were being taken out to purchase these homes and which have been driving up foreclosures in the last 18 months.  If you plot a 3 highest peaks in sales from the 2nd quarter of 2004 through the first quarter of 2005 and project those 3 years to consider when the greatest number of three year ARM’s will reset we will see when the bottom of the market will occur in Las Vegas (the time of the most foreclosed inventory and defaults).  This will mean the best time for the Buyers will probably be in the first or second quarter of 2008.  At that point it is likely that inventory levels will begin to shrink and prices will stabilize.  Keep in mind that Las Vegas has a huge employment growth projected for 2009 which may very well bring the residential real estate market back to a healthy level in a very short time.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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So what is happening to prices?  Yes, they are moderating some but not like you would expect. There are a couple of things you need to be aware of before I give you figures for the valley.  First off in the last year we have had some big high rise condo projects close.  These projects come with big price tags for the units that have been closing.  Most recently Sky Las Vegas luxury condominiums closed its units in the last 60 days.  This will boost the average price per housing unit in the valley higher than it really is.

So here are the figures.

According to the Greater Las Vegas Association of Realtors the average price of a home is down  3.2% from a year ago.  The total number of home sales in June 2007 were 1,476  a 41.6% drop in sales from a year ago.

 

So where are all the Buyers?  Those nasty headlines about the

Yes the market will continue to soften in the short term until probably about the time the Palazzo opens.  And know I don’t think the Palazzo is going to cure the soft housing market in

Prices will probably continue to moderate slowly through the balance of 2007. But the outlook for 2008, 2009 and 2010 show a much stronger market here in

 

So if you are thinking of selling a home you need to price your home right.  You need to know the market in your area and your neighborhood.  Your home needs to be well maintained, clean and staged. And you need the right Real Estate Agent who knows how to market in a Buyers market to help you sell your home.

That is what is going on with the Las Vegas real estate market!

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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Truth three:  The value of a property is based on what someone is willing to pay for it.  When real estate was HOT here in Las Vegas lenders were offering sub prime loans.  Sub prime means to barrowers with lower credit scores and many of these loans were being offered in programs with beginning interest rates below what you would normally pay, or what the mortgage industry calls “teaser rates.”  This allowed some people to obtain a 3% loan when the normal mortgage interest rate was 5%,  but with a clause in the contract that the loan interest rate would reset to the market rate 2 to 4 years later.  So if you had a loan that was 3% in 2005 you may be looking at a new interest rate of about 6.5% today. On a $300,000 house your first 2 years payments were $1,265 per month principle and interest with no money down, but this year the payment will jump to $1,897 plus principle and interest.  That’s a 33% jump in monthly payments, if the buyer had substandard credit then the payment will jump even more because the rate the mortgager will have a higher risk rating.  The reason prices rose so quickly in the valley was partially due to these sub prime loan because people could afford to pay more for their houses because of the lower interest rates. Add to that the borrower only had to qualify for the 3% loan and not the higher reset rate. The new regulations enacted by congress recently now require the Borrower to qualify for the highest rate not just the lowest.

Plus the residential builders didn’t see the influx of buyers partially as a result of the Wynn opening and other job creation.  Prices started rising and then the real estate speculators came in and started buying seeing the opportunity of a fast appreciating market and a way to make a quick buck.  And that is the real estate boom.

So what is the result of this boom? Is it a bust?

Well the sub prime loans continue to reset and will do so for the next 2 ½ years according to the National Bankers Association.  Approximately 25% of the mortgages in the Valley are some type of sub prime loans because a number of people who went in and refinanced to get the equity out of their homes.  So it is possible that many people here in the Valley will continue to loose their homes because they can no longer meet their payments. We still have a number of real estate flippers that got trapped with houses they didn’t sell in time before the market changed.  Many of these investors have rented there homes out to wait out this slow down, anticipating a serge in the market as soon as 2008. The building industry has shrunk to about 1/3^rd of what it was in 2005 and will stay that way until resale inventories shrink to about 12,000 units.  And all this has resulted in an inventory level of about 23,500 homes for sale here in the Valley. Compare that with summer of 2005, at the height of the Boom with inventory levels of about 1,500 homes.

We currently have about a 16 month supply of homes on the market opposed to about a 2 day supply in 2005.

Stay tuned for Part 4 of this installment about the Las Vegas real estate market.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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Truth two: If a community’s economy is growing including its work force, so grows its real estate.

 We have a huge building boom in Las Vegas, we have more cranes in the sky than a Montana marsh.  They are everywhere.  Then add to that all the small commercial, commercial and mid-rise residential being built.  YES, single family residential building is SEVERLY OFF, but the rest of the building industry is booming! Our economy is still growing.  But for the moment our work force is really not growing.

In the casino industry with the closures of so many properties here in Las Vegas we have actually shrunk the inventory of hotel rooms available and the number of workers it takes to staff the properties that are left.  The last major casino openings were the Red Rock and the Wynn.  We have seen the closing of Stardust, New Frontier, Boardwalk, staff reduction at the Tropicana and several smaller properties have shut to make way for the new Super properties of the future. So the number of Casino jobs have actually been reduced.

The residential home building industry has had to shrink because of soft demand as the number of resale houses have increased.  As a result the total number of jobs in residential construction has fallen over 40%.

But surprisingly in spite of these two negative numbers other job categories in the area have been increasing leading to a total unemployment rate of just .01% higher than the national average.  But for the next 3 to 6 months we should see these numbers begin to climb as the people that were laid off find employment in other job sectors and as the Palazzo Casino/hotel opens at the end of this year.  This should have an impact on our economy much like the Wynn did upon its opening.

The Las Vegas Convention and Visitors’ Authority says that by 2010 we will have added an additional 40,000 rooms to the valley resulting in a need for an additional 70,000 jobs.  Now understand that includes the bagger at the grocery store where some of these new hotel people will shop.  They aren’t all going to be standing in the hotel halls waiting to help the guest.

So what we are experiencing for the moment is almost flat employment as the people that have been laid off find new work in the jobs that are being created in the valley.  But all this is about to change as you can see.

Please com back for part 3.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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I have just completed the 2007 market report for Las Vegas for the first half of this year.  This report will give you the latest sales statistics with an in depth look at what has happened in the Las Vegas real estate markets.  The information covered includes, new home sales, resale homes, condominiums, future forecasts and much more.  The report shows many easy to understand charts and graphs to help you better understand what has happened and what is anticipated to happen in the Las Vegas real estate market in both the short term and over the next few years.

You can find this free on demand video on the Las Vegas real estate report by clicking on the picture above or by cutting and pasting this link into your browser bar:

http://www.maxsellsvegas.com/videolibrary/LasVegasReport/LVReport.htm

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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