If history repeats itself then the graph above can give us some sense of what is happening and possibly going to happen in the U.S. real estate market.  Case Shiller issued the above chart in July 2007. 

What makes this interesting is the historic last dip in the market we experienced in 1990.  If you will take note we seemed to find the bottom of that market in 1991.  This lead to another smaller decline culminating in 1993 and a second decline in 1996 which then brought the market back to a zero basis and the beginning of the last historic climb from late 1996 through 2005.

Beginning in 2005 the real estate markets began to slide and are continuing their decent and now with the lending markets in turmoil we will see further slides until either the mortgage companies wake up and decide to renegotiate their contracts with their debtors on all the exotic loans they handed out, or they simply go broke and other mortgage companies step in and take up the slack.

No matter what happens in the mortgage market it looks like from an historical perspective we will continue to see prices slide and the market continue to slow at least through the first quarter of 2008.

We in Las Vegas have other factors to consider in this real estate roller-coaster ride.  A major consideration is the investor factor.  In 2004 and 2005 we had almost as many short term investors putting money in our real estate market as we did visitors betting on the blackjack tables.  It is estimated the half the real estate sold in those two years was sold to investors.  This means that a vast amount of oversupply in real estate is on the market due to investor gambling and much of this inventory is not occupied.  These propeties are surplus inventory.

With 6,000 people moving in to Las Vegas each month you would think we will eat up this excess inventory in a hurry and eventually we will, when these new move-ins decide the market has bottomed out and its time to buy. But for right now most are renting!

So where does this down cycle end? For we here in Las Vegas it looks like we will be experiencing a shortage in the work force in 2009 when 45,000 new hotel rooms come on line.  Employment Security is estimating the need for about 110,000 workers and estimates a shortfall for the available jobs coming up.  This may lead to a competition for good workers leading to increased income.  This means we could see new qualified Buyers in the market place looking to Buy a home in late 2009 and early 2010.

Keep in mind that we still have all those Buyers that are out their renting now.  If they don’t purchase before this employment flood in 2009 they very well may find themselves not getting the deal they were waiting for but may have to buy in an appreciating market.