Las Vegas Real Estate
Market Update
The home sale price graphs I published recently (See below) were
extremely bullish on prices. On the other hand, there's Vegas.
The Las Vegas real estate market is fascinating to me. Las Vegas
had a crazy red hot real estate market last year, much earlier than
Phoenix. No one knows if Phoenix will follow the same pattern as
Las Vegas, it seems unlikely, but the comparisons are irresistible.
Las Vegas had the highest annual home price increases ever recorded.
The median home price in Las Vegas increased 50% from April-June
2003 to April-June 2004.
Then last summer resale home prices peaked and leveled off.
New home prices in Las Vegas didn't level off until the autumn.
The prices of many new homes completed in the summer and autumn
were set before construction began - back in the spring and summer
when prices were skyrocketing.
After being flat for awhile, both new and resale median home
prices in Las Vegas fell in February, according to graphs from
SalesTraq. Is this the beginning of a "price adjustment"
in Vegas? Or is this within the normal month to month variation
of prices? We'll know in a few months.
Looking back to the heyday of the Las Vegas market, it's hard to
avoid parallels with metro Phoenix today. Look at this quote from
a Las
Vegas Journal-Review article from January.
People were having to camp out to get a new home and it would
take six months to a year for the builder to deliver the product.
Those who didn't want to wait turned to the resale market, where
a home can close in 30 to 60 days. That pushed resale prices from
$183,750 in January 2004 to $250,000 in July.
That first part sounds like Phoenix today even though metro Phoenix
home prices have increased at only half the rate mentioned.
One reason the article gives for the rapid Las Vegas price increases
was the low inventory of homes for sale, it fell to only a 2-week
supply. In metro Phoenix this past January and February, we had
only a 2-week supply of homes.
Hopefully the Las Vegas experience won't foreshadow Phoenix in
all regards.
A few builders, probably 10 percent, were overly aggressive
with their pricing structure and got themselves in a situation
where they had to cut prices, Murphy said.
Here are some more quotes from a February
Las Vegas Journal-Review article.
Some people who bought a new home for $500,000 in April or
May saw the value drop to $425,000 by the time they closed escrow
on it in November, and the builders weren't releasing buyers from
their contracts, Cunningham said.
Most builders in Phoenix, however, stopped selling to investors
last summer. Apparently, the builders learned from their Vegas mistakes.
Keeping out investors should help stabilize the Phoenix new home
market.
In both the new and resale home markets in metro Phoenix, prices
are still skyrocketing... but it won't last forever. Take advantage
of it while you can.
The resale median has been stuck on $250,000 in Las Vegas
for six months and could stay there through July, Murphy said.
John L. Wake
Home Sale News publisher
HomeSmart agent
480-596-3851
March 31, 2005
