LAS VEGAS RESIDENTIAL OVERVIEW

RESIDENTIAL MARKET 

	2003	2004	2005	2006	2007 (Thru May)
Single Family	$223,739	$321,769	$324,252	$344,515	$380,049
Condominium	$119,621	$187,470	$209,905	$225,699	$245,779

Source: Greater Las Vegas Association of Realtors

Las Vegas Housing Market Conditions

Quarter Overview

“The fourth quarter of 2006 looks pretty much like the third quarter of 2006, at least with respect to the overall picture of residential housing. Permitting for single-family units continues to contract, dropping by about 50 percent from the first half of 2006 to the last half of 2006. All in all, housing rebalancing is well underway and will likely continue throughout 2007. Continuation in the rate of permitting at recent rates and continued population growth will be needed to bring supply and demand back in balance.

Southern Nevada, for near twenty years, set the pace for regional growth.  New residents, measured by the number of redeemed drivers’ licenses is off slightly for 2006 compared with 2005 and 2004. The price escalation in housing since 2003 has pushed the average Southern Nevada prices above the levels for Phoenix and Salt Lake, creating an economic disadvantage. On the other hand, Las Vegas continues to hold a price advantage over the Southern California. All in all, Southern Nevada’s cost of living attractiveness ebbs, though the critical advantage remains with California.”

R. Keith Schwer, Ph.D.
Director, CBER                                                                                   Source: CBER 

	2003	2004	2005	2006	2007 (Thru May)
Single Family	$181,738	$275,000	$303,475	$310,000	$305,000
Condominium	$109,325	$164,000	$195,000	$200,500	$203,000

 Source: Greater Las Vegas Association of Realtors

Quarter in Depth

“The marked slowdown in housing continues with permitting in the last half of 2006 at half the rate of the first half of the year. There were 33,942 units permitted in 2006 – 22,554 in the first half of the year and 11,388 in the last half of the year. The substantial drop in permitting activity signals the onset of rebalancing; and, of course, the sharper the drop, the quicker the correction will take place.

Housing prices have remained essentially unchanged, rising to $322,500 in the fourth quarter, from $320,000 in the previous quarter. This small difference may easily reflect differences in home characteristics. Still, most importantly, most investors seem resolved to hold housing units for longer term investment prospects than sell for less today. The longer the period of housing rebalancing, the more likely prices concessions will be granted.

Apartment availability and pricing, having been on the sideline since the residential housing became highly attractive investments, continues to show less volatile than the single-family residences market. In short, reported vacancies hover in the 5 percent range and average rental rates have moved up, from 833 to 850 over the past six months. Generally speaking, an oversupply of housing, even if for single-family residences, will have some impact on other market subsections. As the primary housing source for lower income households, market conditions for apartments will be watched carefully with respect to shifts in affordability. “

R. Keith Schwer, Ph.D.
Director, CBER                                                                                   Source: CBER

Source:	Single Family					Condo/Townhome
Greater Las Vegas	Thru April 2007					Thru April 2007
Association of Realtors	# Listed	# Sold				# Listed	# Sold
2003	39,194	30,142	77%		2003	7,531	5,539	74%
2004	60,661	35,260	58%		2004	11,306	7,581	67%
2005	57,943	33,529	58%		2005	11,474	7,872	69%
2006	64,049	24,130	38%		2006	15,589	5,826	37%
2007	22,715	5,790	25%		2007	5,903	1,232	21%
58% 77% 38% 58% 25%
74% 67% 21% 69% 37%

"Home Builders Research reported another dismal month for housing in Las Vegas, with new and existing home sales falling by double-digit percentages in April, home building analyst Dennis Smith said Wednesday.  He counted 1,568 recorded new home sales in April, a 40.7 percent decline from the same month a year ago. Existing home sales fell 36.6 percent to 2,353, the second-lowest monthly total in the past six years.

"This correction or slump or slide or dip or whatever you want to call it is deeper and longer than most expected," Smith said. "It will get better, but until sales and permits improve, it will continue to be very painful for a lot of folks and businesses."

There were 1,804 new home permits pulled in April, bringing the year-to-date total to 6,210, down 38.3 percent from a year ago.  Las Vegas' housing market has softened after leading the nation in home appreciation and sales, which led to a frenzy of speculative investment that has left about 40 percent of the 22,000 homes on the Multiple Listing Service vacant, Smith said.

New home inventory is low as builders have cut back on building permits, Pardee Homes Division President Klif Andrews said.  "As the new home inventory drops, we think the resale inventory will drop. When they drop, this market will firm up," he said. "We all agree we have limited land supply and we continue to have strong economic growth in Las Vegas, regardless of residential construction. The key for us is residential listings must drop before this market improves. Part of that is owners are not pricing their houses properly and that's why they're not selling."

The median price of a new home in April dropped 3.1 percent to $318,346, Home Builders Research reported. There were 214 high-rise condo units that closed escrow in April, all but one of them at Sky Las Vegas on the Strip. The average price was $729,009 and the median was $687,181. The median resale price was $285,000, the same as March and up from $283,500 a year ago.

Robin Camacho of Direct Access Lending said she can see that the median price isn't accurately reflecting house values right now, but she can really only make an educated guess as to why.  "Our research does show that the number of homes listed on the MLS for less than $270,000 has increased substantially in the past year," she said. "This indicates that prices are falling, though people are actually still paying the same but getting more for their money."

Camacho said she can spot when prices are rising or falling earlier than most analysts with her up-to-the-minute data, but she hesitates to give exact figures as she uses a different indicator.

"It is very accurate in terms of direction, sort of like a compass in that I can see the general direction we are traveling," she said. "And what I definitely see is that houses are dropping in value at a steeper decline than the median price indicates."

Luxury home sales ($1 million or more) declined 18 percent in the first quarter to 132, but April sales jumped to 53, two more than a year ago, said Ken Lowman, owner of Luxury Homes of Las Vegas. The average price rose to $1.79 million, compared with $1.26 million in April 2006.  Lowman said more homes are selling in the "ultrahigh end of the market," including eight in April above the $3 million mark.

"I foresee this trend to continue as higher lot and construction prices have led to more homes being constructed and sold over $3 million than ever before in our history," Lowman said. "We also have a steady stream of qualified buyers in this price range relocating to Las Vegas."

Smith of Home Builders Research high-rise sales can skew the median prices because they usually come in groups. Before Sky, the median was skewed by all of the closings at the Manhattan mid-rise condos, he said.”

The following In Business Las Vegas article, “LV Housing Slump Worsens”, April 20-26, 2007, provides additional support for the Las Vegas Review Journal article presented previously in this report:

“The price of new homes has tumbled nearly 10 percent this year, the inventory of existing homes has reached an all-time high and bank repossessions accounted for a greater percentage of existing home sales in Las Vegas, according to the March housing statistics.

The ongoing weakness in the housing industry was reflected in numbers released Tuesday by Larry Murphy of SalesTraq. The housing research firm reported the median price of new homes sold in March was $308,471, down nearly 10 percent from $341,990 in December.

The new-home market rebounded slightly in March with 1,771 sales, up 330 from February, but sales were down nearly 51 percent from March 2006.

Dennis Smith's HomeBuilders Research reported Tuesday that there were 5,204 new-home sales in the first quarter - the fewest since 2001.

"The first quarter of 2007 will go into the archives as one that most in the homebuilding industry would like to forget," Smith said.

Don Boettcher, an area vice president with Pulte Homes, said the price reductions are a reflection of the softening housing market. In a competitive market, it's part of a "continuing correction of supply and demand."

Since January, Smith said the price of new homes has dropped nearly $29,000 or 9 percent. He attributes part of the decrease to sales of condos on Las Vegas Boulevard South, with 37 at one project selling for less than $300,000.

On the existing home market, it recorded its highest sales this year at 3,175. But that was offset because the drop of nearly 28 percent from March 2006 was even greater than the percentage declines in January and February. In addition, 402 or 13 percent of those 3,175 sales were bank repossessions - the first time that figure has reached double-digits in Las Vegas in history, SalesTraq reported.

Bank repossessions accounted for 9 percent of the existing home closings in January and February. The growing number of repossessions isn't surprising given Nevada is No. 1 in the country in homes entering foreclosure.

The continued softening of the housing market comes as the homebuilding industry has expressed concern in recent weeks that any recovery would be pushed back by the tightening of loans. That was prompted by a large number of defaults in the subprime market.

The drop in new-home prices isn't surprising given the large number of existing homes on the market, said Monica Caruso, spokeswoman of the Nevada Home Builders Association. SalesTraq reported the 22,970 existing homes on the market in March was the highest in history and represents a 13-month supply.

"It is having a tremendous impact (on new home sales and prices) because there are a significant number of existing homes that are essentially brand new homes," Caruso said. "They have never been lived in. Homebuilders are competing against that housing. This has to do with supply. If new homes are sitting on the market and not selling, prices have to come down."

That competition is borne out because 44 percent of homes listed for sale on the Multiple Listing Service remain vacant, SalesTraq reported.

Not only does the large inventory compete against new home sales, but it also poses problems for homeowners who want to sell their house and purchase a new home, Caruso said. That's why so many builders last year had several months of inventory and offered incentives and reduced prices, she said.

Las Vegas housing analyst Steve Bottfeld, executive vice president of Marketing Solutions, said the resale prices will remain stagnant until the inventory is thinned. That could take into early 2009, he said.

The median price of existing homes stood at $280,000 in March, which is down 1.8 percent from March 2006.

Despite the lackluster sales and drop in prices, there is some hope within the housing industry for a rebound by the end of 2007. There were 1,550 permits issued in March, the highest since August. That mirrored the rest of the country where housing starts ticked up unexpectedly in March.”

The supply of existing homes for sale decreased significantly during 2006 as noted on the Greater Las Vegas Association of Realtors graphical reports presented previously. Similarly, the percentage of sold/listed single family residences declined in 2006 and shows signs of further decline per 1^st Quarter 2007 indications.   Likewise, the total sales volume (SFR and Condominium) was down from year’s end 2006 compared to year’s end 2005.   The Las Vegas area housing market continues to adjust back to a more normal national growth course; below the extraordinary levels achieved in early 2004, but at levels that remain above most of those experienced in the past.  New home sales volume has moderated, prices are softening with builders offering a variety of incentive packages and concessions as inventory levels increase or are controlled by the developers. Home prices in Las Vegas continued to move toward a more stabilized market, if not decreasing market.

Jan.-March 2007 - Change from Jan.-March 2006

Source: snhba.com

Based on an extensive review of several third-party research firms’ market reports, we expect new and re-sale home sales to continue to drop throughout the remainder of 2007.  As a result of declining affordability and lessened investor activity, the Las Vegas market is expected to continue to show decelerating prices. The result of the past two year’s rapid price appreciation continues to show its effects as the market experienced declines in housing affordability. To continue at the current sales pace, the market will have to shift to more affordable higher density detached homes and attached homes (including condominium conversions).

With most economists predicting increased mortgage rates in 2007, we are projecting decreasing prices or limited price gains for the remainder of 2007 with the market-wide median prices of a new home remaining stable or decreasing by the end of the year. 

As permitting dropped sharply in 2006, new demand, as measured by new residents, also declined. A slowing population growth accompanying an oversupply condition associated with housing speculation, other things equal, could add to the housing imbalance adjustment.  As permitting and new residents slowed, housing prices continued to decline. The price per square foot declined slightly. Going forward, however, there is no reason to believe the supply and demand balance will necessarily hold prices at the current levels. Indeed, as more properties come on the market, we expect time on the market to lengthen. Pressure for price concessions will likely increase, and prices will continue to decelerate.

Condominiums:

High-rise construction is well under way in the Greater Las Vegas with over 95 projects either planned or under construction. As reported by local realtors, on average, the starting price for smaller high-rise condominium units is around $200,000; whereas, projects in close proximity to the “Strip” have prices of over $1,000 a square foot.  Current condominium construction trends appear to favor planned condominium developments or mixed-use developments, also referred to as "New Urbanism".   This concept encompasses living, working and shopping in the same proximity, where an individual has a residential dwelling and necessary support services “on-site”.

However, a recent article in the Las Vegas Business Press indicates the recent boom in the Las Vegas Luxury Condo market may be at an end. 

“Luxury Condo Demand Softens”

(Source: Las Vegas Business Press, May 18, 2007)

“Demand for Vegas' pricey high-rise, high life is starting to fizzle out. Buyers for the valley's luxury condos were scarce in the first quarter as new projects flattened out, reports Applied Analysis, a Las Vegas-based economic advisory firm.

There was a potential inventory of 97,776 units during the first three months of the year, yet 11,814 were canceled and another 2,491 suspended.

The project R.I.P. list includes such casualties as the 3,000-unit W Las Vegas, at the northwest corner of Harmon Avenue and Koval Lane, which was officially pronounced dead on May 11. Also fallen by the wayside are the 50-story/888-unit Vegas 888, 60-story/900-unit Club Renaissance and the 35-story/398-unit Sandhurst tower.

"While it would have been an unreasonable expectation to believe that all of the projects in the development pipeline would enter the market as planned, it would be equally questionable to conclude that resort and residential condominiums are a passing fad," commented Brian Gordon, principal of Applied Analysis. "The luxury condominium market continues to evolve and respond to the latest market conditions."

The bulk of the market is still speculative, with 56,302 units accounting for 57.6 percent of the valley's total inventory. Only 13,409 units -- or 13.7 percent -- were under construction in the first quarter, including the 1,282-unit Trump Las Vegas, 2,700-unit CityCenter, 3,000-unit Cosmopolitan, 632-unit Turnberry Towers and the 1,000-unit One Las Vegas.

Roughly 55.5 percent of those under construction in the first quarter, totaling 7,444 units worth, were located on the Strip, not including another 1,014 units on the South Strip. Also, 47.2 percent of all units under construction have some form of rental program.

Meanwhile, 4,214 units of the valley's total inventory were pre-existing in the first quarter, including the 800-unit Turnberry Place, 405-unit Sky Las Vegas and 84-unit Park Towers at Hughes Center, along with another 9,546 units, or 9.8 percent, still being planned or pre-sold.

"The vast majority of units in the pipeline have been sold and their total is exponentially higher than the present market inventory," maintained Gordon. "Land owners and developers are dealing with conservative reactions by the investment community and potential buyers, in response to recent reports that a supply-demand imbalance is inevitable."

At the end of the first quarter, an estimated 754 units, or 17.8 percent, were listed for resale, with an average asking price of $803,900, or $622 per square foot. Yet first-quarter resale prices averaged $764,000 per unit, or $537 per square foot -- about 5 percent below the median asking price.”

A second more recent article from the Las Vegas Review Journal entitled “Condo Market Points Down” (May 30, 2007) casts a similar light on the Las Vegas condo market.  Excerpts from this article are as follows”

“Potential supply is flattening and market demand is modest in Las Vegas' luxury condominium market, a local research analyst said.  Potential inventory levels declined for the first time since the condo boom struck Las Vegas in 2003, Brian Gordon, principal of Applied Analysis, a Las Vegas financial consulting firm, said in his first-quarter luxury condo report.  The report showed 4,214 existing units with another 13,409 under construction. Most of those have been sold or reserved. Total units that are built, proposed or canceled exceed 97,000.

Industry insiders are saying that many high-rise condos are being put back on the market for resale and, like single-family detached homes, they're not selling.

One luxury condo broker said he walked the floors at Metropold saw lockboxes on nearly every door. Real-estate agents use lockboxes to access empty homes for showing. He said 70 percent of the units at SoHo Lofts are listed for sale.

"Of course, every project has investors," said Aaron Yashouafar, developer of Sky Las Vegas, which opened this month on the Strip. "Our percentage of investors is substantially less than other projects because we had a hold-back period in the contract from Day One."  Sky Las Vegas owners are restricted from selling for at least six months after buying, he said. About 80 people are making their primary residence at the 409-unit, 45-story building near Circus Circus.

Las Vegas-based SalesTraq reported 213 escrow closings at Sky Las Vegas in April at an average price of $723,480 a unit. About one-third of high-rise closings are showing up for resale the next day on the Multiple Listing Service, SalesTraq President Larry Murphy said.

At the end of the first quarter, an estimated 754 existing luxury units were on the market, Applied Analysis reported. The average asking price was $803,900, or $622 a square foot.  Resale units that were sold during the quarter averaged $764,500, or $537 a square foot.  The mix of properties available continues to determine market-average pricing, Gordon said.

Eric Smith, owner of Corporate Housing by Owner, a Colorado-based company that matches owners of executive homes with potential renters, said: "There's so many condo owners trying to figure out what to do with their property. They're on the phone to us all day. It's a very hot topic."  Smith, who opened an office in Las Vegas this month, said luxury condo rentals fit investors' goal to hold for long-term appreciation and can save investors from selling at a loss.  "There's huge demand for corporate housing in Las Vegas, not like San Francisco, but it's a big market and people want to know what to do with their condo," he said. "If they furnish it, they can turn it into a hotel alternative."

Vertical construction is becoming a more powerful element in the housing market, consultant Steve Bottfeld of Marketing Solutions said. Based on his research, the number of mid- and high-rise condo units closing escrow in 2007 will easily pass last year by 30 percent to 50 percent, probably totaling around 5,000 closings, he said.

Condo presales account for 9.8 percent of the market, while speculative plans call for 56,300 more units, or 57.6 percent of the market, Applied Analysis reported. More than 14,000 units have suspended sales or have been officially canceled.

Buyers at projects such as Krystal Sands, Vegas Grand and Icon filed class action lawsuits against the developer and the next potential lawsuit could involve Spanish View Towers, which has halted construction in the southwestern valley.

"The luxury condominium market continues to evolve and respond to the latest market conditions," Gordon said. "Land owners and developers are dealing with conservative reactions by the investment community and potential buyers in response to recent reports that a supply-demand imbalance is inevitable."  He said the vast majority of units in the construction pipeline have been sold and their total is "exponentially higher" than the present market inventory.

Bruce Hiatt of Luxury Realty Group said: "We still think it'll take nine to 12 months to absorb the luxury condos coming on the market. Meanwhile prices are escalating. In the future, you'll never see $600 a square foot again."  Of his 40 clients who bought at Sky, about a dozen are considering renting out their units, he said. Several investors are making their units their second homes.  "People are saying, 'I'm not sure what to do with it,'" Hiatt said. "One couple from Tucson (Ariz.) bought in Sky and were going to rent it out. Now they've put their unit at Metropolis up for sale and they're going to keep Sky to live in."  The Metropolis condo is listed for $1.6 million, or close to $600 a square foot, he said.

Las Vegas real estate agent Sabrina Porras said she thinks investors will become more receptive to converting their homes to corporate rentals, particularly in today's market of stagnant home sales. She plans to rent out a client's condo at Sky for $3,500 a month.”

Excerpts from the Las Vegas Review Journal article entitled “Strength of High-Rise Market Discussed”, March 5, 2006, by Hubble Smith provide an insightful description of the Las Vegas high-rise condominium market.  In this article   John Restrepo, principal of Restrepo Consulting Group, indicated that research shows that 80 percent to 90 percent of condo buyers in the Strip corridor are speculators, investors and second-home buyers.   Restrepo said “That's different from downtown, where the blend is probably 50-50 between local residents and second-home owners.”

However, most observers agree that in the next five years, thousands of high-rise condo units will debut in Las Vegas. The condo boom essentially represents a new sort of "resort." Instead of creating themes of other cities like Venice and Paris (or New York) in huge casino resorts, the city's increasing residential towers would, in effect, theme Las Vegas itself as an urban center.

Las Vegas Strip Luxury Condominiums

Source: VegasVerticals.com

Harmon Corridor Luxury Condominiums

Source: VegasVerticals.com

“Downtown” Las Vegas Luxury Lofts and Condominiums

Source: VegasVerticals.com

Off “Strip” Luxury Condominiums

Source: VegasVerticals.com

“…The thousands of potential for-sale, luxury condominium units that carry price tags averaging in excess of $700,000 for units averaging a modest 1,000 square feet. Valley-wide potential inventory levels continue to escalate at a rapid clip. Total inventory of more than 95,000 units in approximately 140 projects include approximately 2,200 existing units, with another 13,500 units under construction. Competitive units currently pre-selling account for only 12.2 percent of the market (11,700 units), while speculative plans exist for 58,200 more units. To date, an estimated 2,600 units are suspended in the sales process, and another 7,210 have officially been cancelled.

How can the market be expected to absorb this level of inventory? Simply put, it can’t. We estimate that another 10,000 units may commence construction activity in the next 5 years. While the depth of the market over the long run appears fairly strong, the likelihood that 2007 will repeat the feverish sales volume reported in 2005 is limited.

Compared to other resort-residential markets, Las Vegas maintains a relatively low share of condominiums to total housing. The latest available data suggests Las Vegas’ share of condominiums to total housing is less than 15 percent, while more mature markets maintain significantly more higher-density living (e.g., West Palm Beach, Florida is approaching 30 percent). This condition will change as Las Vegas aligns with other resort-residential markets over the course of the next 5 to 10 years, but this relatively new high-rise living concept won’t take shape overnight.

Not unlike any real estate market, location, branding and experience are keys to success. Projects announced by major operators and development companies are likely to enter the market with greater success. However, this is far from a guarantee. Less demand, higher construction costs and higher costs of capital are making all projects more challenging. Proximity to the Las Vegas Strip is important, as are viewscapes and amenities, particularly with regard to higher-priced projects. Units meeting these criteria have proven successful, while those without are unlikely to move beyond the concept stage.

The nearly 3,000 units slated to begin sales in 2007 at MGM MIRAGE’s CityCenter should be well received by the market compared to the challenges several projects face today. That having been said, a portion of the current pullback by buyers may be the result of a wait-and-see attitude as the CityCenter metro-resort will change market dynamics. Expect the luxury market to find a new equilibrium as the majority of proposed projects will face demand and financing challenges, with the first wave of resale units adding another layer of complexity. {Source: Applied Analysis website)

Source: New York Times, January 9^, 2007

You have our permission to use this original content from the official site of Appraisers of Las Vegas if the following link and text is provided to the site of Appraisers of Las Vegas. www.AppraisersofLasVegas.com Commercial and Residential Las Vegas, Henderson, North Las Vegas and Clark County Appraisals by Nevada Licensed and Certified Appraisers.