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What Happened To
The Las Vegas Real Estate Market? |
I have been in Las Vegas, monitoring the Real Estate
Market since 1983. The Las Vegas Real Estate Market has a wonderful
history of being robust and active until recently. We have generally
enjoyed phenomenal growth and development. We have had our downturns,
but nothing like what is happening now. In 1986, there was a culinary
strike and 19 hotels slowed down to a crawl. These included more than
half of the hotels at the time and 42% of Las Vegas employment was in
gaming. In 1992, the Gulf War slowed the economy temporarily and Las
Vegas seemed to slide through without any major consequences. Then in
2001, after September 11, tourism came to a screeching halt and Las
Vegas' visitor rates slowed down for several months. These and other
major and minor events have all affected the local Real Estate Market.
Now for the events leading up to the recent slow down
that we have just experienced. Las Vegas home prices have, since the
early 1990's, been restricted by the new home builders. They have always
kept their price increases limited, which gave stability to the market
and prevented any severe swings. This worked until some time in 2003.
That is when the investors came to town. Recognizing the low housing
prices and tremendous opportunity, the investors swarmed over Las Vegas.
For the next two years, a person could buy a home and flip it in a
matter of months and make more than an average down payment in profit.
When they discovered the new home market, investors were tying up a new
home with a minimal deposit, waiting the construction time and selling
for profits close to, and in some cases, over $100,000. Some investors
sold houses to other investors and these properties were never occupied.
Some investors were in for the long run and rented the homes. What
happened was that they ran the price of housing up so quickly that more
people got involved and bought multiple properties. Some homeowners were
borrowing money to buy houses or to put in pools or take vacations. We
had 46% appreciation one year and 23% the next. The common consensus was
that everyone was going to keep making this tremendous profit and it
would never end. This continued until some time in 2006, when things
began to change.
The national economy was changing. The war in Iraq was
taking its toll. The political atmosphere was in turmoil. Banks were
failing. Large corporations were going bankrupt and the CEO's were
fleeing with "Golden Parachutes". The stock market was fluctuating on a
daily basis with speculators gambling like never before. The world
economy, already somewhat unstable, started to be affected by what
was going on in The United States. What happened was the coincidental
simultaneous collision of multiple factors. I have heard this referred
to as "The Perfect Storm". The result of this was turmoil worldwide. The
good news is that this will probably never happen again.
The affects of this "Perfect Storm" hit Las Vegas
first. We were the first to ride the wave of excitement, get the most
out of the crest and we were the first to come crashing down. Nevada has
had the advantage of adding about 75,000 new residents every year,
mostly in Southern Nevada. The national economy has slowed down the rest
of the country; so people are unable to sell their present homes and
make their move to Nevada. Our tourism has also been affected by the
slowdown. Even though Las Vegas is one of the best values for a
vacation, it is difficult for someone to justify a vacation when they
are struggling to pay bills. Mostly due to the construction industry
slowing down, our unemployment rate is higher than the national average
for the first time in Nevada history.
Now for the good news. These symptoms of a bad economy
are beginning to correct themselves and the government has taken some
steps that may be starting to affect the results. The current situation
has taken years to develop and the cure will probably take years to be
totally effective. Las Vegas has an incredible ability to bounce back
quickly and adjust to any situation.
The Las Vegas Real Estate Market has been on the
upswing for 2009. Every month so far we have had more sales than the
previous month and in June we set a record for the most sales ever. Some
of these purchasers are investors; but a large portion are homeowners,
taking advantage of the low prices, discounted interest rates and tax
credits. Home prices have seemed to reach the bottom and stopped their
decline. Our inventory of homes has gone from over 24,000 in December of
2008 to less than 16,000 in June of 2009. There still may be some
foreclosures on the horizon but with multiple offers on any nice home
under 150,000, the inventory should stay down. If this trend continues,
we should see home prices increasing soon. It is definitely a Buyer's
Market, with opportunities available. Las Vegas is improving already and
will again be leading the country in growth and development in the very
near future. The Las Vegas Market has been
improving for the first half of 2010; with the investors coming back to
take advantage of our under-valued homes. This is the first time in 25
years that an investor can get a good cash flow and a healthy return on
investment. This and the tax credit have helped to stabilize our Market
so that we have halted our downward slide. Our Inventory has decreased
and our Demand has increased. We are on the road to recovery. The only
question now is . . . "How long will it take?"
To Be Continued . . .
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Article Written by Michael
J Wrage, Broker for New Homes Research |
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New Homes Research,
Inc. |
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330 E. Warm Springs Rd.
Las Vegas, NV.
89119 |
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Licensed Real Estate Professionals
in Nevada,
Las Vegas, North Las Vegas, &
Henderson
Buyer
Brokerage & Seller Brokerage,
Residential, New & Resale, Land &
Commercial
Researching Southern Nevada Since
1983
We Provide Research, Statistics, Reports,
Education
for Real Estate Companies, Brokers, Agents,
Builders and Clients |
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800-458-3390 |
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