Many people are wondering if the current Las Vegas home price increases are a mini bubble or if it is sustainable. Potential Las Vegas home sellers are wondering “when is the right time?” You have people on the news scaring the pajeesus out of the potential sellers thinking we are headed to another decline because of the “Shadow Inventory Boogeyman” (BOO!)
The “Shadow Inventory Boogeyman” has been around since 2009. You hear about 50K vacant houses and all that baloney. Our Las Vegas REO inventory peaked in late 2008 – early 2009 and I have not seen that epic inventory all the so called “experts” have talked about since. Oh well, it all makes for a great fairy tale.
Still hard to say WTH is going on, I personally thought 20% in one year would be unsustainable and drive away home buyers that are price sensitive to the Las Vegas market. I thought FOR SURE by now we would have some inventory but unfortunately (unfortunately for buyers that is, fortunately for home owners) Las Vegas home inventory is still at extreme low levels with no sight in rising inventory any time soon. The only way I can believe we can get inventory is if sellers start severly overpricing their homes (talking 15-20% here at once). I am personally encouraging my sellers to overprice at 10% and we are getting activity, traffic, offers and closing. The market catches up to us in a couple of months.
Are we in another “Las Vegas Real Estate Bubble”? Probably not. When AB 284 was implemented last year and I started to watch Las Vegas home inventory shrink, I ran some numbers. I looked at our “pre-housing bubble” numbers from 2002 in my own area (Rhodes Ranch area) and compared the numbers. Here is the median price per square foot break down by key years:
- 2002 – $104/SF
- 2005 – $200/SF
- 2006 – $196/SF
- 2009 – $81/SF
- 2010 – $78/SF
- 2011 – $70/SF
- 2012 – $74/SF
- 2013 – $89/SF (this is only “so far”, date of this post is February 7, 2013)
I took the year 2002 and added what would be considered “normal” appreciation at 3%. Roughly this area “should” (under normal circumstances) be at $134-140/SF. The non-short sale pending numbers are now trending at $95/SF. The reason why I am using non-short sale pendings in this analysis is because Las Vegas short sales are getting their prices declined IN DROVES!
As this area is quickly approaching $100/SF (2002-ish prices,) I am really not worried that this is a bubble. High buyer activity due to low interest rates and affordable prices is absorbing the inventory very quickly. I will worry if this area hits $134-140/SF by year’s end about prices being sustainable above and beyond that.
We currently only have about 4300 active residential homes for sale in our MLS. We will need to hit about 10000 active listings before we can talk stagnation or decline of our prices. If you really need to sell NOW (or in the very near future), please fill out this form, we have LOTS of buyers that want a home NOW and very little competition out there!
Obviously this is my current humble opinion which could be proven wrong if market forces change. Only history will decided if this increase in Las Vegas home prices is sustainable.
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