Las Vegas Housing Market: Where Do We Go From Here?
Editor’s note: This is the fifth and final installment of a major article by urban infill real estate developer Jim Noteware examining the Las Vegas real estate market—where it has been and where it is going.
Part V
Where Are We Going From Here?
In conclusion, the Las Vegas real estate market in early 2007 is approaching or is at its bottom. Recovery will likely begin in the spring in advance of anticipated supply/demand balance in the summer. The key factor to this recovery is and will be the continued growth in residential demand created by Las Vegas unique job creation and population growth.
To assure recovery, however, and to accelerate future absorption of the current excess inventory, prices must adjust to reflect the realities of the market—most especially, buyers’ expectations. Very simply, buyers will not re-enter the market until they are convinced that prices have “hit bottom†and are beginning to recover. Sellers therefore must make the price adjustments necessary to bring buyers back to the market; meanwhile, sellers are well advised to do so, since the alternative is continued suspension in transactions, overall market uncertainty, and the costs associated with both the carry during this period of suspension and the cost of uncertainty.
Most importantly, we in the Las Vegas marketplace must face our challenge openly and honestly. Accurate and timely market information is essential to our successful recovery. And, we must realize that, while recovery will indeed come, and I believe relatively soon, it will not be as robust as previous market conditions, because future market conditions will not include the participation of nearly so many investors which accentuated apparent demand on the way up, but also have accentuated excess supply on the way down. Most of these investors have learned their speculative lesson, and will likely stay away.
There is a silver lining in this recessionary cloud, however, and that is costs are beginning to get back under control—land, construction labor and materials, and other services are quickly re-pricing themselves. This should lead, all other things equal, to—at once—a more profitable and lower cost business environment for all concerned. Long term, Las Vegas continued success will depend upon its ability to provide housing that its population can afford. Thankfully, Las Vegas employment growth is occurring at ever-higher income levels, but affordability remains a major challenge for all business, civic and governmental leaders. With a finite amount of land in the valley, it is inevitable that land prices will continue to rise quickly in real terms. Indeed, the imbalance of supply and demand may speed the current housing recovery. But long term, the residential real estate industry has a special challenge to behave as efficiently as possible in order to deliver housing at pricing that its customers, the citizens of Clark County, can afford.
My love affair with the Las Vegas residential real estate markets continue. True, as in any romance, we have hit a rough spot. But, once we work through it, we will be better for it—smarter and stronger and more committed to our position here.
Jim Noteware, principal of Houston-based Noteware Development, specializes in infill projects in rapidly growing urban areas. In addition to Brickwater Condominiums in Las Vegas, the company is developing Sevilla in the Moon Valley area of Phoenix and The Jamestown adjacent to Candlestick Park in San Francisco.
Comments
A quote from a news article about Las Vegas prices, written almost a year ago.
""Builders are aware of the inventory amount we have and the problems we have moving it," Murphy said. "They don't drop prices and say, 'Let's start another 500 homes.' They'll want to hold off on starts while they get rid of what they've got.
"The market will take care of itself. We're probably at the peak of inventory. It's just going to take six months to run through it and get back to levels builders feel good about."
Murphy predicts that by the end of 2006, the market will see significant declines in inventory. And 2007 will bring even bigger reductions in housing availability.
"If you want to define 10,000 (resales on the Multiple Listing Service) as normal, then I think we'll be there 12 months from now," Murphy said.
Rheinberger agreed with Murphy's forecast.
"I really believe this (inventory) is a short-term phenomenon. I believe we have peaked," she said. "I believe there are some short-term opportunities if you're a buyer. All our indicators point to inventory levels going down in two to three months, even as demand doesn't go down."
Local real estate brokers and agents say they're already noticing signs of a reviving market."
Posted by: daniel | April 28, 2007 6:04 PM