Friday, September 21, 2012

Las Vegas Real Estate Story

Las Vegas Real Estate is getting back some price appreciation but the market is still in deep trouble.  If you were underwater by about 30% you might be back to even in some areas of the city.  This large of a rebound has only happened in very selected areas of the Las Vegas.  Some areas have been stagnating or even declining over the past year but over all Las Vegas Real Estate has seen about 15% price appreciation from last year according to recent statistics. 

So the hype that we have hit the real estate bottom might be true right?  It could be true for most parts of the country but it might not be true for Las Vegas Real Estate just yet.  The big reason for the upswing in prices is the massive reduction in inventories.  The real estate market is seeing record low numbers of sellers.  The bank owned property accounted for only 16%  of sales in August of 2012 while over 46% of closed sales where "short sales" as people or pushed to sell before the debt relief act that allows sellers to not be taxed on their forgiven debt, has people desperate to get out from under their mortgage. 

The illusion that is being created is that the demand for real estate is at a sky high level.  The reality is that the supply is so low that it can not even sustain below average demand levels. The good news is that there are people that qualify to buy property and they will buy something if they can find a suitable home in Las Vegas.  What is hurting sales now is the long drawn out process of the short sale and the large amount of underwater homeowners who will never short sell and likely never see their home be worth the current mortgage amount. 

Is there a solution to the devastating effects of the 60% drop in housing values in Las Vegas?  I don't really know but something has to give sooner or later.  My feeling is that the 17% drop in sales this August compared to last August in Las Vegas has much more to do with lack of inventory than slowing demand.  With inventory levels at records lows it is hard to tell what really is driving the drop in sales.  It could be the low number of newly created jobs as well as the high unemployment or it could just be that there are no homes to buy. 

It will be interesting to see how the banks proceed with the "shadow inventory" that is being whispered about daily in real estate offices in Las Vegas.  Are banks holding back thousands of homes or are they truly having problems taking back the real estate because they have lost the original paperwork? 

Nevada and particularly Las Vegas, has been devastated by the real estate crash.  People have suffered tremendously and thousands have lost good paying jobs.  You know it is serious when even casinos are going under.  If you can't make money off legal gaming, the economy must have been in the tank. 
Hopefully something will give so the real estate market will begin to find some equilibrium because now we are just seeing another bubble being created due to the extreme market changes. 

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