Las Vegas Real Estate Struggling to Recover

Las Vegas frequently counts itself among the most troubled regions in the U.S. real estate market, but eight consecutive months of improved resale home numbers and an increase …

Las Vegas frequently counts itself among the most troubled regions in the U.S. real estate market, but eight consecutive months of improved resale home numbers and an increase in investor dollars is helping to slowly turn the tide. The city saw its best August for sales in five years, boosted largely by investors and first-time buyers in the sub-$150,000 market. Cash buyers and absentee buyers continue to make up a large portion of the purchase force in the area, with lower median prices attracting more and more interest from people looking for investment opportunities. New-homes sales remain depressed in Las Vegas, however, and the majority of homes sold are in foreclosure, bank-owned or in some other form of distress. For more on this continue reading the following article from The Street.

Home sales in the Las Vegas area jumped to the highest level for an August in five years, the result of a relatively long month for escrows closings and robust buying by investors and first-time buyers in the sub-$150,000 market. Home prices seemed to trend sideways to downward last month, with the median sale price dropping to its lowest level in more than 16 years, a real estate information service reported.

In August, 5,412 new and resale houses and condos closed escrow in the Las Vegas-Paradise metro area (Clark County), up 19.3% from July and up 26.4% from August 2010, according to San Diego-based DataQuick. The firm tracks real estate trends nationally via public property records.

On average, the region’s sales have risen 6.3% between July and August since 1994, when DataQuick’s complete Las Vegas region statistics begin. August is typically one of the stronger sales months of the year, largely because many families want to move before school starts in late summer.

Last month’s sales picture changes a bit when viewed in terms of the average number of homes sold daily. That’s because August had 23 business days on which home sales could be recorded, compared with 20 business days in July and 22 in August 2010. The average number of homes sold daily last month rose only 3.8% from July and rose 20.9% year-over-year (vs. the 19.3% month-to-month gain and the 26.4% annual gain for the total number of homes sold in the month).

One reason it’s getting easier to beat the year-ago sales numbers: Home sales fell off sharply beginning early last summer as federal and state homebuyer tax credits expired.

Last month’s sales total was 5.3% higher than the average number of homes sold in August since 1994. The new-home market remained very slow by historical standards, but resale activity rose year-over-year for the eighth consecutive month, boosted by robust first-time buyer as well as investor and cash-only purchases.

In August, a popular form of low-down-payment financing for first-time home buyers – government-insured FHA loans – accounted for 39.9% of all home purchase loans. That was down from 42.1% in July and down from 46.6% a year earlier and a peak of 55.1% in September 2008.

Cash buyers purchased 52.3% of the Las Vegas-area homes that sold last month. That was down from 53.0% in July and 48.8% a year earlier. The record was 56.7% this February. Cash purchases are where there is no corresponding purchase mortgage in the public record.

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Cash buyers in August paid a median $84,000 for a home in the Las Vegas area, down from $85,243 in July and $100,000 a year earlier.

Absentee buyers – mainly investors and vacation-home buyers – purchased 47.1% of all homes sold in August, up from 46.5% in August and 43.3% a year ago, but still below the record 49.9% this March. Absentee buyers paid a median $92,000 in August, down from $93,050 in July and $110,000 a year earlier. Absentee buyers are those who indicate at the time of sale that the property tax bill will go to a different address.

The heavy presence of cash buyers and other investors, with their focus on lower-cost homes, helps explain why 42.9% of July sales were for less than $100,000. That’s up from 41.9% in July and 32.7% a year ago. Last month 69.1% of sales were below $150,000, compared with 60.2% a year earlier.

The median price paid for all new and resale houses and condos sold in the Las Vegas metro area in August was $112,500, down 2.2% from July and down 13.5% from $130,000 a year earlier. It was the 11th consecutive month in which the median fell year-over-year.

The $112,500 median in August is the lowest for any month since the median was $112,000 in January 1995, and it is 63.9% lower than the peak $312,000 median in November 2006.

The median’s recent decline to a more-than-16-year low can be attributed to several factors: price depreciation; robust sales of low-cost foreclosures; robust sales to investors, who mainly target low-cost properties; extraordinarily low new-home sales (new homes tend to sell for more than resale homes); and higher-than-usual condo resales (condos tend to be the least expensive homes).

August new-home sales represented just 9.8% of all transactions, compared with a monthly average of nearly 30% of all sales over the last decade. August’s condo sales represented 20.3% of total Las Vegas sales, compared with a 10-year monthly average of 13.5%.

An alternative home-price gauge – the median paid per square foot for resale single-family detached houses – held at $67 in August, the same as in July but down 11.8% from a year earlier. The July and August figures were the lowest since the median paid per square foot was also $67 back in February 1994. The August median was 64.8% below the peak $190 paid per square foot in May and June of 2006.

Distressed sales – the combination of sales of foreclosed homes and "short sales" – continued to dominate, representing 70.0% of the resale market last month.

Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 57.2% of the Las Vegas resale market in August. That was down from 59.5% in July but up from 52.5% a year earlier. Foreclosure resales peaked at 73.7% of the resale market in April 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 12.8% of Las Vegas-area August resales. That compares to an estimated 11.1% in July, 16.5% a year ago, and 9.2% two years ago.

Mirroring a similar spike in California, the number of notices of default ("NODs") filed in Clark County last month surged to 5,354, up nearly 58% from July but still about 14% lower than a year earlier. A significant portion of the month-to-month gain in NODs reflects a nearly 190% increase between July and August in the number of NODs filed where Bank of America (BAC) is listed as the "beneficiary" – from 747 in July to 2,163 in August.

The sudden spike in notices of default filings, which represent the first step in the formal foreclosure process, appears to reflect, at least in part, a move by some lenders to employ new policies and procedures and work more aggressively through their backlogs of delinquent loans. It is unclear how long the upward trend will continue, and whether any sustained rise in NOD filings this fall will result in far more distressed properties on the market next year – something that would put downward pressure on prices.

The number of homes foreclosed on in the Las Vegas region in August fell from July but rose slightly from a year earlier. Lenders foreclosed on 2,477 single-family house and condo units last month, down 21.6% from July but up 0.5% from a year ago. The figures are based on the number of Trustees Deeds filed at the county recorder’s office.

During the first eight months of this year, 25,098 house and condo units were foreclosed on in Clark County, up 29.5% from the same period last year.

The foreclosure totals can include units that the county assessor has designated condos, but are currently used as apartments (e.g. a 100-unit complex designated as condos but used as apartments could be foreclosed on and those units would be reflected in the foreclosure total for that month). For this reason and others, the number of foreclosure filings has seesawed, and a single month’s increase or decline doesn’t necessarily indicate a new trend.

This article was republished with permission from The Street.


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