Las Vegas is having a tough time living down its sordid past. Not that sordid past. It’s our reputation as Ground Zero in the foreclosure crisis a decade ago that has Southern Nevada in the news now.
The headline in the New York Times reads: The Epicenter of the Housing Bust is Booming Again. (That’s a Warning Sign.)
Las Vegas is booming again, and bracing itself for next slump says a Reuters story from this week.
And in August, S&P CoreLogic Case-Shiller reported Las Vegas overtook Seattle to lead its 20 Cities Index with 13 percent year-over-year price increases.
Escalating values in the local housing market are generating a lot of fuss despite a summertime lull that, after years of monthly increases, left the August median price for a single-family home on par with May, according to the Greater Las Vegas Association of Realtors (GLVAR).
And while Las Vegas is the fastest appreciating market in the nation, home values are still below their hyperinflated pre-recession peak prices.
The median price of an existing single-family home sold in August in Southern Nevada for $295,000, still below the June 2006 all-time high of $315,000. Prices bottomed out at $118,000 at the beginning of 2012.
Year-to-year, single-family homes increased in value by 13.5 percent, according to the GLVAR. Almost one-quarter (24.8 percent) of homebuyers in August paid cash, down one percent from a year ago.
Chris Bishop, President of the GLVAR, says the market is tilting in buyers’ favor. Sales so far this year remain behind last year’s brisk pace. Single-family home sales fell 6.6 percent from a year ago but sales of condos and townhomes are up 11 percent. But inventory remains tight at two-months supply. A six-month supply is considered standard for a healthy market.
“Finally when the Las Vegas market has hit some recovery, it’s ironic that people are eager to talk about a crash,” Bishop says of the recent headlines. “It’s a different economy, it’s a different place. North Las Vegas itself, which was featured in the New York Times — look at what it went through — the economy, the government. If you’ve been out to Lamb and the Interstate 215 you see warehouse after warehouse. Look at the available land to be developed. Not a lot of places have that.”
“The New York Times story talks about a lady who bought three homes with a $1.3 million loan back then. No wonder she got in trouble. You can’t do that now,” Bishop adds. “We were selling homes in North Las Vegas for $50 a square foot. That’s less than the replacement cost. Of course, prices have gone up.”
Bishop admits 13 percent year-to-year growth is unsustainable with incomes essentially flat when adjusted for inflation.
“But when you’re down 70 percent those gains aren’t unreasonable,” he adds. “I don’t think we’ll keep up 13 percent, but we’ll keep some appreciation.”
Homes in danger of foreclosure amounted to just two and a half percent of existing home sale listings in August, down from just over six percent a year ago.
Realty Trac, a foreclosure tracking service, reports the number of homes receiving a foreclosure filing in July was down 21 percent from June, but up 168 percent from the same time last year.
Realty Trac reports 3,175 properties in the valley are in some stage of foreclosure. By zip code, 89179, the area west of I-15 and south of West Cactus, leads in foreclosures with one default for every 227 homes. The next highest ratio is in 89142, the neighborhood at the east edge of the valley known as Sunrise Manor. It has one default for every 562 homes. Statewide, one in 2,055 homes is in foreclosure while nationally, the ratio is one in 1,362.
By contrast, at the height of the recession, almost one out of three homes in Southern Nevada was in default or had been foreclosed.
Loan-to-value, the ratio of how much is owed on a home and how much it’s worth, now stands at an average of 86 percent, compared with 92 percent in 2006/2007, according to Vivek Sah, the Director of UNLV’s Lied Real Estate Institute.
Despite the menacing headlines, Sah says the market is far from another fall.
“People like to come up with losers in the past and say it’s happening again. But it’s not, for multiple reasons.”
Sah says the Las Vegas that succumbed to the recession was wholly dependent on gaming and conventions, suffered from the Sin City image, enjoyed liberal lending policies in an investor/speculator driven market and relied on a population of 1.38 million people.
Today, the valley boasts professional sports, a stable lending environment with no NINJA or subprime loans and fewer adjustable rate mortgages. Southern Nevada is now home to 2.2 million residents. It’s also a hub of distribution and hosts technology-based gaming companies.
Sah says the profile of the buyer has changed, too. Most are “boomerang buyers” who lost a home to foreclosure or have been longtime tenants and have saved enough to plunk down 15 to 20 percent on a home.
Increasing prices are putting upward pressure on rents and pushing vacancy rates lower.
UNLV’s Center for Business and Economic Research reports the average asking rent increased by 2.4 percent in the second quarter to $1,003. The vacancy rate has been seven percent for nine consecutive quarters.
“People are moving here for the booming economy of the Strip. Rents are matching their migration pattern,” says Sah. “These are younger people taking advantage of the hospitality industry or empty nesters leaving states that have catastrophic risks such as earthquakes and hurricanes.”