Forrest’s Blog

Anyone who has been following the Las Vegas real estate market knows that September 2007 closings were the lowest in a decade.  Meanwhile, the resale inventory remains close to 30,000 homes.  So, what can we learn from the September stats about the underlying condition of the Las Vegas market. 

 First, download and take a look at:  September 2007 Closings vs Available Listings

 This table is a snapshot of the single family residential listings that were available in the Las Vegas market on October 5th.  The listings are broken down by MLS areas; you may also want to download a map to the Greater Las Vegas MLS Area Codes.

The table details the number of homes available is each MLS area as well as the average current list price for homes in that area.  The columns to the right of these compare what actually sold in those same areas, including the number that sold, what percent of the available inventory that sold in September, as well as the average closed sales price for homes in each MLS area.  The column on the far right of the chart is titled “% Gap/LP-SP”.  This calculation is the percent difference between average list price and average closing prices by area.  In short, it really depicts just how overpriced that the current inventory of available homes remains.

For example, Area 102 has an average listing price of $416,865 but an average sales price of $327,229.  Listing in MLS area 102 remain approximately 22 percent overpriced compared to the 4.4% of available inventory that actually closed in September.  That 4.4% is also considered the absortion rate for Area 102.  Overall Las Vegas has an absorbtion rate of 4.8% and is 13% overpriced on the average.

Be careful not to confuse the averages with what is happening with any specific property. In fact, let’s talk about the new competition in the Las Vegas real estate market!  Many homes purchased in the second half of 2003 and later probably got caught in the extraordinary market price run that saw home increase nearly 50% in 2004 alone.  It may be difficult for many of those homes to be priced competitively, especially if they were financed with little or no equity  . . .  or refinanced with most or all equity removed from the home.  However, consider the owners that purchased their home in 2002 or earlier!  They may be sitting on a great deal of equity . . . assuming that they resisted the temptation to pull the majority of equity out of their home.  This seller . . . with good equity . . . and perhaps a small mortgage (or no mortgage at all) can list their home today at an extremely competitive price that will allow them to net a very healthy return on their investment for the years that they have owned the property.  That is why you might see a $700,000 home sell for $475,000 in this market.

In 2004 homes were selling for more than they were valued at due to the heavy demand for homes in Las Vegas.  Today, homes are worth what they are worth, but they very well may sell for less than they are worth.  Simply, supply and demand is alive and well in up and down markets.  It’s just imperative to establish list prices carefully in the current Las Vegas market if one is serious about selling in the short term.