Wednesday, February 25, 2009
Las Vegas Housing Crash Continues
Since the peak of the economic boom in 2005/6, I've been writing that Las Vegas was extremely vulnerable and would ultimately feel the brunt of any economic downturn.
Many, based on previous history, felt that I was wrong and thought the city would be insulated from any recession, as peoples' "vices" would still need to be serviced and they would always be willing to spend in doing so..
Anyway, with the cheap-credit infused prosperity of the early decade, Las Vegas experienced one of the nation's steepest rise in home values - as the masses of soon-to-be millionaire investors flocked to the city to compete with the 6,000 or so new LV monthly residents who came to fill the many new service sector/gaming jobs created by the massive hotel/gaming construction boom - spawned by easy credit and analyst profit predictions that reached to the never-ending future... But I digress.
Ultimately, the factors above, combined with creative financing - which provided affordability regardless of price - created a massive demand for homes and inventories were quickly gobbled up - causing prices to go parabolic as they reached out and touched the stratosphere.
But the party eventually had to end - regardless of what all the kool-aid drinkers wanted one to believe.
Last year I wrote that the median house price in Las Vegas would ultimately fall to levels seen in 1999 - Las Vegas homes for $60 a Square Foot?
Well, based on recent data from Housingtracker.net, which is a combined look at condo and single-family home statistics, Las Vegas's median home values are currently down 40% YoY and 53% from April 2006 (April 2006 Median=$344,900; Today's Median=$162,500).
Based on the data/trends above, combined with the significant uptick in Las Vegas's unemployment situation and lack of available mortgage credit, I anticipate foreclosures and inventories to significantly increase and prices to fall another 30% by this time next year.
Stated differently: Today's Median price is $162,500. After a 30% haircut from here, I expect to see a median of ~ $115K by March 2010 - very close to the $60 median price that I wrote about last year (link above).
But I may have been too optimistic in predicting that $60SF floor, because I'm now starting to believe that won't be the ultimate bottom...