LAS VEGAS VALLEY – LOOKING BACK AT 2008 2008 held much intrigue for many of us. A lengthy election season was finally concluded, world athletic representatives met for the Olympics in Beijing, oil prices ground upward then dropped and Wall Street woke up and ate a big bowl of credit crunch. Las Vegas was not immune to the financial issues, resulting in many stalled or delayed projects. Others forged on, with Aliante Station Casino and Wynn’s Encore opening in the last half of the year. While some of the events of last year were startling and many markets turbulent, long-term fundamentals should help continue to push our economy towards some form of normalcy. G. Scott Thomas and Bizjournals analyzed metro areas to determine the nation’s current growth centers.1 These were the areas with the most momentum going into the recession and since past performance often is an indicator of future results, presumably the metros which should climb out the recession the quickest. They found that under the criteria of population, employment and income growth in the past five years, Las Vegas was the top performer for doing well in all criterions. We also move into 2009 with a better home inventory condition than we did in 2008, where we entered January with nearly 24,000 homes and left December of 2007 with a mere 1,000 or so sales for that month. December of 2008 on the other hand had nearly 3,000 sales, and despite continued foreclosures, inventory was approximately 21,000 homes. Taking available inventory and dividing by homes sold in the same period yields months of supply. In October 2007 months of supply peaked at 24 months. In October 2008 months of supply was approximately 7 months. If anything, 2008 showed us that housing markets are working, with prices moving towards their long-term trends. We are far past the peak of the market and are finding that, price/rent, price/income, affordability and trend analysis as well as other measures, we are now re-discovering fundamental values for homes in the Valley. This is very encouraging for those looking to purchase homes. Their options are plentiful, interest rates are low and we can’t think of anywhere else they would want to make their home but the Las Vegas Valley.
1
G. Scott Thomas, “Some U.S Metros Still Show Economic Strengths”, Bizjournals, November 10, 2008.
Selling Your Home Looking at increased affordability, a variety of home options and neighborhoods, buyers have recently moved off of the fence. With that said, the market for homes is fiercely competitive and sellers that want maximum value with a reasonable marketing time must understand the importance of accurate pricing. Finding the correct price is both an analytical skill and, since homes vary greatly, an art gleaned from careful study and experience. Living and breathing real estate, agents at Coldwell Banker Premier Realty experienced an average of 97.8% of their listed price. Further, 53% sold at or above their listed price with 33% selling above.
Existing Home Sales HOME RE-SALES (LESS THAN $1M) 2002 THROUGH 2008
2008 broke a trend of declining sales which began in 2005. Sales advanced to nearly 2006 levels as fair market values declined to
50,000
more affordable values than in the past. For many, it was a time
45,000
to seize an opportunity.
40,000 35,000
Comparing 2008 to 2007, marketing time was fairly stable within
30,000
the price range where the majority of homes were sold ($100,000
25,000
to $400,000). Larger more expensive single family homes and
20,000
condominiums experienced increased marketing time, as did
15,000
homes within the $50,000 to $100,000 range. For the bulk of
10,000
homes sold in 2008, stability in marketing time has a lot to do with the adjustment of prices downwards to achieve an equivalent marketing time.
5,000
2002
2003
2004
2005
2006
2007
2008
SOURCE: MLXCHANGE
SINGLE FAMILY AVERAGE DAYS ON MARKET COMPARISONS 2007 VS 2008 $800,000 – $1,000,000 $600,000 – $800,000 $400,000 – $600,000 $300,000 – $400,000 $200,000 – $300,000
2008 2007
$100,000 – $200,000 $50,000 – $100,000
50
100
150
200
250
300
DAYS ON MARKET CONDOMINIUM AVERAGE DAYS ON MARKET COMPARISONS 2007 VS 2008 $800,000 – $1,000,000 $600,000 – $800,000 $400,000 – $600,000 $300,000 – $400,000 $200,000 – $300,000
2008 2007
$100,000 – $200,000 $50,000 – $100,000
50
100
150
200
250
300
DAYS ON MARKET SOURCE: MLXCHANGE, COLDWELL BANKER PREMIER REALTY
New Home Sales The trend of lower new home closings continued in 2008. This is largely a function of the lack of new home supply and the increased competition with recently built existing product. For the first time in many years, there are new home offerings priced below $100 per-square foot however, these are not a substantial part of the overall housing market and tend to have low spec levels. We do believe that there are some new homes that should receive the consideration of a variety of homebuyers such as the first time buyer, moveup buyer and luxury buyer, as there are several projects that are richly appointed, have great amenities and are available at very competitive prices. At the end of 2008 median new home prices approached 2004 levels, compared to existing homes, where prices were even lower than 2004 levels.
NEW HOME CLOSINGS & PERMITS
NEW & EXISTING HOME PRICES
5,000
$400,000
NUMBER OF PERMITS/CLOSINGS
4,500
$350,000
4,000
$300,000
3,500 3,000
$250,000
2,500
$200,000
2,000
$150,000
1,500
$243,254 $207,615
$183,750 $157,250
$100,000
1,000
$50,000
500 Ja nM a 04 r Ma - 0 4 y-0 Ju 4 lS e 04 pNo 04 v-0 Ja 4 nM a 05 r Ma - 0 5 y-0 Ju 5 lS e 05 pNo 05 v-0 Ja 5 nM a 06 r Ma - 0 6 y-0 Ju 6 l -0 Se 6 pNo 06 v-0 Ja 6 nM a 07 r Ma - 0 7 y-0 Ju 7 lS e 07 pNo 07 v-0 Ja 7 nM a 08 rMa 0 8 y-0 Ju 8 lS e 08 pNo 08 v-0 8
Ja nM a 04 r Ma - 0 4 y-0 Ju 4 l S e -04 pNo 04 v-0 Ja 4 n M a -05 rMa 0 5 yJu 05 l S e -05 pNo 05 v-0 Ja 5 nM a 06 r Ma - 0 6 yJu 06 l S e - 06 pNo 06 v-0 Ja 6 n M a -07 r Ma - 0 7 y-0 Ju 7 l S e -07 pNo 07 v-0 Ja 7 n M a -08 rMa 0 8 yJu 08 l S e -08 pNo 08 v-0 8
-
New Hom e Closings
Existing Hom es
New Hom e Perm its
New Hom es
SOURCE: SALESTRAQ
PriceS As we noted in the New and Existing Home Median Prices graph, re-sale home median prices in 2008 were already below 2004 levels. Another estimate of prices which utilizes repeat sales to measure price changes is the popular Case-Shiller index. This longer series of analyses illustrates the severity of the home price peak. Due to the social epidemic circumstances in which the peak arose, which precipitated the real estate fever and brought us away from the basic fundamentals, we should not expect to see a return to the pre-peak prices. In Las Vegas, prices are adjusting quickly and we believe there’s a positive aspect to this adjustment. Prior to the peak in 2006, home price appreciation was fairly stable. The sooner we can re-establish prices at or near the long-term trend, buyers’ decision making should be simplified. As one can see from the index, all price tiers have returned to or near their long-term trend. While the Case-Shiller and median price indices are highly illustrative, caution and prudence is necessary when pricing individual homes. Homes vary greatly in their condition, amenities, type and location and may not mimic the price changes of an index, so if you are planning on selling your home, we recommend seeking the advice of a well trained professional Realtor®.
S&P/CASE-SHILLER INDICES JANUARY 1993 TO OCTOBER 2008 – LAS VEGAS 300
200
150
100
50
nJu 9 3 l J a -93 nJu 9 4 l J a -94 nJu 9 5 l J a -95 nJu 9 6 l J a -9 6 nJu 9 7 l J a -9 7 nJu 9 8 l J a -98 nJu 9 9 l J a -99 nJu 0 0 l J a -00 nJu 0 1 l J a -01 nJu 0 2 l J a -02 nJu 0 3 l J a -03 nJu 0 4 l J a -04 nJu 0 5 l J a -05 nJu 0 6 l-0 Ja 6 nJu 0 7 l J a -07 nJu 0 8 l-0 8
0
Ja
Index Value (Jan-2000 = 100)
250
LOW TIER (Under $193,681)
MIDDLE TIER ($193,681 - $260,995)
HIGH TIER (Over $260,995)
AGGREGATE (Overall Market)
SOURCE: STANDARD & POORS. NOTE: THERE IS A TWO-MONTH LAG IN THE REPORTING OF THE INDICES.
FORECLOSURES Bank owned or real estate owned (REO) homes continued to set the stage for pricing in 2008. In 2008 nearly 60% of the closed sales were bank owned. At the end of the year, approximately 38% of the listed homes were bank owned and the majority of these homes were listed below $250,000, giving them a good chance of selling within a reasonable marketing time. We expect that foreclosures will continue to dominate the market in 2009 as notices of defaults have given us a preview of what is to come. We count over 10,000 notices of default in the 4th quarter of 2008, so we can expect that the majority of these will spill onto the market in the first part of 2009. Bank owned inventory has appeared to be increasing but at a decreasing rate, with gains as high as 9% month-to-month in early 2008 to 2-3% in the final months of 2008. While new foreclosures are slowing the real estate and economic recovery, a lot of progress has been made in reducing the market inventory levels. Sales are up substantially over 2007, the inventory has slid from nearly 28,000 homes to nearly
FORECLOSURES, SALES & BANK OWNED INVENTORY 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 -
7 7 7 7 8 7 7 8 8 8 08 l-08 08 08 07 08 08 t-08 07 -07 r-07 -07 n-0 08 07 -0 y-0 -0 l-0 g-0 p-0 ct-0 v-0 ng- epnv- ec-0 c- anbbc ay Ju ar Ap a ar Apr Ju Au Ju Au O Ja J Ju O No Fe De M M Se Fe M M No D S
20,000 and many home prices have returned to what we consider highly
Foreclosed
Existing Home Sales
Bank Dispositions
Bank Owned
SOURCE: SALESTRAQ, MLXCHANGE, COLDWELL BANKER PREMIER REALTY.
affordable levels.
short sales Due to the increased number of real estate transactions that took place during the height of the market at peak prices, 31% of homes currently on the market are short sales. At approximately 69% of available homes, we see that the majority of listed homes are either a short sale or foreclosure. Lenders have been bombarded with managing the disposition of homes making it important and advantageous to have an agent experienced with short sales in order to help expedite the sale and purchase processes.
65% OF THE PROPERTY ON THE MARKET IS VACANT The vacancy rate is 12% higher than mid-year 2008. Nearly 8% of the homes on the market have tenants, leaving only 27% owner occupied. The vacancy rate is largely a function of the amount of bank owned inventory, followed by investor and second homes.
TAKING YOUR MONEY FURTHER The table below depicts some comparisons of what one can acquire with their monthly payment in the past five years. As you can see from the left column, median home prices have decreased substantially. At the same time, interest rates have varied on average less than 1%, and continue to be historically low. In 2004, if you wanted to put 10% down and have a monthly payment of $1,326 , you could purchase the median priced home at the time, which was approximately $250,000. This would buy you a home with approximately 1,500 sq.ft. Today, for the same payment, you could purchase a home costing $240,000 with nearly 500 more square feet. Or one could buy today’s median priced home for about $170,500 and pay almost $470 per month less than you would have in 2004. For many homebuyers, the options available today are much better than they were in the past, as indicated by recent sales.
YEAR
MEDIAN HOME PRICE
INTEREST RATE
MONTHLY PAYMENT
HOME PRICE ATTAINABLE WITH 2004 PAYMENT AMT
SQ FT OF MEDIAN HOME
SQ FT ATTAINABLE WITH 2004 PAYMENT AMT
2004
$250,300
5.84%
$1,326
$250,300
1,539
1,539
2005
$285,000
5.87%
$1,516
$246,950
1,564
1,376
2006
$285,000
6.41%
$1,606
$233,200
1,535
1,257
2007
$250,000
6.34%
$1,399
$234,850
1,485
1,402
2008
$170,500
5.30%
$852
$240,350
1,529
1,957
OWNING VS RENTING While price declines in the Valley’s housing have made a lot of news, some homebuyers are finding that purchasing a home now makes fundamental financial sense for them. We took a look at what mortgage amount would yield an equivalent monthly payment to monthly apartment rent. Current low interest rates combined with price declines make many homes listed on the market today accommodate a similar monthly cash outlay. Further, while apartments and traditional homes are substitute choices, most Valley condominiums and single family homes that fall within these price ranges have greater square footages than most apartments and the majority of the single family homes have a garage for 1 or more cars. Over half of the homes on the market were built after 2000 so the floor plans are typically modern and the amenities well appointed. These are important factors to consider as well as HOA fees and the location. While HOA’s require an additional monthly fee, deducting mortgage interest from one’s personal taxes is another offsetting proposition. Owning a home may not be for everyone, considering other lifestyle choices such as a planned, short tenure in the Valley or a preference to live closer to work, wherever that may be. Another deciding factor may be the down payment. However, for those individuals and families that are making Las Vegas their home, a home purchase appears to be a solid choice for many. Today you will get more house for your money, with additional amenities in a neighborhood you enjoy, making saving for the down
Apartment Rent/Monthly Payment Equivalence
payment well worth it. The Valley’s two bedroom listings have an
Apartment Type
2 Bed
3 Bed
Apartment Rent
$936
$1,102
$877
Finance amount to achieve rent/monthly payment equivalence
$170,000
$200,000
$158,000
1,847 square feet. Reviewing the
Home Price with 10% down
$187,000
$220,000
$173,800
table, one can recognize the many
Number of Homes within $150,000 to $200,000
671
2,962
5,435
Number of Homes within $200,000 to $250,000
335
1,392
3,098
average square footage of 1,244 while the three bedrooms average
available options.
Valley Avg.
NOTE: USES AVERAGE INTEREST RATE OF 5.3% ON A 30-YEAR MORTGAGE. SOURCE: CENTER FOR BUSINESS AND ECONOMIC REASEARCH, BENTLEY GROUP, MLXCHANGE, BANKRATE.COM, COLDWELL BANKER PREMIER REALTY.
LUXURY HOME RE-SALES Unlike the stronger sales achieved by the overall market, the single family luxury segment did not break the trend of declining sales which started in 2006. Luxury single family homes, defined as homes priced above $1 million, posted sales nearly half that of last year. In 2008 sales in luxury single family homes were lower in each price segment except the $3-$4 million range. Notable sales continue in areas such as
LUXURY SINGLE FAMILY HOME RE-SALES 2002 THROUGH 2008
Anthem, Macdonald Ranch and Summerlin.
700 600
Luxury condominiums performed similar to last year, selling seven
500
fewer homes. However, several of the condominium price segments
400
did outperform the sales of 2007. Supply continues to remain elevated
300
in the resale luxury condominium market due to new project closings
200
in 2007 and 2008 in projects such as Sky Las Vegas and Turnberry
100
Towers, some of which have been listed for sale on the mls. Re-sales continue in projects such as Park Towers and the Turnberry projects, 2002
2003
2004
2005
2006
2007
2008
LUXURY CONDOMINIUM RE-SALES 2002 THROUGH 2008
luxury SINGLE FAMILY HOME sales
60 50 40 30 20 10
2002
2003
2004
2005
2006
which receive interest for their design elements, amenities and views.
2007
2008
SOURCE: MLXCHANGE
PRICE RANGE
2007
2008
$1,000,000 – $1,500,000
246
124
$1,500,000 – $2,000,000
84
34
$2,000,000 – $3,000,000
45
33
$3,000,000 – $4,000,000
15
16
$4,000,000 – $5,000,000
9
1
$5,000,000 – $6,000,000
7
3
$6,000,000 +
8
1
TOTAL SALES
414
212 SOURCE: MLXCHANGE
luxury high-rise sales
luxury CONDOMINIUM sales
CONDOMINIUM RE-SALES BY DEVELOPMENT
PRICE RANGE
2007
2008
2007
2008
$1,000,000 – $1,500,000
15
12
REGENCY TOWERS
5
0
$1,500,000 – $2,000,000
8
4
PARK TOWERS
5
3
$2,000,000 – $3,000,000
5
6
TURNBERRY PLACE
20
19
$3,000,000 – $4,000,000
4
0
TURNBERRY TOWERS
4
2
$4,000,000 – $5,000,000
1
2
SKY LAS VEGAS
0
$5,000,000 – $6,000,000
1
2
$6,000,000 +
0
0
TOTAL SALES
34
26
3 SOURCE: MLXCHANGE
SOURCE: MLXCHANGE
PROPERTIES SOLD
PROPERTY FEATURES
217
4 PLUS BATHS
213
BEDROOM DOWNSTAIRS
194
GUARD GATED
Homes priced above $1 million are not merely about size, location or the beauty of
180
POOL
the home from the street. These homes contain the top echelon of fixtures and finishes.
126
3 CAR GARAGE
The homes sold in 2008 were packed with the top amenities available such as custom
109
COMMUNITY TENNIS
designed and crafted pools, golf course, city and mountain views, multicar garages,
85
COUNTRY CLUB
state of the art audio, video and security features, custom and unique finishes, imported
84
GOLF COURSE VIEWS
cabinetry and flooring and much more. Common features of the luxury homes sold in
68
4+ CAR GARAGE
68
GATED COMMUNITY
63
FIRST LEVEL MASTER
Luxury Home features
2008 are listed in the table.
SOURCE: MLXCHANGE
MOST EXPENSIVE LUXURY HOME AND CONDOMINIUM SALES A home in Summerlin’s The Ridges took the top spot for the most expensive single family home sold in the valley in 2008. The 13,943 square foot contemporary masterpiece has breathtaking views of the Strip from all entertaining areas and the pool. The property sold for $11,500,000 and closed in October. Turnberry Place produced the most expensive condominium sale for 2008 coming in at $5,250,000. The 6,421 square foot unit has stunning 360 degree views of the Las Vegas Valley and is beautifully appointed throughout. This sale closed in June.
THE SMART MONEY IS BETTING ON LAS VEGAS 2008 brought continued increases in home sales month over month bringing our sales tally up 58% over 2007. Our real estate market remains extremely active with bidding wars returning as a typical scenario on competitively offered properties. Las Vegas has become incredibly affordable once again and the selection of quality homes is remarkable. First time buyers are able to purchase more home for their money in better neighborhoods than we have seen in years. Savvy investors (not unseasoned speculators) are recognizing that at today’s bargain prices, where rental rates closely match mortgage payments, there may never be a better time to capitalize on market conditions. We will experience a substantial return fueled by affordable home prices and the significant new home inventory shortages from the overwhelming decrease in construction. Forbes.com ranked Las Vegas #1 in their America’s Best Cities for Home Sales report this January and IHS Global Insight and National City Track lists Las Vegas as one of the most undervalued major markets in the country. The incredible social and economic advantages we experience in this dynamic city continue to convince experts that betting on Las Vegas is the smart money! For additional information on your neighborhood please contact your Sales Executive.
Bob Hamrick – Chairman of the BoarD
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CBPR DEEMS INFORMATION RELIABLE BUT NOT GUARANTEED.