Las Vegas housing affordability challenge

For the lower middle-class home buyer the good old days here were the 80's and 90's when he could afford to buy a nice residence fronting a wide street and had a decent-sized backyard. Maybe even a pool if he had saved diligently. Newspapers across the land were writing about that. But in the early 2000's things started to turn for the worse. Mortgage guidelines by then had become increasingly lenient, allowing home buyers to borrow money way more than they could actually afford, fueling artificial demand. Then real estate speculators moved in and fanned the flames even further. Prices surged and the market badly overheated. And then stalled. And that's where we are now.

During this run-up median prices of resale and new homes reached to a little over $300,000 and are desperately struggling to hold on. In fact, they have given up modest ground so far due to a glut of property out there for sale and sluggish demand. But the value adjustment hasn't been enough for many, at least not yet. The market effectively priced itself out for the blue-collar worker, the hotel maids, bartenders and food servers, teachers and the police force. The backbone of this resort destination.

Here's a statistic that sheds more light on the dilemma. In 1999, 78% of the homes for sale here could be purchased by a family making the median income and that figure has shrunk to 14% in 2006, according to a real estate expert John Restrepo. That is a huge shift in affordability. The recent market overheat can be held accountable for just about all of the gap.

Now the talk is about how much of a downward correction is on its way? Or how much is needed to turn the market around? I wish I knew. No one does. Whatever it is, it'll make it more likely that the first-time buyer and the local wage earner can again afford to purchase a home. And it'll help the Strip resorts recruit new staff when they finish construction on all the new properties that are set to open doors over the next three years. They will add roughly 30,000 new positions during that time span. That's a lot of housing demand.

 

8 Comments on Las Vegas housing affordability challenge

Esko...I am seeing this trend in commercial lending as well. Investors have more appetite on affordable housing developments than luxury home developments. Exit strategies have to be continually revisited and revised in accordance to the market because of the sluggish sales and increasing inventory due to foreclosure.

08/13/2007 10:00 PM by JEROME GENTOLIA (UNIVESAL HOLDING LTD- UNILION GROUP)


Esko, would you agree there is a happy medium between the Loan Programs of old, and the new generation of relaxed guidelines?

"cochin-goraka"...mmm Thai Food!

08/13/2007 10:01 PM by Joe Long - Purchase Perfect (First Choice Mortgage)


Jerome,

It's a tough situation here right now. Lots of buyers are priced out at the moment.

08/13/2007 10:45 PM by Esko Kiuru - Las Vegas NV Mortgage Consultant (Sinifox Financial)


Joe,

Let's see what happens with the loan programs when all the dust settles.

08/13/2007 10:46 PM by Esko Kiuru - Las Vegas NV Mortgage Consultant (Sinifox Financial)


Same problem, different town.  The second homeowners can afford it, but locals can't.  It makes things tough for local workers.  Are there any affordable housing or deed restricted programs for locals?

08/13/2007 11:18 PM by Summit County, Colorado Realtor l Joanne Hanson (Coldwell Banker Colorado Rockies Real Estate)


Joanne,

There are some, but they can only help a fraction of the market.

08/13/2007 11:23 PM by Esko Kiuru - Las Vegas NV Mortgage Consultant (Sinifox Financial)


We are facing much the same problems with housing affordability here as well with the median price at $434,000 CDN.  What really hurts us here is that the vacancy rate on rentals is also very low meaning that the people who do work for lower wages are really having to scrimp just to make ends meet.  We are seeing lots of projects currently under construction and the number of active listings on the market are up as well so that is helping to cool things a bit within the resale market.  Where things go in the next year is really hard to say.  Affordability is a huge challenge in our market for the lower income earners.

08/13/2007 11:32 PM by Jon Angevine Calgary & Airdrie Real Estate (Royal LePage Foothills)


Jon,

Calgary seems to have the same boom-town growing pains that we have here.

08/14/2007 03:40 PM by Esko Kiuru - Las Vegas NV Mortgage Consultant (Sinifox Financial)


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Loan Officer: Esko Kiuru - Las Vegas NV Mortgage Consultant (Sinifox Financial)
Esko Kiuru - Las Vegas NV Mortgage Consultant
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