The home sale price graphs I published recently (See below) were
extremely bullish on prices. On the other hand, there's Vegas.
The Las Vegas real estate market is fascinating to me. Las Vegas had a crazy red hot real estate market last year, much earlier than Phoenix. No one knows if Phoenix will follow the same pattern as Las Vegas, it seems unlikely, but the comparisons are irresistible.
Las Vegas had the highest annual home price increases ever recorded.
The median home price in Las Vegas increased 50% from April-June 2003 to April-June 2004.
Then last summer resale home prices peaked and leveled off.
New home prices in Las Vegas didn't level off until the autumn. The
prices of many new homes completed in the summer and autumn were set before construction began - back in the spring and summer when prices were skyrocketing.
After being flat for awhile, both new and resale median home prices in Las Vegas fell in February, according to graphs from SalesTraq. Is this the beginning of a price adjustment in Vegas? Or is this within the normal month to month variation of prices? We'll know in a few months. Looking back to the heyday of the Las Vegas market, it's hard to avoid parallels with metro Phoenix today. Look at this quote from a Las Vegas Journal-Review article from January
- People were having to camp out to get a new home and it would take six months to a year for the builder to deliver the product. Those who didn't want to wait turned to the resale market, where a home can close in 30 to 60 days. That pushed resale prices from $183,750 in January 2004 to $250,000 in July.
That first part sounds like Phoenix today even though metro Phoenix
home prices have increased at only half the rate mentioned.
One reason the article gives for the rapid Las Vegas price increases was the low inventory of homes for sale, it fell to only a 2-week supply. In metro Phoenix this past January and February, we had only a 2-week
supply of homes.
Hopefully the Las Vegas experience won't foreshadow Phoenix in all regards.
- A few builders, probably 10 percent, were overly aggressive with their pricing structure and got themselves in a situation where they had to cut prices, Murphy said.
Here are some more quotes from a February Las Vegas Journal-Review article.
- Some people who bought a new home for $500,000 in April or May saw the value drop to $425,000 by the time they closed escrow on it in November, and the builders weren't releasing buyers from their
contracts, Cunningham said.
Most builders in Phoenix, however, stopped selling to investors last summer. Apparently, the builders learned from their Vegas mistakes.
Keeping out investors should help stabilize the Phoenix new home market.
In both the new and resale home markets in metro Phoenix, prices are still skyrocketing... but it won't last forever. Take advantage of it while you can.
- The resale median has been stuck on $250,000 in Las Vegas for six months and could stay there through July, Murphy said.
John L. Wake
Home Sale News publisher
HomeSmart agent
480-596-3851
March 31, 2005
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