Is the Las Vegas Real Estate Market Now Overpriced

See the original blogpost:  http://robflitton.com/blog-las-vegas-real-estate-market-overpriced-5-7-13/

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That is a good question: "Is the Las Vegas Real Estate Market Now Overpriced?"

No.

But what decides the matter?  It is decided by the buyers in the free marketplace who compare existing resale homes to new home.  Right now, the replacement cost of a new home is still quite a bit higher than almost every resale home.

A new home builder has several daunting sets of costs: (i) the price of the finished residential building lot or site; (ii) the hard construction costs of building the home; (iii) the soft costs of legal, administration and compliance; (iv) general overhead; (v) interest-carry; (vi) warranty issues – which are generally unknown until several years later; (vii) the sales and marketing costs of selling the home.

A new construction 2000 sf home in today’s market is probably broken down roughly like this:

→ building site $100,000
→ hard costs $150,000
→ soft costs and overhead $30,000
→ contingency factor $15,000
→ minimal profit margin $25,000

The total price would need to be about $320,000 on this home.  Whereas, in a cursory search of the Las Vegas MLS just now, the vast majority of Las Vegas resale homes fall in the $190,000 to $250,000 range.

In other words, resale home in the Las Vegas real estate market, despite having risen more than 25% in value over the last year, are still available to be bought at about 60 cents to 80 cents on the dollar.

So, no, the Las Vegas real estate market is not overpriced … not even close.