I read a "report" on Smartmoney that determined Overvalued and Undervalued Homes in 152 Markets.
I go insane over these statistics when in reality the Las Vegas Market is quite unique - as many other sunbelt markets are! They based their statistics on: When home prices outrun wages, real estate becomes overvalued; when incomes rise faster, it's undervalued. This equation becomes flawed when you take out simple market driven equations such as: supply & demand, land scarcity, the economy, job growth, population growth, and I can march on this all day long etc etc etc
1) Developable land is at a premium in the valley.
2) Something like 40% of our residential real estate is owned by: vacationers/2nd property owners/investment-rentals. This skews the wage theory because most often than not (in this area) we are dealing with property owners who do not make "wages" in our economy such as retirees, out of state owners or multiple property owners
3) Wages for Las Vegas are way off because of tip compliance deals that unions & casinos have with the IRS. For example: A cocktail waitress that earns in reality 90-110K a year looks like they only make $7-14 an hour on paper which puts them at the poverty level and can even qualify for things like food stamps and medicaid.
4) Still have over 7000+ new residents/month. Those residents begin renting, generally. There is a shortage of rentals from apartment to condo conversions and single family homes that were rentals and sold because of the last several years of appreciation. This is pushing rental prices UP.
5) Strong economy with the formation of new jobs with strong growth potential - in fact the sunbelt dominates the top 10
6) Impending boomer retirement. They want to be near: sun, golf, transportation hubs, culture, theater, fine dining, hospitals. They aren't falling for the middle of the desert scams: they want it all and it better be turnkey! They are already taking advantage of low rates and buying their property and holding until their retirement.
While Las Vegas DOES have much supply with low demand right now, I do believe this is only a temporary situation with buiding permits scaling back to 5-15 year lows each month. In most cases the closed new construction vs permits pulled is about 2.5:1 ratio.
This is excellent news for our inventory problem in the resale sector. Prices are holding steady and stagnant. One must be careful when they read articles about Las Vegas "LIST" prices going down. Those are list prices, not closed sale prices.
Has anyone seen an actual good chart in these articles about where depreciation/drops in prices are actually occurring? Where the manufacturing sector is, mainly Michigan. Places that never had seen the outrageous appreciation of late.
I have been saying to the Chicken Littles for YEARS that the big "overvalued market" correction will not happen at the magnitude they describe, if it happens it will be a slight correction followed by more growth. I do predict that the implosion will occur from the midwest to the northeast. Boomers bought houses in the sunbelt, they eventually have to sell their primaries someday!
Nevada is still a great place to buy and relocate to! Over 7K still move to Las Vegas each month and take advantage of low (and capped 3% OO, 8% NOO) property taxes, no income taxes, sun, great communities, entertainment and job opportunities.