The housing market bust in Southern Nevada - home to communities like Summerlin, Silverstone Ranch, Henderson, Mountains Edge, North Las Vegas and Rhodes Ranch - has taken down with it homeowners, mortgage lenders, real estate agents and builders, and a host of others closely tied to the industry. It has been as brutal a segment collapse as any in history. One of the most plundered victims has been the price. Homes in some of the newer subdivisions have lost as much as 60% of their value in just a few years.
To scores of once-happy and optimistic homeowners the word underwater has suddenly become a hot topic, as their property value now is much less than the underlying mortgage. On the other side of the coin are first-time buyers who are drooling over the current housing affordability in Las Vegas, seeing a unique opportunity to grab a home for mere pennies, it seems. A nice home in a solid neighborhood can be purchased for under $150,000, essentially at a price from 10 years and beyond ago.
NAR, or National Association of Realtors, national affordability index bravely backs the trend and soared to a record territory in 2009, reaching 171.6. A household with a median income thus had 171.6% of the income to be approved for a home loan on a median-priced property. This puts it way above what is required. In comparison, the same index stood at 115.4 in 2007, making home buying those days a fair contest.
The Center for Neighborhood Technology, or CNT, a research shop sorting out community development, transportation, energy and natural resource matters, throws cold water on the argument, though. Transportation looms as a big issue here. Its own affordability metric came in showing that only 40% of subdivisions nationwide are affordable to the average household when transportation costs were counted in. Typically they involve commuting to work, school, market and so on, some guys probably sneaking in a weekly trip to the golf course, too.
On the other hand, when transportation expenses were excluded from the index 69% of the communities became affordable. According to its research then a hefty 29% of subdivisions fall off the affordability grid when in-city travel costs are figured in. That is a sobering result, and less understood among the general mortgage and real estate faculty. CNT's study blanketed 337 metropolitan centers in the U.S., totaling about 80% of the population.
Las Vegas is notorious for being sprawled out all over the valley, crisscrossed by wide streets from one end to the other. Public transportation is pathetic. To get around for life's necessities likely costs even more here than in most other urban centers in the index. Predictably then Sin City's status falls a notch or two below the average, rendering it somewhat less affordable than what solely looking at the current price levels indicate.
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Provided by:
Esko Kiuru
Mortgage, real estate and apartment industry analyst
www.BluefoxToday.com - syndicated mortgage, housing and property management blog
eskokiuru@gmail.com
My cell: 702-499-1006
HI Esco, I really hope things get better in Nevada! It is cousin to California when it comes to the real estate market happenings!
Tiffany,
There are some positive signs around here, which is encouraging, but it's probably going to be a bumpy road for a while longer.
I think it is relative where you are from (it=transportation.) LA area transplants don't understand when we complain about sprawl. Midwesterners think it is a pain!
Being from the midwest there is an advantage to affordability with lower property taxes and no income tax here.
Renee,
You make some good points. No state income tax is a nice break indeed.