The Las Vegas housing market has slowed down considerably since last year (2006). Sales are off by 40 percent and prices continue to fall and home builders have sharply cut back on construction. Las Vegas was ranked among the top four at-risk housing markets by PMI Mortgage Insurance Co. The others are Phoenix, Riverside and West Palm Beach, Fla.
The inventory of unsold homes has reached 30,000 in July 2007 which includes homes on the Multiple Listing Service plus new homes from homebuilders and condos. It is reported that nearly 40 percent of them are vacant. Sales of homes have sunk to a low of 1,400 in June 2007, normally a brisk month for home sales. At the current rate of home sales, Las Vegas has close to an 18 month inventory of homes. The national average is 6 to 7 months currently.
Real estate consultant John Burns said home prices in Las Vegas must drop by 33 percent, or about $100,000, before the market returns to normal conditions as he told the Associated Press. He said the housing cost-to-income ratio in both Las Vegas and Reno is 50 percent, meaning people spend half their income on housing. The national average is around 30 percent.
Analysts are in a disagreement about when the market in Las Vegas will come back. Las Vegas continues to see population increases. A number of new hotels will open in the next three years and employees will need housing which will offset the loss of commercial construction jobs. The meltdown in subprime lending will delay buyers coming into the market as credit standards have been tightened and the affordability of housing will be another factor.
It's been a rough market for home builders. Richmond American announced a $106 million loss for the quarter ending June 30, 2007 which included pre-tax charges of $161.1 million for asset impairments and $6.4 million for write-offs of deposits and pre-acquisition costs on cancelled land option contracts. This loss combined with the first quarter's loss, totaled a net loss for the six months ended June 30, 2007 of $200.5 million, which included pre-tax charges of $302.5 million for asset impairments and $10.5 million for write-offs.
John Laub is the President of the CEO-CFO Group. (www.ceo-cfogroup.com)
1. "M.D.C. Holdings Announces Second Quarter 2007 Results." Company Press Release. PRNewswire-FirstCall. July 25, 2007.
2. "Price Drop May Signal Correction." Brian Wargo. In Business Las Vegas. August 10, 2007.
3. "Housing Inventory Hits Record as Sales Slow." Brian Wargo. In Business Las Vegas. July 13, 2007.
4. "Las Vegas Inventory (Sales)." Bubble Markets Inventory Tracking. www.bubbletracking.blogspot.com. August 10, 2007.
5. "Analysts See No End in Sight to Las Vegas Housing Slump." Associated Press. July 15, 2007.
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