Las Vegas housing weak in 2007

2007 was one of those years in Las Vegas residential real estate that many will remember for a long time. The glut of homes on the market, new and resales alike, from single-family houses and townhomes to condominiums, put tremendous pressure on prices. On top of that the mortgage industry ran into homeowner and investor payment problems and as a result foreclosures began to rise steeply. In summary, it was an ugly year.

New home sales totaled 19,670 for all of 2007, a serious 45.6% decline from 2006. On the resale side last year's final number was 24,838 which amounted to a 40.7% drop from 2006, as was recorded by Home Builders Research. Combined sales haven't been this low since 1997 when they were 39,187. This last comparison alone is enough to indicate how far the market has thus far dropped.

The price structure has pretty much followed the same path. The median new home value decreased 20.1% to $273,359, while the existing one slid 11.2% to $253,000. The importance is that today's median is at about the same level with 2004, erasing some hefty gains made that year and to some degree the next. As the market seeks to recover its health those absurd appreciation rates at the pinnacle of the boom are being neutralized, which really is the only route to go.

Yet, despite the obvious weak spots in the mortgage and sales sectors, the market is ripe for the taking by the buyer. Home loan interest rates remain low and prices are rather advantageous, so what else can he ask for.

Las Vegas condominium project faces difficulties

The frustrating mortgage lending environment and soft residential real estate market in Las Vegas are testing the resolve of many condo developers. Several projects in the past few years have been cancelled or put on hold. Some that are presently under construction are struggling to attract buyers offering their usual amenities, so they have done the next best thing and lowered prices, sometimes substantially. But even that hasn't always been enough, though.

Newport Lofts is a downtown condo project being built by West Seegmiller that had recently advertised an auction of 60 of its units, priced from $229,000 on up. Evidently sales had been lagging, so an auction became a viable option. Soon after the announcement one of the lenders, Pyramis Global Advisors which is the institutional asset management arm of Fidelity Investments, decided to intervene and assumed control of the 23-story development. That effectively cancelled the planned auction.

To read the entire article, please click on the link in the first paragraph.

CityCenter condos selling briskly

MGM Mirage's CityCenter is a massive entertainment and residential enterprise located right on the Strip south of Bellagio. Construction is moving on schedule and the project is estimated to open its doors in November of 2009.

The development will have a total of 2,650 luxury condominiums in four separate buildings, namely in Veer Towers, Mandarin Oriental, Vdara Condo Hotel and Harmon Hotel. About half of the available units have been sold to date which has produced $1.63 billion in revenue, nearly 60% of the total projection at sell-out.

It could well be that all of them are sold by the opening day. Las Vegas residential real estate in general is struggling today under the weight of overbuilding and a fluid mortgage market, but it obviously hasn't affected the upscale condo sector. The one where units go for over $1 million each. It is operating at its own level, as per square foot prices ranging from a whopping $1,500 to $3,000 at CityCenter prove.

The last property to offer its condominiums to the public is the Harmon Hotel, Spa & Residences which began sales this week. Besides the 207 condos, the resort will have 400 hotel rooms in a 47-story tower and it'll only be accessible to hotel guests, unit owners and diners at Mr. Chow. It'll be a private venture, but still be connected to the entire collection of CityCenter's amenities. The project is managed by the Light Group, better known for operating trendy nightclubs and restaurants in MGM Mirage properties.

Las Vegas single-family house inventory drops again

For the local real estate market the new year starts with some rare positive news. The Greater Las Vegas Association of Realtors, or GLVAR, released its December statistics and they show that the single-family house inventory in the MLS decreased to 22,005, a drop of 1,489 units from November.

Some may argue that December is traditionally slow, which it is, yet the inventory has been slowly sliding since August and that is significant. It's a four-month trend that cannot be ignored. It just might indicate that the housing sector is cautiously heading toward a working balance between supply and demand, which eventually will translate into a more stable marketplace.

In other categories, the single-family inventory, although now falling, is still 23.4% higher than a year ago, so there remains work to be done. The condominium and townhouse listings grew 14% from December of 2006.

The median price for a single-family house declined 15.1% from last year, standing now at $260,000. The price level is moving down to narrow the boom-widened gap with the average household income, a necessary development for a healthy market. It wouldn't be surprising at all if it went even lower in the coming months.

December sales were down 46.5% from a year ago, about where it has been for several months. Over one-fourth of them were either bank-owned, or repossessed, homes or short sales, which is noteworthy. Banks don't want to own real estate, so they often sell homes for less than the appraised value and that pushes the median price point lower. Sort of an artificial adjustment. This may continue well into 2008 as thousands of exotic adjustable rate mortgages, or ARMs, will reset higher during the year and predictably bring about more foreclosures.

The housing inventory slipping for several months in a row is welcome news, but as the other numbers describe, the market still has a way to go.

Las Vegas condo owners sue developer

Just like the rest of the real estate market in the Entertainment Capital of the World the condominium sector has fallen on hard times. Units for sale are sitting unsold for months on end and prices are dropping. That makes a lot of owners nervous, especially those who are in it as investors.

A group of them at the Signature, the MGM Mirage - Turnberry Associates condo-hotel project with three towers, has decided to sue the developer for fraud, for selling them high-rise units that are unprofitable. Yes, that is the reason for the legal action. Unprofitable condos. Disputes typically arise when deposits are paid and then the project fails to get off the ground or when the building opens with material defects and missed features. As is evident, this particular grievance is rather unusual.

According to the complaint, the developer enticed them to purchase condominiums that would bring net profits when they are rented out, in addition to the potential for appreciation. In this setup the owners would have a management company rent their units to visitors when they are unoccupied. But for many owners rental incomes haven't even been enough to cover the underlying mortgage payments and high maintenance fees, much less bring a profit, and they feel exploited.

On the surface it appears to be very difficult to prove that the developer is at fault. The profit assurance assumably wasn't included in any written contracts, so what promises the sales agents orally made is hard to establish. It really is the investor's responsibility to do his homework before signing anything and if the market turns, like it has now done, it's just part of investing, and also a learning experience. Seeking help for a questionable business decision making from the courts is stretching it.

Photo by Steve Marcus