Southern Nevada luxury market under pressure now

All along it has looked as if the general real estate slowdown here in the Las Vegas valley would leave the high-end segment largely unmarked. Mortgage lenders felt confident for a long time about the viability of the luxury market and kept underwriting loans here for those who needed them. Many, of course, were able to close a purchase by bringing in a sack of cash and that was it.

The outlook has changed, though, quite a bit in the last year or so. The segment has slowed down considerably and is now going through the same type of adjustment that the rest of the market started couple of years ago. The evident overbuilding, the tighter mortgage environment and the slow economy are now adversely touching on it.

SalesTraq, a local real estate research shop, reports that sales of single-family homes and condominiums going for over $1 million nosedived during the first half of the year. 161 homes were closed during the first six months while at the same time last year there were 343 closings. That is a serious decline.

For one thing, it's all over town that mortgage banks have gradually tightened underwriting guidelines overall, including in this segment despite the fact that many of these buyers are financially well-established. Las Vegas being a resort destination, over a third of these high-end purchases are second homes and if the luxury condo end of it is taken alone, the percentage is even higher. Today, anything outside primary residence status is a touchy subject to investors buying mortgages.

Price stability also plays a huge role in this. There are several prominent condo projects here with names like Turnberry Place, Trump and MGM Mirage's Signature that commanded nice prices early on. Now those value levels are eroding as more units enter the market, either as resales or new, while demand is waning. Not surprisingly, lenders are taking a cautious approach to all luxury mortgage applications hitting their desks. And not only lenders, but buyers, too, will take another look at the potentially unfavorable price movement before making a commitment.