Las Vegas housing: Now a buyers market
Inside Liberty Watch Today - July 24, 2006

Stephen Bottfeld led off his quarterly Crystal Ball seminar by giving away the punch line: "Buy now," Bottfeld told the capacity crowd at the Suncoast, "there will never be a better time to buy real estate in Las Vegas than right now." But one local homebuilder, who is trying to make a living selling homes (instead of putting on seminars), was not convinced, and calling Bottfeld's rosy prognostication "a bunch of crap." 

The EVP of Marketing Solutions, a consumer research firm, believes home prices in Las Vegas will continue to increase because of job growth, building costs that are increasing 1 to 3 percent each month, lack of available land to build on, and continued low interest rates. 

Bottfeld pointed out that Nevada has led the nation in job creation for the last 13 quarters and since Las Vegas is 70 percent of Nevada, people are still moving here to fill those jobs. Because the BLM owns the vast majority of the land in Clark County, "we are running out of buildable land very, very quickly," according to Bottfeld. "There will be no more traditional single family new home subdivisions as we currently know them in the Las Vegas valley in ten years," Bottfeld told the crowd. Residential development must go vertical. He also believes casino operators will have to build affordable housing projects for their employees to live in. 

The current inventory of resale homes will decline over the next six months, according to Bottfeld. The current level of approximately 20,000 listings on MLS is not a cause for concern because the number of listings has peaked. He pointed out that 8 percent of home sales in the second quarter were to investors, which is an increase from last year. 

Many of the people who have their homes listed are just seeing if someone will give them a big price so that they can cash out their equity. Speculators from 2004 are also trying to cash out because their adjustable rate loan payments are ratcheting up. 

Bottfeld's sidekick Larry Murphy from Salestraq, told the crowd that the number of listings on MLS amounts to just under 7 months of inventory, not far from normal levels in his view. With the median price of a new home up nearly 13 percent from a year ago, Murphy told the crowd that there "hasn't been a bubble, there isn't a bubble now, and there won't be a bubble in the future," in the Las Vegas housing market. Even the resale home price median is up over 5 percent. But, for those selling new homes right now, the statistics don't reflect how tough a market it is. "There's no bubble now," one builder CFO said leaving the seminar, "because it popped four months ago." 

In his Las Vegas Housing Market Letter dated July 15th, Dennis Smith anticipated Bottfeld's and Murphy's optimism. Although he didn't name anyone in his current letter, Smith wrote, "they feel it is their purpose to say positive things to an audience to keep them motivated…whatever the reason, we don't agree with that assessment." Smith doesn't believe the market will improve very soon. Although he is bullish on Las Vegas for the long term, he thinks "the next 12 - 18 months could be 'much of the same." Interestingly, Smith emphasizes that there are lots of good deals to be had right now in the resale market. Sounding much like his rival Bottfeld, Smith writes, "IT IS A GREAT TIME TO BUY A HOME." 

But for builders who see the interest rate on their construction loans increase each time the Federal Reserve meets and for speculators whose negative amortization adjustable rate loans are just about ready to adjust from teaser rate never-never land to market rates at higher loan balances, those good times (and willing home buyers) can't come fast enough. 

Doug French, Liberty Watch Columnist

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