Analysts say Vegas housing is overpriced
LAS VEGAS (AP) – Two national analysts say housing is overpriced in Las Vegas, a finding disputed by local real estate observers.
Ingo Winzer, president of Local Market Monitor in Massachusetts, said in a report that Las Vegas has an average home price of $296,500, or 28 percent above the $231,000 average that he said economic fundamentals warrant.
A joint study from Massachusetts economic consulting firm Global Insight and Ohio bank National City Corp. said Las Vegas home prices, at a median of $282,600, are 41.8 percent higher than they should be.
The estimate is based on a calculation made up of four indicators: household population density, the going interest rate on conventional mortgages, relative income, and a “constant” that controls for historical differences in price-to-income ratios.
The authors said the last time the local market came close to a healthy value was in the first quarter of 2004, when the median was $188,600 and homes were 6.1 percent overvalued.
Local real estate watchers said the findings did not account for Las Vegas’ strong job market.
The Nevada Department of Employment, Training and Rehabilitation pegged job growth in Las Vegas at 5.6 percent in July, compared with 1.3 percent nationwide. July unemployment in Las Vegas was 4.6 percent, compared with a national rate of 4.8 percent.
Abundant jobs have helped lure a net number of more than 5,000 new residents a month to Las Vegas for at least the past decade, according to the Nevada state demographer. Such growth calls for thousands of new homes every year, said Larry Murphy, president of local real estate research firm SalesTraq.
“People are going to keep coming here as long as there are jobs here, and I don’t see anything on the horizon to indicate job growth will disappear,” Murphy said. “As long as people keep coming here, we have to have places for them to live. We have to build homes.”
Richard DeKaser, chief economist at National City, said his report’s population-density benchmark gives Las Vegas “the credit it deserves” for its brisk in-migration, because rising population density is a byproduct of growth.
DeKaser said Las Vegas has higher-than-average rates of unconventional mortgage products, such as interest-only loans and option adjustable-rate mortgages that allow buyers to choose their payments every month. The city also has a higher-than-average share of investors, he said.
Those indicators are “symptoms of speculative elements,” DeKaser said, and they could soon drive home prices lower in Southern Nevada.
“Because (homes are) financed, they need to be turned over, and that would in time lead to either significantly slower price increases or price declines,” DeKaser said.
Information from: Las Vegas Review-Journal, http://www.lvrj.com
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