Las Vegas Real Estate Market – Gamblers Wanted

If you gamble on a new home in Las Vegas, you will find that the odds are stacked against you. For now, at least.

According to recent data compiled in the S&P / Case-Shiller home price index, Las Vegas is one of the only metro real estate markets where prices are still falling.

Of the 20 metropolitan areas surveyed in the report, Las Vegas was the only one where home prices dropped in June. Home prices in all of the other markets either appreciated or held steady. Though the pricing trend is two months old, the report itself was recently released.

The Case-Shiller index is one of the most trusted measurements of real estate activity in the U.S. The index tracks changes in real estate values on a national basis, and also across 20 key metropolitan areas. Las Vegas is one of the 20 metros. Pricing trends are calculated monthly and published with a two-month lag time.

Las Vegas was one of the hardest hit cities during the housing crash. Speculation and sprawl had driven prices up considerably in the gambling capital of the world. So when the bubble started to bust in 2008, it sent home prices through the floor. Median home prices in Las Vegas have fallen 50% from their peak, just a few years ago. Translation: The house you bought for $400,000 in 2006 is probably worth closer to $200,000 today. And the market continues to decline.

The two factors doing the most damage are (1) foreclosure inventory and (2) unemployment. At the time this story was published, there were nearly 40,000 distressed properties on the market in Las Vegas (source: RealtyTrac). This includes pre-foreclosure homes, bank-owned properties and auctions. The city’s unemployment rate was 14.8%, one of the highest in the nation.

What it Means to Home Buyers

Las Vegas is a city built around gambling. But this is one gamble you don’t want to make. If you buy a home in a declining market, you are losing equity from day one. Depending on the size of your down payment (and future declines in the housing market), you could soon become underwater in the loan. This means that you owe more on the loan than your home is worth.

For now, the best thing you can do is watch and wait. When the Las Vegas real estate market finally hits bottom — probably in mid to late 2011 — buying a home will be less of a gamble.