In Las Vegas, home prices are still in the red, year over year. Zillow shows a one-year change of -0.4% for this metro area. The latest Case-Shiller report shows a change of -1.8%, from June 2011 to June 2012. Red, red, red.
But that doesn’t seem to worry investors. Month to month, home prices in Las Vegas have been inching upward. And apparently, that’s all it takes to spur home-buying fever in Sin City. As early as June of this year, there were confirmed reports of bidding wars in Las Vegas.
But what’s really going on here? Is the Las Vegas housing market truly on the path to recovery? Are the worst days in the rear-view mirror? Let’s dig a little deeper.
Bidding Wars Reported
In June, the Las Vegas Review-Journal did a story about cash-in-hand investors bidding against each other for Las Vegas homes. The story was supported by anecdotal reports from local real estate agents, many of whom had experienced the bidding wars firsthand.
“There tends to be somewhat of a bidding war on nice properties,” said Kolleen Kelley, president of the Greater Las Vegas Association of Realtors (GLVAR). “Investors are outbidding each other and not getting appraisals.”
Several of our Las Vegas contacts reported seeing bidding wars in August, as well.
Much of this demand is coming from investors who detect an upward trend in home prices. They have watched and waited for months, and now they feel this market is recovering. So they are snatching up properties and driving down inventory. Between July 2011 and July of this year, the number of homes listed for sale in the Las Vegas metro area dropped by nearly 30%.
Las Vegas Home Prices in Review
On August 28, the S&P/Case-Shiller Home Price Index was released, with data through the end of June 2012. According to that report, Las Vegas home prices rose by 1.5% from May to June of this year, and by 1.9% the month prior. Year over year, however, prices dropped slightly.
According to the local Realtors association, prices for existing homes in the Las Vegas metro area have risen for six months in a row.
Last month, the National Association of Realtors reported a significant increase in the median list price for this market. According to their data, the median list price rose by 8.34% from July 2011 to July of this year.
On Wednesday, Trulia published the latest findings from their Trulia Price Monitor, which monitors real estate prices in 100 of the largest metro areas in the U.S. The report included a top-ten list of cities where asking prices have risen the most, over the last year. Las Vegas appeared at the #10 spot, with a 6.9% increase in asking prices from August 2011 to August of this year. Asking prices rose by a whopping 24% in Phoenix, another city hard hit by the foreclosure crisis.
Earlier this summer, Las Vegas appeared on another top-ten list. Zillow, the real estate information company, compiled a ranking of the top sellers’ markets in the United States. These are markets where homes are selling quickly, and often for the full asking price. Las Vegas appeared at #3 on the list. Phoenix, San Francisco and Washington, D.C. also made the top ten.
Pending Foreclosures: A Wave or a Trickle?
Everyone is talking about the short-term rise in Las Vegas home prices. But there’s a lesser-known aspect of this market that may drive prices down over the coming months, and that’s foreclosures. It seems there are quite a few bank-owned properties that haven’t been released onto the market yet. Call it a shadow inventory, if you like.
As of July 2012, approximately 1.47 million homes in the U.S. were in some stage of the foreclosure process, according to RealtyTrac. About 620,000 of those were owned by banks. Of those 620,000 bank-owned properties, only about 15% are currently listed for sale. That’s a pretty big hold-back.
In Las Vegas, some real estate professionals fear that a sudden release of foreclosure could shake home prices. Others, like Paul Murad of the Nevada Real Estate Commission, are skeptical about the so-called shadow inventory. “The myth is actually there are tens of thousands of homes on the shadow inventory and they’re all coming to the market,” he said, “so we’re hearing the numbers in terms of tens of thousands, but we haven’t seen that.”
However the situation plays out, it certainly isn’t scaring investors.