Rise in LV home values shatters U.S. record

Jennifer Shubinski

Monday, Aug. 16, 2004 | 11:04 a.m.

Ask almost any homeowner in the Las Vegas Valley about their house and they'll tell you how much it's appreciated in the past year -- or how they wish they'd bought sooner.

Everybody has a story and usually isn't too shy to share it.

Now homeowners have another notch to add to the sun-scorched lawn around their homes: A new report shows they're participating in the hottest real estate market ever measured in the United States.

The National Association of Realtors, which has tracked sales of previously owned homes in different markets across the United States since 1982, last week reported the Las Vegas home market has been the hottest in the nation, smashing all records set during those 22 years of tracking.

Resale median home prices in the Las Vegas market, which includes Clark County, Nye County and Mohave, Ariz., increased to $269,900 in the second quarter -- up from a median of $177,100 in the second quarter of 2003. That's an astonishing 52.4 percent gain.

"That is the biggest annual home price increase in any metro area on record," said David Lereah, the association's chief economist.

The median price is the midpoint where half the homes sold for more and half the homes sold for less. It is often used instead of average because extremes on both the high and low end can skew the numbers one-way or the other.

"We've never seen anything approaching a 50 percent appreciation rate," said Walter Molony, association spokesman.

The next-highest appreciation rate on record was reached twice, most recently in Anaheim-Santa Ana in Orange County, Calif., which posted a 38.7 percent increase, also in the second quarter of 2004. Median prices there rose to $655,300. The 38.7 percent appreciation was first reached in Fort Myers, Fla., during the third quarter of 2001.

Michelle Lindsay, 27, had to talk her husband into paying $236,000 for their first house in the northwest Las Vegas Valley in June 2003.

One year later the 2,200-square-foot home was appraised at $409,000, Lindsay said.

Lindsay, who works for a local engineering and construction company, said she knew her home had gone up -- just not that much.

"We just bought at exactly the right time," she said.

As the median price of a home in the Las Vegas area goes up, the gap between local prices and the national median existing-home price, at $183,800 in the second quarter, continues to grow, the national association reported. The national median existing home price rose 9.1 percent from the second quarter of 2003, when the median price was $168,500.

At least one reason that Las Vegas home prices shot up was the limited supply of resale homes that were on the market in the second quarter.

"Las Vegas only had a 1.7 month supply of homes on the market in the second quarter, compared with a 4.2 month supply for the nation as a whole," Lereah said. "By contrast, a housing supply in the range of six months represents a fairly even balance between home buyers and sellers."

It was simple economics. There was more demand for homes than there was supply.

Molony said the new home market in Las Vegas also played into the price appreciation equation. In most markets, sales of new homes make up a small amount of the overall homes sold, while in Las Vegas they represent about 30 percent of the market, according to local research firm SalesTraq.

"The cost of construction is one of the things that feeds into the rapid increase of existing homes," Molony said. "Shortages of materials available for home construction and some fairly rapid increases in prices for materials, that all feeds into existing home (prices)."

The median resale price reported by the National Association of Realtors is higher than the median price reported by local companies, which track just Clark County, not including Boulder City. While the prices they reported were lower, their statistics backed up the trend of a booming resale home market.

SalesTraq reported that in June, the median price of an existing home locally was $245,000, a 48.5 percent increase from the previous year.

Industry experts are now cautioning that the market can't sustain such giant gains in price appreciation.

In the past month or two real estate agents and industry experts have noted a significant departure from days earlier this year when bidding frenzies caused run ups in home prices and in some areas of town, houses sold in hours.

"Currently there's a lot more inventory on the market," said Judy Christy, a real estate agent with Realty Executives of Nevada.

She said some of the sellers are now demanding unreasonable prices because they automatically expect to make "$30,000 more than their neighbor, but that's not happening now."

The Greater Las Vegas Association of Realtors reported that the market is indeed changing.

The number of available single-family homes listed in the association's database in July was 13,917, an increase of almost 20 percent from June. Of those listings, 6,998 were new listings.

The number of single-family houses that sold in July that were listed in the database was 3,397, a 4 percent decline from June.

But while there was a decline month over month, it was still a 14 percent increase in sales over July 2003.

"It's not the craziness it was from December to this time of year to now, but there is still a higher level of business going on when compared to last year," said Lee Barrett, president of the association and broker/president of Century 21 Barrett & Co. Inc. "There are still more clients trying to buy homes and there are still more sellers."

Molony said an increase in the number of homes for sale in the Las Vegas area is a good sign, and should not be looked upon as a negative change.

"It will take the pressure off of prices ... we don't expect the market to go south," he said.

It often takes a negative hit to the local economy to cause a fall in prices, Molony said.

"You need a negative local impact, such as a weak job market or an abundant supply of homes. You have neither of those in the market," he said.

Molony said while an increase in inventory should slow the rate of appreciation, it will remain above historic norms in the Las Vegas area.