According to Larry Murphy, President of SalesTraq, in the In Business Las Vegas, "There never was a bubble, and there isn’t a bubble now. We don’t see a bubble in the future." "In Business" describes SalesTraq as monitoring real estate trends. However, on the Salestraq website, the company describes itself as follows: "It’s like an MLS for new homes!"
Murphy cites rising prices in Las Vegas as proof against the bubble. The new home median price at $337,250 is up nearly 13 percent for the year. The message that new home prices still going up in Las Vegas flies in the face of the bubble (conspiracy theorists). stated Murphy.
Mr. Murphy’s thesis that a price increase precludes a bubble is less than convincing. What would have been more convincing is if prices had been stagnant. Bubbles have a front and back side- prices go irrationally up before they come down. Prices have continued to rise in many markets across the country, as sales have dropped off. This has generally been a phenomenon caused by entry level buyers being priced out of the market, and larger homes being sold.
When the inventory increases along with the prices, the law of supply and demand starts to kick in. The excess inventory starts to exert downward pressure on prices.
The rush to buy those pricey homes in Las Vegas is slowing, as inventory is rising. According to numbers from Bubbletracking Blogspot, there were 23,155 listings in Las Vegas as of 7/24- a record number for the area. The previous record was set in 1995 with 20, 217 listings.
As listings have gone up, sales have declined. Sales dropped in June to 3097, down from May’s 3,161. For June of last year, the figure was 4,079 for a 24% decline year over year- this combined with the rising prices is following the trend of other bubble markets around the nation.
Not everyone in Las Vegas real estate wears "bubble free" glasses. Eric Woodsen, a local realtor, gives this assessment:
As of July 19, 2006, 16,295 single family homes were actively for sale in Las Vegas, North Las Vegas, and Henderson. 1,987 single family homes went under contract. If no new homes were put on the market, it would take about 246 days for a home to "absorb" the market, or just over 8 months to sell a house. (16,295/1,987=8.2 x 30 days in a month = 246 days) What does this mean to you, the consumer? People have to wait to sell the house, or lower the price to sell it faster. I believe we will see a general price reduction throughout the valley which will definitely impact the overall market in the next 6 months. There were 3,969 condos/townhomes for sale and 502 went under contract in the last 30 days. So, it takes roughly 237 days to sell a condominium in Las Vegas, or about 7.9 months.
Note that Woodsen said these sales times assume that no new homes come on the market– given all the ongoing construction in Las Vegas, those times are bound to lengthen.
Another realtor who does not seem to equate bubble talk with conspiracy theorists is Deborah Zupancic. Zupancic describes the current sales trend in Las Vegas:
Single family home sales decreased 1.1 percent from May and nearly 24 percent from a year ago. Condos and townhomes sales slid 22 percent to 592. However, prices jumped 5 percent in June to $315,000 based on 2,527 sales. Another 4,630 condos and townhousess are listed for sale an 82.7 percent increase from a year ago.
It’s becoming increasingly harder to deny that Las Vegas is a typical bubble market, but that has not stopped some like Larry Murphy from trying. More real estate professionals are recognizing that they lose credibility by denying the obvious trend.
Join the dark side and embrace the bubble Mr. Murphy. Bubble talk may seem like a conspiracy now, but in the end, you will see that a business model based on actual market conditions is better for the market, and better for Las Vegas.