In Friday’s Realty Times, a reader asked the following of Peter Miller, a regular contributor:
I‘m currently renting in Nevada. Within the next five years I would like to purchase property here. Right now the home prices are pretty ridiculous. I’m hearing buzz that real estate prices in my area will decline within the next two years or so. True? Will the next two years be a good time to purchase property?
The reader doesn’t say where in Nevada, but the odds are pretty good that it’s Las Vegas. Miller’s response?
You have raised a very reasonable question. Unfortunately, there is no equally reasonable answer.
No one knows what will happen in the future. "Buzz" is not a substitute for research or a sound basis for investment.
What might help is to spend some time with the local economic development office. Ask about future population and job trends in your community. Speak with active real estate brokers to determine the local areas most likely to be in the path of future growth. Consider how changes in mortgage rates might impact local real estate activity, etc.
I agree with Miller that you shouldn’t invest in anything based on buzz. While it’s true that no one knows the future, there are ways of calculating the odds based on current trends. One respected "bookmaker" is the PMI Mortgage Insurance Company. According to a recent report by PMI, there is a 61% chance that two years from now, home prices in Las Vegas will be lower than they are now. [They give Reno a greater than 60% chance of lower prices too, by the way.]
I have to concur with PMI that it is likely pricing will be headed downward for awhile. Here’s the main reason why: [Data from GLVAR]
