2008 was a year of uncertainty and near panic as the American public was bludgeoned out of its collective denial, that the sub-prime crisis had far more sinister implications that just punishing speculators and a small segment of borrowers. I believe 2009 will be a different environment; interest rates are lower, at around 5%, than last year. Buyers now see the opportunities created by the current downturn.
Brian Wargo, a staff writer for In Business Las Vegas, cited the enormous price drops and increased sales in 2008.
Fueled by foreclosures and a 37 percent drop in median price to $205,893, the existing home market ended 2008 with 31,727 sales, 38 percent more than in 2007. Combined with declines in 200, the median home price has fallen 45 percent since February 2007 when it was $288,000. http://www.inbusinesslasvegas.com/2009/01/23/feature1.html
I was watching a local broadcast this evening on KLAS TV and the anchor, Jeff Gillan made a very interesting comment in a conversation with Richard Lee, a V.P. from First American Title here in Las Vegas. Mr. Gillan asked his guest during the course of his interview ‘if prices are too low and actually over-corrected’.
I have been thinking a lot about our current prices. As a Las Vegas real estate agent, I am asked nearly every day if the market has “bottomed”. Good question, not many people have to ability to predict highly complex systems such as an entire marketplace and believe me, I won’t try. I do however believe that prices are on average, too low. Unlike many markets with high foreclosure rates, the Las Vegas real estate market is moving properties. We sold an average of 3000 units (single family homes and condos) a month during the last three months of 2008. Many existing homes aren’t selling because they are overpriced, but because of a lack of credit access.
If one accepts the popular analogy of a bubble bursting, think about what happens afterwards. We have all seen super slow-motion photography of a bubble of liquid bursting. The droplets created, eventually begin to fall and then create a depression in the surface of the liquid. That depression undulates until the surface eventually settles. That is where I believe we are today. The weight of the crash has pushed prices below where they should be. I hear all the time from real estate professionals and builders that ‘we have returned to 2002 prices’ or ‘2003 prices’, like that is somehow natural. Our prices really started moving upwards in the 2nd half of 2004 and stopped climbing in mid 2006. Think about that for a moment, if current prices are truly accurate, wouldn’t we return to 2004 prices instead of 2002?
We now have prices equal to seven years in the past, interest rates at levels not seen in half a century, what else would a potential buyer require for a buying signal? Look at the numbers and make a decision as to whether you think it is time. Why wait until some government decree to officially name a bottom? Once something fully enters the public consciousness, it is often already passé. People who wait will mostly likely enter the market as part of a heard, and that could mean facing more competition for the best properties than those who are out there buying now.
My buyers have made their decision and all they really have to focus on is buying the right property, an undervalued concept in this market. Once the word gets out, many will feel compelled to pick up a deal and possibly get stuck with some home that sat deteriorating in a torrid desert environment for two years while that buyer was trying to “time” the market.
Paul Rowe is an agent with North American Realty of Nevada and a five year veteran of the Las Vegas real estate market.