For more than a year house prices in the areas hit hardest by the property downturn in the US have been registering the sharpest increases. Nowhere is the rise more acute than in Las Vegas, where real estate prices are up 26.7 per cent over the previous year, according to statistics from the Greater Las Vegas Association of Realtors. The area of the market enjoying the most activity is at the high-end. Sales of homes priced at more than $1m almost doubled last year to 342, compared with 2012.
Although much of the increase is being fuelled by a strengthening economy, shrinking inventory of existing homes and sellers’ willingness to reduce asking prices is also benefiting the high-end property market, says Joan Kuptz, an estate agent with RE/MAX Advantage. “Sellers have learnt to be more flexible in this market,” she says. “After the real estate collapse, the expectations here have drastically changed.”
The added vigour in the Las Vegas property market is a sharp contrast to just a few years ago when plummeting home prices and record foreclosures helped sink the city into a deep and sustained housing slump.
From mid-2006 to 2012 home prices fell more than 60 per cent, says Dale Thornburgh, a principal with Synergy Sotheby’s International Realty. By 2009 Las Vegas had the highest foreclosure rate of any major metropolitan city in the US, according to Realtytrac, a real estate information company.
The market for condominiums suffered the biggest falls. The median price of a condo jumped 73.2 per cent between 2004 and 2007, according to Greater Las Vegas Association of Realtors. The sharp rise accelerated a building boom that added more than 12,000 condo units to the city by 2009, according to Home Builders Research, a housing research firm.
When the market began to soften, and ultimately collapsed, fewer than half of those units found a buyer, leaving thousands of empty apartments and rocketing foreclosure rates. At the time, Las Vegas came to epitomise the country’s remarkable property boom as well as the collapse that followed.
“The downturn was so dramatic that it essentially overcorrected the market,” says Gavin Ernstone, an estate agent with Simply Vegas.
After enduring almost five years of depressed housing values the property market in Las Vegas is once again enjoying robust price gains. The median price paid for a Las Vegas home rose 17.8 per cent in March compared with a year earlier, from $157,000 to $185,000, according to DataQuick, a real estate information service. The increase marked the 24th consecutive month with an annual gain. In fact, the figure in March was the first month to record a year-on-year gain below 20 per cent since October 2012.
March sales of homes priced at $500,000 or more rose 12.5 per cent from a year earlier, DataQuick figures show. The annual year-on-year gains in the median sale price have been double-digit for the past 21 months.
Much of the city’s property market is dominated by high-rise condominiums on Las Vegas Boulevard, whose southern stretch is commonly known as the Strip. Yet affluent outlying districts such as Henderson, Southern Highlands and Summerlin, which are dotted with upmarket gated communities and amenities such as country clubs and golf courses, are still coveted by high-end buyers.
Simply Vegas is marketing a four-bedroom home in The Ridges, a gated community in Summerlin, for $4.49m. The home measures more than 7,000 sq ft, with four bathrooms and a lower-level guest suite with patio.
A fully furnished, three-bedroom, three-bathroom condominium is on sale at The Residences at Mandarin Oriental, a five-star hotel on the Strip, for $4.99m through Synergy Sotheby’s International Realty.
International investors, a sector that contributed heavily during the property boom, are still a significant part of the Las Vegas market, says Azim Jessa, a partner agent with Redfin Realty. He estimates that 15 per cent of the property market is populated by foreign buyers mostly from Canada and Asia. “It’s a globally recognised city where prices are still much lower than other major metropolitan areas in the US,” says Jessa, who is also vice-chairman of the Global Business Committee, a group that caters to international buyers.
Chronic low inventory is the biggest hurdle to sustained growth, says Cynthia Jezzard, an estate agent with Century 21 Martinez and Associates, with single-family homes, condos and townhouses particularly in short supply. According to data compiled by real estate agency Redfin, inventory has fallen 35.3 per cent since last year, which has contributed to a 22.7 per cent drop in sales volume.
“You still have some owners who simply can’t afford to sell their homes because they owe more [in mortgage] than they are worth,” says Jezzard. “And banks and lenders aren’t foreclosing on as many properties as just a few years ago and that’s affecting buying opportunities.”
● McCarran international airport offers direct flights to Europe and South America
● Real estate commission is typically 6 per cent of the sales price
● The climate is mostly dry, sunny and warm. In winter average temperatures range from 13.8C to 19.4C, and in summer 37C to 41C
● Violent crime fell 1 per cent in the first six months of 2013, compared with the same period in 2012
● Nevada is one of seven US states without income tax
What you can buy for …
$3m A two-bedroom home with a terrace and whirlpool bath in northern Las Vegas
$5m A three-bedroom, 6,000 sq ft condominium on the Strip
$10m A six-bedroom, six bathroom home with an acre of land, a pool and mountain views in Henderson