That's funny. Our realtor, as we toured a few houses for sale in our neighborhood recently, said, "If you buy a house now, you have to be prepared for it to lose ground before it gains any."
So who's right? Who knows?
If your realtor (or ours) can predict the future, ask him who's going to win this year's World Series and next year's Super Bowl. Then you don't have to worry a thing about how much you pay for a second house in Las Vegas or if it drops a bit before it rises.
In our personal opinion, we believe that the market hasn't hit bottom. Buying a house today, especially in a boom-bust place like Las Vegas, is like trying to catch a falling safe.
This is true most places in the country, but especially true in Las Vegas. According to Fannie Mae CEO Daniel Mudd, 48% of the mortgage giant's giant mortgage losses have been from four states, Nevada among them (the others are California, Arizona, and Florida). Since the top of the market, home prices in Las Vegas have plunged more 35%. And they're still dropping. The median home price in June, the last month for which statstics are available at the time of this writing, was $225,000, down from a peak of $315,000 in June 2006 (32%).
Patty Kelley, president of the Greater Las Vegas Association of Realtors, says, "About sixty percent of everything that is selling is foreclosed properties. A feeding frenzy of buyers is coming in and picking up property at the fifty to sixty cents on the dollar that owners had paid for it."
And when it comes to this real estate market, that, we believe, is the whole story. The number we use to gauge the situation is the foreclosures. As long as foreclosures are rising, we believe, prices will continue falling.
Foreclosures in Las Vegas in 2007 were up 169% over 2006. Houses in foreclosure rose by more than 6,000 in March 2008, a 50% increase over February, and a 100%-plus rise year-to-year. July 2008 foreclosures were 38% over June, and up 62% year-to-year. For the 12 months ending in July 2008, foreclosures in Las Vegas reached a record 13,548 homes, nearly double that of the 12 months ending July 2007.
And that's just the final step in a long process. It can take four to six months for a home to go through the foreclosure process, from notice of default to notice of trustee sale to final eviction and bank repossession. More than 5,000 preforeclosures entered the books in July. In addition, 2,000 short sales awaited bank approval, with another 6,200 short-sale listings in inventory. (A short sale takes place when the lender agrees to accept less money for a property than is owed on it.)
It's true that the overall Las Vegas real estate inventory has declined slightly in the past few months and existing-home sales have increased. However, all the foreclosures, preforeclosures, and short sales put continued downward pressure on pricing.
"Consumers waiting on the sidelines may find themselves trying to time the market at its absolute low point," Brian Gordon, of the research firm Applied Analysis, says. "This timing element and continued uncertainty will likely extend the recovery time in the residential sector." In other words, sitting on the fence and waiting for the bottom, like you're contemplating, itself puts downward pressure on the price of houses.
The fact is, no one knows the future, so no one can time the market. It might turn around tomorrow and happy days will be here again. It might continue to drop for five more years as the country plunges into a deeper and deeper recession. Furthermore, how are you to determine that the market has bottomed out? You need several consecutive months of positive indicators -- increasing sales rates, increasing home prices, declining inventory, fewer days on market, faster absorbtion of new inventory, fewer foreclosures, etc. -- to be able to pinpoint the bottom and by then, you'll have missed it.
