Las Vegas Land Prices ‘Down 47%’: Review Journal
The Las Vegas News Journal has some news on land prices. “Housing prices are flat, high-rise condo projects are canceling sales, and now land values have dropped by almost half in Las Vegas, local research firm Applied Analysis reported. The average price for an acre of vacant land in the valley was $376,200 in the fourth quarter, down 47 percent from the previous quarter and down 28 percent from the same quarter a year ago.”
“Several factors contributed to the decline in land prices, Brian Gordon said Wednesday. Foremost is the sale of 2,675 acres in North Las Vegas by the Bureau of Land Management. Olympia Group paid $639 million, or about $239,000 an acre, for the land.”
“Secondly, there was a shift in investment activity toward other Las Vegas Valley locales that have below-average pricing, Gordon said. ‘We saw significant investment in the north and northeast part of the valley that traditionally carry lower-than-average prices,’ he said.”
“Land prices that shot up by as much as 99 percent during the past 18 months are ‘clearly unsustainable,’ Gordon said. ‘The economics of land pricing, escalating development costs and modest increases in interest rates will not allow for average land valuations to reach well beyond the recent peak, at least not in the near term,’ he said.”
“Jeremy Aguero said parcels that have the ability to capitalize on density and develop ‘new urbanism’ projects will allow pricing levels to reach in excess of $1 million an acre. Creative, risk-taking developers will likely hold land values up early this year, while speculative investors are finding it difficult to ‘make the leap,’ he said.”
This is interesting because it was the big developers/homebuilders that were bidding this stuff up. I wonder if their stockholders are going to be pleased?
Ben,
Do you think it might be about time for a downward revision (-50% or so) of the inventory entries which have been making HB balance sheets look so strong?
FAS 121 (imparement of long-lived assets) writedowns should begin ASAP!
crispie……..this is accounting & you quoted FASBie no less…Are you kidding! Arthur Anderson lives reincanate in the other Big 3!
No write -off will occur until Decmeber then then I am not certain the accounting team will force sucha reduction and hot to Earnings….Come-on now be realistic…
These CPA’ s don’t even make adjustments to impairment even while DEFAULTS are occurring….If in their judgement 100% of the asset will be realized……..In in the Long run they can argue that such assets must grow due to inflation…Fiat currency …is the standard of all good GAAP
And I’m sure these write-downs will not be included in the “headline” earnings number, so they should be on target for all their rosy projections. LOL
no ..the inventories are @ cost. Plus they may use FIFO (first in first out) rather than bu BAtch or “specific id…..Undelvoped property may have a mark to market treatment but, it would be my guess that is NOT as significant as the inventory under construction….That is where they OFFSET direct labor etc.
They aren’t making any more land.
But they are selling some of the millions of acres there already is.
Potential amendment to NAR position on real estate prices:
Although home price appreciation some times slows down but never enters a period of decline, some times land prices drop like a rock.
It looks like the BLM is selling things off at the top of the market. They should sell off all of Southern Nevada up to Area 51 to more suckers like the Olympia Group. Maybe in turn the Olympia Group could find the proverbial greatest fools in the form of a bunch of Trekkies that want to camp out in their back yard watching the base and hoping they have a close encounter of the third kind (or whatever you call it). I can just imagine some real estate yahoo trying to sell some POS with “granite countertops, RV Parking, Stainless Steal kitchen, fantastic views of the Area 51 airstrip, watch the planes take off and land all from your backyard!”
Would those house come with two-saucer garages????
“Foremost is the sale of 2,675 acres in North Las Vegas by the Bureau of Land Management.”
Who would have guessed the BLM would try to cash in on the bubble price levels? If they get into this as a habit, I would guess land prices in the desert southwest are in for a very hard landing, as there is no shortage of BLM land to my knowledge…
What an unusually fiscally sound thing for the government to do.
My understanding is the BLM owns most of the state.
I may be wrong but, I recall reading a article some time ago about a land swap with the BLM in Las Vegas….
The deal as I recall was the BLM wanted some enviormentaly sensitive land that a large developer owned…The Developer offered the land in exchange for a large tract of land (With Entitlements) in the Las Vegas area…This may be the one ??
gstucco..and others…
Lets really get down to the story about So.NV. Real Estate…land squeeze…The CABAL of the Local NAR and government officials @ the BLM conspired to withhold land “OFF” the market place creating a “false” shortage of acreage available for development.. As the squeeze became more and more profitable (as prices rose), the CABAL worked their black magic scooped up the balance of available land from “small” time investors just before every land speculator could smell the profit potential…When Pulte paid $ 1 million an acre in Summerlin for residential, I tought surely the developers would pressure the BLM/ Fed. govt. to release land…And to the rescue it came, in dribbles and drabs, just enough to keep the “big Fish” in town active in the business.. Last Nov. or December the BLM released a sliver of property and the BIg Boys were OUT BID………missing out on the creme and having to play with novices…The BLM comes to the BIg Dog’s recue….in the nick of time…near the top!
Once all the coastal land is spoken for, Americans will clamor over each other to buy acres of sand dunes or frozen tundra. Then, once every square inch of wasteland in Nevada has been devoured by specuvestors, those condos built on cruise ships will be descended upon. For the first time, I actually think the government had it right when they said that allowing people to self-direct their Social Security accounts could only possibly result in them squandering it away on snake oil and tulip bulbs.
For the first time, I actually think the government had it right when they said that allowing people to self-direct their Social Security accounts could only possibly result in them squandering it away on snake oil and tulip bulbs.
As opposed to dot-com stocks or t-bills?
It’s all a lie.
Warning to condo owners in north las Vegas. Close your north facing windows on June 2!
The June explosion “represents to us the largest single explosive that we could imagine doing conventionally to solve that problem” of destroying underground bunkers, Tegnelia said.
The huge explosion 85 miles northwest of Las Vegas at the Department of Energy’s remote Nevada Test Site will be one of the largest since the U.S. halted nuclear bomb tests in 1992.
Can’t they turn those bunkers into condos or day spas or something?
I love when they call the nevada test site a “remote area”. I have worked there many times over the last 2 decades. Its 50 minute from the LV airport. The old timers used to watch the mushroom clouds from the pools of casinos on the strip. The whole area is contaminated including LV and the ground water
Actually, Vegas is fine. They always made sure the wind was blowing toward Utah or central Nevada…
And if you got from McCarran to Mercury in 50 minutes, you were in an aircraft!
At least the condo market is solid. Now that Pamela Anderson has acquired a condo there, the market will be inundated by ugly, tattooed drummers with body piercing and video cameras.
Or is it 90 year old perverted Texan gadzillionairs…I think I got my blond bimbos confused.
condos and comb-overs for everyone!
Sand Dunes for everyone!
Don’t for get the dentist. They’ll buy condos there.
Read about Author discusses ‘coming housing crisis’.
“This is a question being asked by folks looking to sell and those in the market to buy. If you’re not sure what to do in this real estate market, I suggest you pick up a copy of a book, “House Poor: Pumped-Up Prices, Rising Rates, and Mortgages on Steroids” (Collins, $21.95) by June Fletcher.”
I believe it was she I heard this morning on NPR talking about not using one’s home as an ATM machine, considering it as shelter rather than as an investment, … . Why now? It’s too late.
Read about Protect Yourself If The Bubble Bursts.
“First, a look at the risk that comes with an interest-only loan. If, for example, a borrower took an interest only loan of $200,000 in 2003, their monthly payment would have been around $667. After the first adjustment, those monthly payments could jump to $1,415 in 2006.”
“Another important piece of advice from McBride: don’t borrow against home equity.
“If you are the type that’s going to go out and run up additional credit card debt it’s best to leave that home equity untouched,” he said.
This means no home equity lines of credit to pay off credit card bills, no cash-out mortgage refinancing to pay for home improvements, and no tapping into home equity to pay for goodies like vacations. To do so would mean eroding your protection for when home prices decline.”
Pre-emptive protection is actually a better idea…
Read about http://www.avpress.com/n/30/0330_s12.hts.
“Yet the ’soft landing’ scenario being predicted by the industry is clearly overly optimistic. We predict that sales of existing homes will fall from 530,000 units today to 390,000 in 2007 and even lower in 2008. New units being built will drop below 150,000 units by 2008. The impact on the real estate and mortgage industries will be substantial.”
California’s share of the more than $100 billion brokerage commission fees, he wrote, is at least 10% of that figure.
“If the average broker pays 20% on this, this implies a $2 billion hit to proprietors (sic) income. The spillover on the rest of the economy will be noticable. Employment growth will slow to 1%, and taxable sales growth will slow to 4%. With taxable sales slowing along with income, the state will start feeling the pinch. Do not expect a collapse like we saw in 2001, but then again we have less room to spare.”
Construction employment, he predicts, “will lose 200,000 jobs over the next three years, with another unknown number in the informal sector also losing jobs.”
Could it be worse?
Certainly, Thornberg wrote, “But there is no evidence of this possibility at this point in time. So we see the housing crunch as a force that will slow growth, not stop it.”
Read about Hidden Costs of the Housing Bubble.
“It is possible, of course, to lower the assessed value of your property after the housing bubble bursts, but cash-starved municipalities do not necessarily make that an automatic process. Generally, you have to fill out a form and then wait months for the re-assessment to occur. Given that other revenue streams will be in sharp decline during a recession, the assessors’ office will no doubt be instructed to be rather parsimonious in handing out lower assessments.”
Some good entries in that blog…
Thanks for the link Melody!
Merced is my town. 70,000 population, maybe 100K close-in. Basically a Central Valley ag town with a history of high unemployment. The University of California is spending +/- 600 million on a new campus 3 miles from town-center, and this has caused the speculative land rush/building boom the article mentions. The expectations are that the campus will host 15K+ students in 10 years, as well as thousands of well-paid faculty, staff and administration. For all of this though, house prices are close to 2x their realistic value, and since about October inventory has exploded. That 600 figure is more like 850, and that’s listed re-sales only. Every street is littered with FS signs, and the national builders, having started some truly huge developments just cannot stop. They are on track to add 500 new homes this year, while a drive down the streets of their current stock shows row after row of empty, dark houses. Frankly, we are hitting a brick wall and everybody knows it.
Comment by Inspired
2006-03-31 17:23:21
gstucco..and others…
Lets really get down to the story about So.NV. Real Estate…land squeeze…The CABAL of the Local NAR and government officials @ the BLM conspired to withhold land “OFF” the market place creating a “false” shortage of acreage available for development.. As the squeeze became more and more profitable (as prices rose), the CABAL worked their black magic scooped up the balance of available land from “small” time investors just before every land speculator could smell the profit potential…When Pulte paid $ 1 million an acre in Summerlin for residential, I tought surely the developers would pressure the BLM/ Fed. govt. to release land…And to the rescue it came, in dribbles and drabs, just enough to keep the “big Fish” in town active in the business.. Last Nov. or December the BLM released a sliver of property and the BIg Boys were OUT BID………missing out on the creme and having to play with novices…The BLM comes to the BIg Dog’s recue….in the nick of time…near the top!
Ain’t that the truth!
Look, there are two reasons that Vegas has become so expensive, and they are 1. An artificial land shortage and 2. A ton of speculators/investors flooding the Vegas market, buying up everything as fast as they can. Both are recent developments within the past couple of years.
As I’ve said multiple times, any fool with eyes can look out the window of his Vegas hotel room or condo and see hundreds of miles of empty, vacant land, which the BLM owns a good part of. So the land shortage is “artificial”, its not like we have no where left to build in Vegas.
The BLM has been slowly auctioning off land surrounding Las Vegas for years, its not a recent thing. And some years, some parcels went unsold–this reflected the housing market in Vegas, the only people buying out here were people who actually intended to live and work out here, or homebuilding companies that intended to sell to these locals, not people out to make a quick buck flipping and investing. So the few home developers out here did not indiscriminently buy land to put homes on. Add some crazy investors in the mix and people suddenly think: “OMG there is a housing/land shortage in Vegas! Must buy, because PRICES NEVER GO DOWN!”
My point is this: THERE IS NO PHYSICAL LAND SHORTAGE IN VEGAS. But there are alot of people holding empty land and vacant homes in Vegas hoping to make an easy buck flipping them. So once the investors leave, I’m sure home prices will go down again. Its only a matter of time…out here local wages are low and rents are cheap, a disaster for any out of state investor when they have only locals left to sell to. Anyone who wants a reasonable priced home in Vegas will probably be able to get one once the investors leave town.