Last week, the U.S. Census Bureau reported that in August, new home sales across the country were up a whopping 18 percent over July, and an even more staggering 33 percent above August 2013’s sales. In sharp contrast, however, existing home sales slipped by 1.8 percent from July to August, and pending home sales (those in contract but not yet closed) also fell, down 1 percent from July and 2.2 percent from the same period in 2013.
One of the major reasons for the decline that’s been cited by many experts is the decreased prominence of investors in the existing home market, put off by a combination of rising prices and creeping interest rates. However, although prices of single-family homes in the Las Vegas area are up almost 10 percent from one year ago, the median price held steady from July to August, according to the Greater Las Vegas Association of Realtors, suggesting the market may be stabilizing, at least price-wise. In the same report, GLVAR also confirmed that fewer buyers are paying cash for properties, reinforcing the notion that investors are backing off from the real estate market (32.1 percent of local home sales were purchased with cash in August, down from a February 2013 peak of 59.5 percent).
This is of particular relevance to the vintage neighborhoods in and around Downtown Las Vegas, where housing inventory has typically been much more limited than in newer parts of the valley, and where investors have been very active, both flipping houses for sale and snapping them up as rental properties. That was easier for them to do when distressed homes that sold for inflated prices in the mid-2000s were suddenly available at fire-sale prices in 2011 and 2012. Now, however, investors have pushed the limit of what the market will bear when reselling those houses, with some listing prices edging closer to (but not quite at) previous peak levels.
Take, for example, a very humble 1,144-square-foot home at 1030 Bracken Ave. in the Huntridge neighborhood, currently listed at $189,900, which puts it at $166 per square foot— much, much higher than the area’s $103-per-square-foot median. On the official tax records, the house is even smaller—only 948 square feet—with an “off the record” bedroom added during the most recent renovation. At the top of the bubble in 2006, the then-two-bedroom, one-bathroom house sold at a now-ludicrous price of $203,000 ($214 per square foot!), but for reasons we can only speculate, was dumped in 2011 for only $35,000. The current investor-sellers snapped it up for $80,000 just last year.
It’s highly unlikely that Bracken house would appraise for anywhere close to its asking price. A similarly sized property on 10th Street recently sold for $115,000, only $95 per square foot when you include its freestanding casita. A few months ago, a massive remodel job on a 2,371-square foot house on St. Louis Avenue that originally listed at $234,000 sold for only $205,000.
On the other side of Maryland Parkway, a sprawling, 2,744-square-foot home at 1413 S. 17th St. has been on the market for more than two months, originally listed at $259,900 and since reduced to $249,900. Although that brings it down to $91 per square foot, chances are that it’ll have to come down more to not only fall in line with the $86 median per-square-foot price for the Huntridge area, but also to compete with a similarly remodeled and sized property right next door that’s listed at $199,999—only $79 per square foot.
Across the I-15, the Nate Jones/John Soderstrom redo at 1247 Barnard Drive we mentioned briefly last month originally listed for $220,000—$123 per square foot, well above the average in the Westleigh neighborhood—but its listing price incrementally declined over the last 60 days, finally dropping to $199,000 this week…at which point it was quickly snapped up. Was it a coincidence that a buyer came along right then? Or was it because the nicely appointed but otherwise unremarkable house was finally priced at a level more appealing to traditional buyers?
And although inventory is tighter than it was in 2013, it’s also looser than it was a few months ago. Right now on real estate website Redfin, there are 56 active single-family listings in the Rancho-Oakey area, 94 in Downtown proper, and 20 in nearby mid-century modern hotspot Paradise Palms. Although there is less inventory than 2013 and prices asking prices are up more than 50 percent since December, the sale-to-list ratio is decreasing across the board—down 2.2 percent from 2013 in Paradise Palms and down 3.7 percent Downtown. What has been a seller’s market isn’t entirely a buyer’s market yet, but we seem to be approaching a more balanced situation where traditional buyers have less competition from cash buyers, and more negotiating power to offset the rising list prices.