If you are thinking about living in or buying or selling a home in Las Vegas, this is for you. A lot is being said about the Las Vegas real estate market and you deserve to know the truth. I will discuss the history of the Las Vegas market, a detailed analysis of the current situation and my predictions here.

The Real Estate Market in Las Vegas is experiencing very interesting twist at present (October 2007). Let us first assess the past and the current situation:

1. The city's history: The Las Vegas Valley has come a long way from its modest beginnings in 1905 as the site of a railroad town. Even the most optimistic speculator could not have foreseen the booming economy and real estate market that is modern Las Vegas. Legalization of gambling, construction of Hoover Dam, arrival of World War II defense industries, testing of the atomic bomb and, more recently, construction of the resort-style lavish, theme-based casinos and expansion of tourism in the 1990s. The most prosperous times for Las Vegas have been the last 2 decades.

Such prosperity has brought along with it a large increase in employment and population figures. And of course, that means thousands of homes were built and the city has expanded to almost three times its area over the last 2 decades.

2. Market Trends and Average Home prices: According to the Urban Land Institute, Residential building permits for Clark County set a record in 2005, with about 38,400 permits issued-nearly double the 20,700 permits issued in 1990. New home sales have nearly tripled from 10,500 units in 1990 to 29,124 in 2006, according to data from Las Vegas-based Home Builders Research. The average price of new single-family homes has more than doubled from $155,500 in 2000 to $330,100 in 2006.

Throughout the 1990's, house prices rose. The period between 2001 and 2005, however, saw a spike like none before. House prices almost rose by 150 rise in rents in less than 2-3 years. Urban Land Institute figures say that monthly rents increased from an annual average of $768 in the fourth quarter of 2004 to $850 in the fourth quarter of 2006. Interestingly, this meant that renting a single-family house was almost the same cost as renting an apartment in some cases. Hence, in the same period, apartment vacancy rose 6. Earlier, I pointed out that prices rose because of two reasons - Increase in employment and speculative behavior. The portion of the price-rise due to speculation went a little too far and is now falling back to more practical levels. However, note that the valley is still experiencing significant inward population migration, which means the prices will bounce back and continue to rise, however, the chances are that the prices will rise at a slower rate, more in relation to the influx of people to the town and the creation of jobs.

3. The condo-conversion race: However, incomes, while rising significantly,

have not kept pace with this rapid viral growth in the town. This led to a

rapid drop in affordability of the houses. To counter this drop, and meet the

demand of the sector of the population that cannot afford the high-priced

single family homes, developers built a large number of condominium-

conversion projects, which were relatively low-priced. For a while, this

seemed like the answer to the situation. However, condo-conversions meant a reduction in the number of apartments

available for rent. This resulted in a 10-25% rise in rents in less than 2-3

years. Urban Land Institute figures say that monthly rents increased from an

annual average of $768 in the fourth quarter of 2004 to $850 in the fourth

quarter of 2006. Interestingly, this meant that renting a single-family house

was almost the same cost as renting an apartment in some cases. Hence, in the same period, apartment vacancy rose 6% as well owing to these "shadow rentals" of single-family houses. High-rise condominiums are a new addition to the mix. According to SalesTraq's latest Las Vegas Hi Rise Handbook, 78 luxury condominium projects were under construction or proposed in the valley at the end of the second quarter of this year, with a construction value of $31.1 billion. Mid-rise projects may be the answer to the current situation. They offer the benefits of pricing and scale and are usually acceptable in both urban and suburban areas.

4. The cause for the slowdown: Now, let's come to the rough part. Since mid-

2005, housing prices in the valley have decreased by 5-20%. Earlier, I pointed out that prices rose because of two reasons - Increase in employment and speculative behavior. The portion of the price-rise due to speculation went a little too far and is now falling back to more practical levels.

However, note that the valley is still experiencing significant inward population migration, which means the prices will bounce back and continue to rise, however, the chances are that the prices will rise at a slower rate, more in relation to the influx of people to the town and the creation of jobs.

5. My prediction: Hence, my prediction is that the downward trend in prices in Las Vegas will continue throughout the first two quarters of 2008 and beyond that, will see a stable phase were some house prices will go up while others will remain stable. In about three years, in 2010-2011, with the creation of several thousand jobs at the City Center and the four new casino projects that are under construction as well as the new industries that are getting created in the valley, home prices will start an upward trend again, but this time, at a regular pace.

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