Real Estate Still Climbing, But Not Quite as Fast

Depreciating real estate prices in California may leave Las Vegas taking some of the brunt. Don't expect the tide to turn so quickly in Southern Nevada however.

The 40 and 50 percent Las Vegas appreciation rates that led the nation for much of 2004 were most likely a once-in-a-lifetime thing. Coming back with a 19.2 percent overall gain in 2005 is none the less not a bad follow-up act.

Home prices have already skyrocketed in upscale master-planned communities such as Summerlin, Green Valley and Anthem. You had to look at the northeast and central parts of Las Vegas, where median prices start much lower, to find the largest gains in 2005. The highest appreciating neighborhoods in Las Vegas Valley are no longer concentrated in the aforementioned areas however.

ZIP code 89109, the Winchester area east of the Strip, posted the highest home appreciation rate last year at 69 percent, based on average price per square foot.

Inner-city ZIP codes 89101, 89104 and 89106 showed appreciation rates of 36 percent to 44 percent, while 89030 in North Las Vegas increased 36 percent and 89115 near Nellis Air Force Base jumped 37 percent.

Appreciation rates were calculated by average price, by median price and by average price per square foot. The reason for price per square foot is if someone goes into a ZIP code and builds 800 or 1,000 condominiums where they traditionally have 2,300-square-foot single-family homes.

Amazingly, the overall appreciation rate came out about the same for each method when looked at 55,728 transactions.

The calculations did make a difference in a few ZIP codes. For example, 50-year-old homes in 89004 around the town of Blue Diamond sold for enormous gains from their previous sale, but there were only 13 of them.

Another tricky ZIP code is 89011, or Lake Las Vegas, where the average home price slipped 4 percent, from $1.17 million in 2004 to $1.12 million in 2005, but average price per square foot rose from $361.52 to $440.94, or 22 percent. Again, a large percentage of the 73 sales at Lake Las Vegas were luxury condos, which are lower in total price but higher per square foot.

It costs more to build attached housing (about $250 a square foot) than detached, single-family homes (less than $100 a square foot).

Las Vegas is headed toward a more normal market, maybe 10 percent (appreciation) in terms of housing, because speculators have left the market. As long as Las Vegas continues to post strong job and population growth, the real estate market will remain healthy.

There was a time in Vegas when you could buy a single-family home for under $200,000. That's gone now and it's been picked up by condo conversions at the low end. There's a huge market for high-rise luxury condos.

Housing affordability will become an even bigger issue in Las Vegas as household incomes fail to keep pace with dramatic increases in home prices.

The only way to stem escalating home prices at this point is to increase density. Density could hit up to 16 units (an acre) on residential zoning. When you go five or six stories, you can do it. There will most likely be a mid-rise element in virtually every new development from here on out.