 Be patient: Home buyers will return
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 Dear
Real Estate Adviser,
I own my home and a few investment properties in Las Vegas, but the market is currently flat due to large amount of inventory available. My so-called real estate mentors and peers tell me that the market will level off in a year and I will be able to double my investment in two years. I would like to know, when do you anticipate market will improve in Las Vegas and elsewhere in the U.S.?
-- Lorenzo
 Dear
Lorenzo,
Your cronies are right about one thing: Vegas is a good long-term
bet in the housing market. But as for that two-year turnaround,
don't count on a windfall so soon, unless you've got a trump card
up your sleeve, and I don't mean a business card from Donald Trump.
The Donald, who is building a 1,200-unit hotel-condo project on
the strip, is actually adding to that housing inventory.
While the house always wins in Vegas, the housing
market doesn't. It's an interesting market to analyze, however,
because it's typical of many others around the country: They were
frothier than a rabid dog just a short time ago but have chilled
considerably. You'll just have to be patient if you want to profit
significantly from a sale.
The fundamentals of your market are still strong,
and the rapid population, job growth, desirable climate and gaming
industry will continue to attract the throngs. The rest of the U.S.,
for the most part, is seeing sustained -- albeit slower -- job growth,
as well. But in places like Vegas and Phoenix, builders and homeowners
are dropping their prices and making all sorts of generous sales
concessions, as the markets catch their breath and wait for demand
to catch up with inventory -- even as thousands continue to move
into those areas.
Part of the problem is that the construction pipeline
lags behind the level of demand by many, many months. Builders are
finishing projects that were started a couple years ago. Many speculators
who cashed in during the boom are now forced to sell cheaply to
exit the market quickly. Combine those factors with high rates of
foreclosure and you have far too many for-sale homes. It is a buyers'
market, for now.
But home building is slowing, and a lot of proposed
condo projects have been scrapped in Vegas and elsewhere. And while
other high-end markets such as California, Florida, New York City
and Boston have also cooled in demand and pricing, average pricing
has not declined in the rest of the U.S.
It's certainly no time to panic. I don't think you'll
be doubling your investment in two years, regardless what your mentors
and peers tell you. It's going to take a while before your market
-- and many of the others mentioned above -- return to equilibrium,
much less repeat the astounding gains they did earlier in the decade.
If you can keep up the payments and (or) rent these places at break-even
or near break-even, there's no need to take a bath on them. The
buyers will be back. Just when that will happen is anybody's guess.
Good luck.
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