What's Really Happening in the Las Vegas Land Market?

If you have an interest, and you have been watching the reports and articles on the vacant land market in Las Vegas you likely have come away confused.  Here are some interesting facts that you, as an appraiser, buyer or seller may want to consider:

1. Some published vacant land sales reports being circulated include trust deed sales or foreclosed properties that have gone back to the original owners for the mortgage amount owing.  These sales are not market sales, they are not sales made between "willing buyers and willing sellers," they are simply properties lost due to too much debt and the sales do not reflect market activity.  The inclusion of this information in a sales activity report artificially bolsters the number of sales and the price per acre reported.  So if the sales report you are reading indicates that foreclosure information is included, take the information with a grain of salt.

2. Sales information is in some sales reports is aggregated, thus it includes residential, industrial and commercially zoned land all combined together.  Clearly there is a difference in the demand for land for more residences in Las Vegas, which has hit an abysmal low, and the demand for commercial development.  Some well healed companies have seized upon the opportunity of a lifetime to buy or lease with huge discounts.  Thus, the demand for land capable of commercial uses has not entirely evaporated.  Reports that aggregate all types of land are thus misleading.

3. Few reports on the Las Vegas land market discuss the significant difference there is between it and the housing market.  If you have followed the news you have read about the tremendous oversupply of home on the market.  As of June, 2009 many defaulted homes were withheld from the market due to the additional grace period imposed via banks due to recent changes made to Nevada law.  Coupled with upcoming mortgage resets, the will likely be a glut of homes on the market again in the near future.  While the land market has suffered, and many banks and other parties have become unhappy owners, land is still in relatively short supply given the small percentage of private ownership in Las Vegas.  When demand returns, however long that may take, it is likely that the price of land will rise relatively quickly in response to it.

4. Many owners of vacant land in the Las Vegas market have kept their property off of the market, or they have it priced at a much higher price than it could be sold for given current market conditions.  Those who can hold on to their interests in land are tenaciously holding it.  While there may be some "dumping" that occurs by banks or others who are forced out, many will simply hold on for the long term.

5. Buyers are not asking "what is the value of comparable sales?"  Since there are only limited sales being made, buyers are asking "is this the lowest priced, highest quality property of this type available?"  If they are going to put valuable cash into the market now they want to know that it is at a fire sale price, clearly below what everyone else is asking.  There is a market, but it's not the kind of market that many are used to seeing.

It is important for those parties involved in the land market as owners and appraisers to closely follow market activity and sub-market activity by their specific property type.

Update 2014: There are still few publications available to track the land market or land sales.  The market saw some strength in the residential sector as new home construction has surprisingly been strong.  Commercial land has not fared as well since, while improved, vacancy rates and real strength in the commercial markets has not returned. 

For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.   

Article source: http://www.appraisalarticles.com/Real-Property-Appraisal/923-Whatand-039-s-Really-Happening-in-the-Las-Vegas-Land-Market.html