All the way back to November 2006. Back then there were still people who publicly said there was no housing bubble and no imminent housing crash. Ahh the good old days for members of the real estate industry. Here is what so-called experts were saying about Las Vegas:
Larry Murphy of SalesTraq and Steve Bottfeld, who monitor housing trends in the Las Vegas Valley, handed out their latest predictions at their quarterly Crystal Ball seminar. Murphy discounts predictions of others and maintains no housing bubble exists in Las Vegas. He points to the median price of existing homes remaining steady.
Bottfeld said he doesn't believe the increasing number of homes entering foreclosure signifies a problem. He said a change in laws that makes it more difficult to declare bankruptcy is the likely reason for more foreclosures.
Hmmm. No housing bubble eh? No need to worry about foreclosures eh?
This is the percentage change in median price for Las Vegas homes according to zillow.com since their dismissal of a housing bubble. (NOTE: I didn't take Larry's advice and sold my home when it was down only 2%).
And you'd think after getting it so flat out wrong, the media would ignore anything Steve and Larry have to say. You'd think. Nope. Both the Las Vegas Review Journal and In Business magazine often use Larry and Steve as "experts" on housing.
In today's edition of the R-J Larry Murphy has this to say:
November's median new-home price fell 20 percent from a year ago to $271,228; existing home median prices are down 10.5 percent to $257,000. These are near 2004 levels, Murphy said.
But Larry, what happened to your prediction old boy? Just a year ago all was A-OK. I wonder how many poor saps read your predictions and decided to buy a house only to be wiped out financially. No mention anywhere about how absolutely wrong Larry was with his predictions last year. It's as if it never happened. The situation is like in the novel 1984. Just wipe away the records and pretend it never happened. Once again shows how corrupt the real estate industry is and how the MSM cannot be trusted.
And so what is the prediction for next year?
Global Insight and NationalCity estimated that Las Vegas housing has moved from about 30 percent overvaluation in third quarter 2006 to near 20 percent a year later, Schwer said. The firms' overvaluation estimates suggest that Las Vegas will be back in balance once prices return to levels of 2004, when median prices ranged from $196,000 to $248,000.
Finally some realistic predictions, only a year later and still way too optimistic. Median household income in Las Vegas is just shy of $50K. Using the traditional 3 to 4 times income rule, median prices should be between $150K and $200K.
In 1990 the median price in Las Vegas was $106K. In 1990 median household income was $28,500. The ratio of price to income was 3.71. In 2000 median price was $137K, median income was $44K. Again a ratio of 3.1, right in that 3 to 4 historical range.
During the 2001-2006 period, house prices doubled yet income barely moved. And yet so-called experts thought this was perfectly normal. As anyone with an IQ over 50 could figure out, this was not sustainable. And we are now in the correction phase which will bring prices back in line with historic averages.
As for the argument that Las Vegas is different. No it isn't. It is a city built on gambling just like it always has been. It is a blue collar, heavily unionized city just like it has always been. There are no real corporate jobs. The vast majority of jobs are low end service level jobs. For every bartender making $2000 a night on the strip there are 25 people making $10 an hour throughout the city. The only way these people will ever buy a house is if the house is affordable. They bought in 2001-2006 using ninja loans. We all know what happened to those loans. It's not a coincidence Nevada has been in the top 3 states for foreclosures since early 2006.
Las Vegas had its fun in the sun so to speak. Everyone thought they'd hit the jackpot with their house. They were all rich and were gonna be even richer in the future. Now it's back to realityville of a lower middle class, blue collar existence. The BMWs are being repossessed and are being replaced with Honda Civics. Oh well, all good things come to an end eventually.
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