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An argument may be made that Las Vegas is experiencing another real estate bubble, but, this time, at the bottom of the market. At the height of the market, it was accepted that Las Vegas real estate was overvalued by over 30 percent. Since this kind of value increase is unsustainable, the bubble began to deflate and then burst as world money market problems exacerbated our situation. Now it’s generally acknowledged that residential real estate in Las Vegas is undervalued by anywhere from 28 to 41 percent, although I would say it is as undervalued now as it was in 2006. With an average per square foot sales price of $77, houses may be purchased for less than the materials used to build them, or less than replacement cost. Certainly, buyers are taking advantage of this bubble, just as sellers took advantage of the previous one. There may be more sales this year than there have ever been in Las Vegas history. The record was set in 2004 with 55,408 sales. The one area which may prove to be a drag is the lack of new home sales. With houses selling at less than replacement value, new home sellers are at an extreme disadvantage. You might think of the market as an hour glass, with a bubble at the top and now a bubble at the bottom. We can take some pleasure in imagining the bursting of this bubble and the rise in prices which should occur at that time. What will make that happen? Here in Las Vegas the answer would seem to be more jobs. There also has to be a loosening in underwriting criteria so more people may qualify for a loan, although we certainly don’t want to go back to the bad old days of lending to anyone. There do have to be some underwriting criteria.

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