Have the land prices in Las Vegas tumbled by 73.9 percent from a year ago? HECK NO!

November 8th, 2008 · No Comments

Las Vegas Land prices tumble 73.9 percent from year ago, prices down for third consecutive quarter. What one infers from this is that parcels of vacant Las Vegas land that were valued at $1,000,000 last year are selling for $260,000 this year. Las Vegas Review Journal had this headline for an article which is written by Hubble Smith, my favorite writer at RJ (who botched the headline this time) and the same headline was reproduced in many real estate blogs without anyone challenging it. This is a misleading headline based on misleading numbers.

So what is wrong with this headline? Well, below is what they have based their numbers on.

“The Las Vegas-based business advisory firm reported an average price of $524,725 an acre for 427 acres sold in the third quarter, down 73.9 percent from the same quarter a year ago.

And here is the market data for land that have been sold in the 2^nd and third quarter 2007-2008

VACANT LAND VALUES IN LAS VEGAS
Transactions	Q3 2008	Q2 2008	Q3 2007
Parcels sold	123	88	140
Acres sold	427.1	232.2	484.0
Price per acre	$524,725	$4.09 million	$2.01 million
Price per square foot	$12.05	$98.93	$46.20
Year-over-year	-73.9 percent	134.9 percent	68.9 percent

SOURCE: Applied Analysis

All that these numbers say is that in the third quarter of 2007 140 parcels of land for sale sold in Las Vegas for the average price of $2.1 million dollars per acre. That is it, it does not say what was the zoning for these parcels, where was the location, etc. Given that we have parcels of land on the Las Vegas Strip that have sold for upwards of 30 million dollars per acre to residential land that is priced less than 200 thousand dollars per acre, the zoning and location provide for a wide range pricing.

To clear this I will use an extreme example, say that in the third quarter of 2007 only 100 acres of resort land on the Las Vegas Strip have sold for an average of 10 million dollars per acre and in the third quarter of 2008 only 100 acres of single family land sold for an average price of $200,000 per acre. Then can we say that the price of Las Vegas land has tumbled by 98%? All that the above numbers say is that more expensive land was selling in Las Vegas last year while cheaper land is selling in Las Vegas this year, no more, no less.

I am not saying that land prices have not gone done or are not going down. Parcels of vacant land around Highway-215 are offered at 2003 prices or close to it except that in 2003 the area was not built up and those who developed their project first had to pay a great deal of money for bringing the infrastructure to their land, and now the infrastructure is close by.

Las Vegas, North Las Vegas and Henderson land values have not gone down by 73% and I hope they never do, because a lot of good guys will go bankrupt. I have written before that price drops of 30%-40% are not out of the question and we are well on our way to getting there, but we are not there yet. But the headline saying that Las Vegas land prices have tumbled by 73.9 percent from year ago, IS RIDICULOUS.