As the mortgage sector and the residential real estate market in the valley stumble along, the same type of instability is now evident in the raw land arena. The weakness in the former is clearly beginning to affect the latter.
In the fourth quarter of 2007 land prices here climbed to a $1.51 million per acre average over the same time period in 2006, announced local research shop Applied Analysis. That amounts to a 21.8% increase year over year. Now, if the comparison is made with the third quarter of 2007, the value in essence decreased 25%, giving it a totally different flavor. Prices are unmistakably floating back and forth and creating a large judgment dilemma for appraisers and banks.
Land on and near the Strip naturally commands a handsome premium, so when it is removed from the data the average price now comes to a much lower $939,400 an acre. That still is roughly a 20% hike from the same quarter a year before.
Residential land values, though, have lately been under a fair amount of pressure, reports Home Builders Research, so much so that they are actually losing ground now. Builders, especially the large ones, are selling some of their holdings and are also reducing new home permit applications.
Last summer a finished lot, typically 3,500 square feet, was appraised around Sam Boyd Stadium at $130,000. Recently similar lots in the same area were purchased from a bankrupt company for $55,000 a piece, according to Home Builders Research. A major price reduction that speaks volumes. What it also means is that homes built on these cheaper lots will be much more affordable, somewhere within a range where an average home buyer can again qualify for a mortgage.