Valley land values rise in 2007

February 11, 2008 - Las Vegas Valley vacant land values still increased at the end of 2007, despite a housing market downturn and softening economy, reports Applied Analysis, a local business advisory firm. Median vacant land values were $939,400 per acre at the end of December, which is 20.1 percent higher than in 2006. The average price per square foot was $21.56 or $3.60 per square foot more than a year ago.

Valley land values skyrocket when resort deals are thrown into the mix, with median prices jumping to over $1.507 million per acre for a 21.8 percent year-to-year appreciation. Land prices swell to $34.61 per square foot, or $6.19 more than in 2006, when premium resort real estate is included. Roughly 13 acres along the resort corridor changed hands at the end of 2007, including several former luxury condominium sites. An entity of Triple Five Nevada, for example, paid $32 million per acre for the 5.4-acre site of the Majestic Conrad condo-hotel at Las Vegas Boulevard and Convention Center Drive.

"While the latest data suggests raw land pricing is escalating, it's important to note the time lag between transaction negotiation to closing," said Brian Gordon, principal of Applied Analysis. "Equally important, the mix of properties sold has changed over time as the southwest portion of the valley has commanded the bulk of sales activity, which has held up pricing in the area. It is very likely that price depreciation has prevailed in many areas and further reductions are expected."

Meanwhile, there was a dramatic drop in the volume of deals occurring in the fourth quarter, with only 140 parcels totaling 452 acres changing hands. It marks a 23 percent year-to-year decline in activity, due, in part, to shrinking available land supplies. The real estate crunch isn't expected to ease anytime soon. The Bureau of Land Management, Southern Nevada's largest landlord, won't hold another major federal land auction until November, with plans to only offer about 150 acres in small parcels between 2.5 acres to 20 acres.

BLM land offerings have been sparse since November 2005, when the federal agency auctioned two large parcels in North Las Vegas for $639 million and several other parcels for $152 million. Henderson hasn't had a major parcel auctioned since June 2004, when Focus Property Group paid $557 million for 1,940 acres that are being developed as the Inspirada master-planned community.

But securities backed by subprime home loans seized up last summer as loans defaulted. It has caused residential developers like Focus Property Group to stop making interest payments on $500 million in loans secured by 4,800 acres in the Las Vegas Valley, Pahrump and Victorville, Calif. The company is currently negotiating with lenders to preserve its assets and attain working capital. Wall Street write-downs, however, are expected to surpass $100 billion, causing wary investors to shun commercial real estate-backed loans in the future.