DEVELOPMENT: LV land prices rise in quarter

Excluding sales around Strip area, average price
was $939,400 in 2007's final three months

February 19, 2008 - Land values in Las Vegas rose 21.8 percent during the fourth quarter to an average of $1.51 million an acre for 452 acres sold compared to the previous year's quarter, Las Vegas-based research firm Applied Analysis reported.

The price was down 25 percent from $2.01 million an acre in the third quarter.

Fourth-quarter sales included 13 acres of resort property, such as former sites for failed high-rises Ivana Las Vegas, Icon and Majestic. Those sites averaged $20.1 million an acre.

Excluding land sales around the Strip, the average price was $939,400 an acre, still a 20.1 percent increase from the fourth quarter of 2006.

Sales volume declined 23.1 percent from 588 acres sold in the same quarter the previous year.

Although the latest data suggest raw land prices are escalating, it's important to note the time lag between when negotiations begin on a transaction to the closing, Jeremy Aguero, principal of Las Vegas financial consulting firm Applied Analysis, said Friday.

"Most of these transactions were in the pipeline six to nine months ago," he said. "You also have to look at what the volume is and where it's taking place. A lot of it's along the south Strip and southwest. Those are the last round of history-based sales."

Housing analyst Dennis Smith of Home Builders Research said residential land prices have peaked and even receded from historical highs, especially now that home builders are selling off excess lot inventory and cutting back on new home permits.

"The big public builders are writing down their land holdings and they can do that," Smith said. "Right now banks are having a difficult time establishing land values. That means the appraisers are, too."

Smith said he knows of one large builder that bought 3,500-square-foot finished lots from Engle Homes -- whose parent company, Tousa Inc., filed for bankruptcy -- for $55,000 each.

Last summer, Smith had a small builder client who had finished lots appraised at $130,000 in the same area, near Sam Boyd Stadium, and was trying to sell them.

"I said at that time builders might give $100,000," he said. "It doesn't matter what the appraisal is. It's a piece of paper. I know what builders are willing to pay. Now you've got $55,000 lots. You've got distressed sales. That may be too strong. You've got discounted sales."

Aguero said last year's expectations that land prices would fall didn't materialize. Even though the housing market slumped, commercial development remained strong in 2007, which helped prop up land prices.