Las Vegas Real Estate Market Meter
There are great times to buy in Las Vegas and great times to sell in Las Vegas. Some times we don't have a choice so NOW is the time. However, if we have time to make a great decision we can follow the market and get a great feel for what is happening.
(Scroll down for historical values) The graph and numbers represent the strength of buyers and sellers within the Las Vegas Market based on homes for sale by a Realtor®(s) (a real estate agent associated with The Greater Las Vegas Association of Realtors (GLVAR). This is strictly an experimental indicator at this point because the numbers are not scientifically proven. Many factors go into the determining of the strength of the market. Most numbers are pulled from the Multiple Listing Service (MLS) provided by the GLVAR. The numbers are usually pulled monthly and no warranty or guarantee is provided by the GLVAR so these numbers are informational only. Please see the site disclaimer.
Las Vegas Market Meter Explained
The Las Vegas market meter formula is fairly complicated. Here is how it works:
Two MAIN factors indicate how a market is doing relative to other markets and relative to its own history. Days on Market (DOM) and Change in Price (CIP) say a lot about a local real estate market compared to a general/national real estate market.
To figure a market based on DOM, figure the average days a house is on the market before it sells. Compare that to a normal average of 90 days on market. According to the Las Vegas Review Journal,
"In a market with a balance between supply and demand, the average seller can expect to wait 90 days for a buyer..."
To figure a market based on CIP, look at the national or local "normal" market appreciation rate. Realtor.org explains,
“Historically, home prices rise 1.5 to 2 percentage points faster than the rate of inflation..."
Inflation, as measured by the Consumer Price Index, is seen at 3.1 percent in 2006, compared with 3.4 percent last year. Growth in the U.S. gross domestic product is likely to be 3.4 percent this year. Inflation-adjusted disposable personal income should grow 3.1 percent this year."
For our formula we choose 2 as the rate of growth above inflation and 3 as the rate of inflation which gave us a national or normal rate of 5% appreciation. So, take the average growth of the last 3 months compared to the previous three months, annulize the amount and divide by the normal rate.
The final formula is
1+((0.5*(1-(AVERAGE(3 months DOM)/90)))
Plus
(0.5*(1-(AVERAGE(previous quarter median sales price)
Divided by
(AVERAGE(current quarter median sales price))))))
This gives us an index of market strength based on inventory movement and home appreciation. Either buyers are buying and they are paying more or they aren't and prices are retreating. If 90 for DOM were plugged in and the average for months 1 to 3 was the same as months 4-6 then the equation would be 100% or 1 with no positive or negative growth. So, anything above or below 1 is what we use in our meter. We multiply the difference by 10 so we can use a scale of 0 to 10 or 0 to -10 and keep the visual aspect managable. If the Index returns a 1.22 or 122% we move to the right 2.2. If the Index returns .88 or 88% we move to the left 1.2.
I typically update this graph 4 to 7 days after the end of the month because properties sold at the end of the month are often not completed in the MLS system for a few days.
A historical view of the Las Vegas market is also very valuable. Notice the cycles that form over periods of time.
|
