Go past the neat pictures and the ground level look at the Las VPicture 1.pngegas real estate market shows how a lot of distressed inventory creates a kind of ice-freeze on a market.

Realtor Rob Jensen, who commented on my observations about the Vegas market in a recent post, has a detailed summary of the February market conditions on his blog.

Key Findings:

* SFR Average Sales Price is down 4.66% per month average in the last 6 months.
* January’s 2.2 % Average Sales Price decline reflects a total drop of $45,956 in 6 months.
* Single Family Homes Under 1 Million were nearly unchanged from last month.
* February showed nearly no change in several key stats: number of sales, # of distress sales, sales of 1MM+ Condos, continuing slide in average sales price, monthly SFR supply at 10.9 months and % of distress sales.
* Inventory of homes peaked in July 2008, and has remained constant between 21,524 and 20,963. There has been a very small reduction each of the last 3 months.
* Lower interest rates and a drop in the average sales price under $180,000 for homes <$1M is attracting bargain hunting foreclosure and short sale buyers to the Las Vegas market keeping the % of distress sales at 88% of total sales.
* Overall, nearly all key stats were very close to last January’s numbers with the notable exception of the drop in Average Sales Price. The drop in ASP is fueling the steady number of sales nearly equal every month to the number of new SFR’s coming on the market.

Jensen does point to some opportunities in the market in a recent post that gives buyers a way to think about value in a market that continues to experience price softness.

On another note, homes in many places across the valley are selling for less than it would cost to build them. This in itself is another “safety” on your investment. Builders will not build again until they can sell homes for a higher price/square foot than you are paying for yours. So as long as Vegas doesn’t fold, values will go back up.

But when will they go back up? That could take quite sometime and is open to debate. In the meantime, I know that it is hard for a buyer to even buy a good home in today’s market because the good homes do sell, quite often with multiple offers. The only way we are going to know that we have hit the bottom, is when prices start to go back up. Once this shift in consumer confidence has taken place, it is going to be zoo trying to buy a home. There will be no new home inventory to compete with the resales, so the bidding wars will be back.

The prices are phenomenal. If you can find your dream home and price in some room for a little more depreciation, then I’d say go for it. This window of opportunity won’t be here forever.

Back in the old days, most of us bought a home with the expectation that our equity would grow at a slow, but steady rate, that we would live in the home for five years or more, and that when we were putting money down on the home, it was for just that: a home. Buying a home was a statement about permanence, about reaching a point in life where you could feel confident about putting down roots and saying, This is where we live.

Over the past decade, a lot of assumptions about home ownership shifted. The accelerating growth in price and transaction volume created an illusion of flexibility associated with home ownership: if I need to move, I’ll be able to. It created the illusion of immediate value generation in home ownership: I’ll make money even if I only stay here a year. It created the illusion of cash generation from ownership: I’ll be able to take out a second mortgage and free up some cash from my home.

That era is over. Think about what Jensen is saying to home buyers: if you’re looking for a home, think about the kind of house you want to live in and whether its going to hold its value over the long term. If you feel good about that, and feel like you can handle it if the price drops a little more over the next couple of years, then find your dream home and go for it.

Sensible advice.