This is the first part of a two-part series highlighting the residential real estate market in Las Vegas. This article examines development trends and the state of the Las Vegas housing market. Part 2 will examine a unique land program in the Las Vegas area that provides for the regular sale of government land by auction in the Las Vegas metropolitan area.

This is the first part of a two-part series highlighting the residential real estate market in Las Vegas. This article examines development trends and the state of the Las Vegas housing market. Part 2 will examine a unique land program in the Las Vegas area that provides for the regular sale of government land by auction in the Las Vegas metropolitan area. (See Part 2: Federal real estate auctions fuel urban growth.)

A silver-mining rush put Nevada on the map in the 1860s. Gambling made Las Vegas a desert metropolis. And now, the sizzling commodity in the Las Vegas area is land to feed the voracious housing boom. This new rush is driving land and home prices into uncharted territory, with some real estate investors and developers playing the market like a high-stakes poker hand.

Hiked prices are leading builders to squeeze in more units per acre and are driving the skyline sky-high for some new residential developments in the region. Las Vegas is quickly growing up…and up. One agent, Beverly Ann Lacey of RE/MAX Advantage in Las Vegas, has even capitalized on this trend in high-rise residential with a "Vertical Vegas" Web site.

There is a surge in the conversion of apartment buildings into condo developments, rezoning for residential development, and the construction of mixed-use projects that blend residential with other uses. Some locals refer to this modern massing as the "Manhattanization" of Las Vegas.

Will the increasing cost and density of housing lead to a critical mass for the Las Vegas housing market? The supply of developable land is falling short of demand, say some market observers, and home prices are floating out of reach for some prospective home buyers in the area. Residents are increasingly living at the outskirts of the city, where housing is more affordable. And the market has begun to show signs of burnout, such as a growing inventory of for-sale homes. But Las Vegas was built on gamblers, and some local industry experts say it’s a safe bet that the region’s housing market will continue to thrive.

"Last year was Kansas – this year it’s Oz," said Lee Barrett, president of the Greater Las Vegas Association of Realtors, referring to the storybook, "Wizard of Oz"-like housing market in the Las Vegas area. "Over the past 20 years (the city) has doubled every 10 years in population and size," said Barrett, who’s also a broker at Century 21 Barrett & Co. "Do I think it could happen again? I think so." The association is growing at a fast clip, too, he said, with its membership more than doubling in the past 10 years to a current level of about 12,000 Realtors.

A Las Vegas native, Barrett said the vertical growth of residential development in Las Vegas is an unprecedented phenomenon for the area. "We’re becoming more urbanized." Las Vegas is the fastest-growing metropolitan area in the country, with the number of building permits issued from 1990-2002 almost surpassing the total number of housing units that existed in 1990, according to an annual Harvard University housing report. More land must be made available each year for new housing to sustain this growth trend, he said.

Prices are rapidly rising in the region. The median sales price of existing single-family homes for the Las Vegas metro area jumped from $149,100 in 2001 to $224,900 in the first quarter of this year, a gain of about 51 percent, and from June 2003 to June 2004 the median selling price of single-family residential units in the greater Las Vegas area grew about 55.6 percent, to $280,000.

The Las Vegas metro area had the second-highest gain in median existing-home prices in the country from the first quarter of 2003 to the first quarter of this year, the National Association of Realtors reported.

In June, at a public auction of government land in the Las Vegas area, the average selling price of the land put up for bidding was about $279,300 per acre, or about 2.3 times higher than the appraised value of the land for sale. The largest parcel, at 1,940 acres, fetched $557 million. When the Las Vegas-area land auction program began in 1999, the price per acre was about $61,500, and in July 2002, the land sold for about $153,800 per acre.

Sheryl Palmer, Nevada-area president for Pulte Homes, said such high land prices directly impact the shape of residential development. "You are seeing some significantly higher densities in the marketplace to drive affordability," she said. And the ever-growing cost of land reflects positively on the Las Vegas-area housing market, she added. "Demand has generally heightened. We’re very excited about the market and the future of the market."

Robert Hamrick, broker at Coldwell Banker Premier in Las Vegas, which serves the entire Las Vegas Valley, said, "The Vegas market is not a flash in the pan, it’s going to continue to be strong. It has been absolutely phenomenal." Land prices continue to boost Realtors’ confidence in the future health of the housing market, he said. "It gives us a barometer of where the market is going."

But Hamrick has seen slight traces of imperfection creeping into the market. Namely, the active inventory of for-sale homes has begun to increase. The multiple-listing service for the Las Vegas area reported a 15.8 percent gain from May to June of this year in the number of available units listed. Hamrick said the active inventory had shrunken to as low as about 2,000 homes in the past year before it began to climb, and the inventory is now growing by about 700 listings per week. Some sellers may be fishing unsuccessfully for buyers who are willing to pay an inflated sale price, he speculated. "Everything that is priced right remains attractive and continues to sell," he added.

Bob S. Genzer, director of the city Planning Department, said, "I’ve been here 30 years, so I’ve seen a lot of growth. When other areas of the country slow down, we’ve always been able to weather the storm and keep moving."

"Residential has become such a hot market with so little supply available over the last year to two," Genzer said. "There has been a push to convert existing apartment complexes to for-sale condominium complexes. There have been some applications…where developers are looking at taking industrial properties, which we don’t have that much to begin with, and rezoning those and turning those into residential."

Vertical construction, he said, is another trend that started in the county and "you’re now starting to see that in the city as well." One project, approved this month, will feature four towers that are 14 to 18 stories high, he said. "That’s certainly another form of housing that we have not seen in the past."

The city is running out of elbow room, he said. "The only direction we can go is north." The city of North Las Vegas is to the north and east of the city, and the Las Vegas Valley is an island in a sea of government-owned land.

Some government land is made available each year for sale, but not enough to meet the demand, say local real estate professionals. Las Vegas recently brought about 12 square miles of land within city limits at the far northwest side of the city, though Genzer said it could be years before that land is built out.

The expansion is pushing the city toward Paiute tribal reservation land, and the tribe has announced its own development plans for a master-planned community that will feature single-family housing, a resort and casino, and commercial and recreational uses on its 3,881-acre reservation.

Genzer said the city will work to factor in the Paiute development project when planning for city growth in the area. "It is critical to make sure that whatever happens is coordinated with (the tribe)," he said.

While the land crunch in the Las Vegas area is a worry for some, water issues may become more critical to continued growth. "Water at some point may limit development," Genzer said.

Barrett agreed, "Water could be the number one (issue)."

A survey of 400 adults in the Greater Las Vegas area, conducted by Elway Research in January, found that residents considered water issues to be a top problem facing Las Vegas, followed by crime, pollution, jobs and housing, in that order.

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Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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