What’s the Median Price for a Las Vegas Home?

I think we are coming around the time that the Las Vegas Review Journal publishes their annual Las Vegas zip code appreciation (or depreciation) map. Yuck! I can’t say I’m a big fan of this and I do not know many Professional and experienced Las Vegas real Estate agents that have an understanding of statistics or what an investment property really is that do.

Why? We get too many calls right afterwards for Las Vegas real estate buyers that see it and want a home in the zip code that showed the highest appreciation rate from the previous year.  They could work all the way across town but want a home in the zip codes that showed the highest median price increases because they perceive that zip code as being the best potential “investment”.

In the past, We’ve also had calls from home owners within the zip code who think that their values have decreased while everywhere else in Las Vegas has gone up in price and are confused.

(Luckily, it will be a lot easier to just send this link to Las Vegas buyers or home owners for an explanation for the next round.)

I’ve seen more then one New Las Vegas real estate agent that proudly carries this around in their presentation books ready to show the world that they know where to buy real estate in Las Vegas. In fact, we actually had one real estate agent pull it out on us to try to justify that his buyers offer on a Summerlin home we had for sale justified their low ball offer.

When the report comes out, you’ll certainly see it in the news and plenty of people circulating the link around and labeling it as “appreciation” rates or for 2007, “depreciation” rates.

Unfortunately, you need to know that the numbers provided are based on the increase (or decrease) of the median Las Vegas home price for that zip code. For those of you that have had statistics 101, you certainly know that it’s just a number in the middle of all the numbers (data).

This is a real simple example of what the “median” price means. Let’s say you have three homes in a zip code that sell. One sells for $300,000, one sells for $750,000 and the highest one sells for $1,350,000. The “median” sales price would be $750,000. It’s not really a good indication of what values are and the following example will certainly show how this can come into play and be distorted for Las Vegas.

Las Vegas real estate is pretty dense in population compared to many other areas and it’s also new with plenty of new neighborhoods being built. It’s not uncommon to find a neighborhood of  $250,000 homes in a zip code that has Million dollar neighborhoods. Now, let’s just say that you have a zip code with neighborhoods where the median price is in the $300,000 range and a new luxury golf course community gets built with prices in the $500,000+ range. All of the sudden, that zip code is going to have a higher median price but it certainly does not mean that all of the neighborhoods/homes had a 40%+ appreciation rate. This can certainly be flipped around to work the other way also. (A Real Estate Search for the 89135 zip code will show you a wide range of homes available for sale ranging in price from over $5,000,000 to $190,000.)

Now, that seems kind of obvious but for whatever reason, every year that map comes out it’s construed as appreciation rates for that zip code. (Actually the Reason is because the headline in the Las Vegas Review Journal always calls it the appreciation rates.) With the sample of the agent that attempted to justify a low ball offer on the Summerlin Home we had for sale, the median price of a home in that zip code for that year had actually gone down because of some new condos that had been built with lower prices. They pretty much sold out right away and closed in the same year, resulting in a decrease in the median price.

They certainly were not cheap Summerlin condominiums, they just had lower prices then Summerlin homes you coud buy in that zip code. Unfortunately, if you don’t understand this, somebody could use that map to try to justify why they are offering 6 or 7% below your home’s current value.

Now, for this year’s map that will be coming out, you would think that all of the zip codes are going to have lower median prices showing declines. Prices for Las Vegas real estate have gone down right? Well, there will be zip codes that had new luxury condominium towers close escrow and will bring up the median prices for that zip code.

Hopefully when this map comes out, you’ll have a better understanding of what it really means. Calculating the appreciation rate for your home is a little more complicated then just taking all of the sold prices in the zip code and picking out the one in the middle and comparing it to last years numbers.

There are going to be some very nasty numbers showing up (especially in areas where speculators were chasing the “appreciation” rates and buying overpriced homes to begin with) and something tells me it will be making news in more then just the Las Vegas Review Journal. The media loves attention grabbing headlines so just remember that it’s last years news and it has little value in your Las Vegas real estate decisions.

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Paul Francis, ABR,CRS | Coldwell Banker Premier | Las Vegas Real Estate | 702.592.3058

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