Thanks to longtime reader Reno Ignoramus for forwarding the article below from this week’s edition of “In Business Las Vegas”. The article talks about how some residential lots in Las Vegas have virtually no value. And one land expert quoted in the article says things are “only going to get worse”.
I’m not sure how prices can get worse than zero, unless developers have to start paying buyers to take the lots off their hands. Hmmmm.
Read the article here: Expert: Some residential lots have virtually no value
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[Late Add: additional links forward by R.I.]:
Raymond
This is an interesting article about a subject we never talk about here on RRB, which is the market for improved but vacant lots. As the price at which a person can buy a very decent house continues to drop here in Reno, what impact must that have on the price of vacant lots?
I can very well imagine that at some point, all a piece of improved land is going to sell for is going to be no more than what it cost to complete the improvements, including the actual dirt work and administrative and legal fees.
Walter
Oh I can absolutely assure you that it is possible for the value of the underlying land on an improved lot to fall to effectively zero. It happened to my family in Austin, Texas, when the bottom fell out of real estate values 20 years ago. Now that was then and this is now and that was there and this is here, and I’m not claiming to be able to predict what will happen here now. But rest assured it can, and did, happen. Now, if youv’e got about 15 years or so to wait it out, it can come back.
smarten
Renters Are Wealthier than Home ‘Owners?’
Where’s Derrick when we need him?
3niner
Hi All,
I’ve been reading this blog since late 2006, but this is my first comment. I emailed a comment to Guy, earlier today, and he encouraged me to put it on the blog. So here goes…
I read your blog from time to time, but do not post.
I just wanted to point out that land (and even houses) can have zero market value, if the government taxes them at a rate that exceeds the untaxed market value of the property.
Even when this absurd situation has not yet been reached, high property taxes can have a very chilling effect on the market. I have a young friend who is shopping very carefully for a house (or condo). New properties still look too expensive to her, and bank owned properties carry ridiculous property taxes, when compared to the value of the property.
High property taxes are contributing to the price decline, and poor market liquidity.
Sully
I have to agree with 3niner. The property tax rate in Washoe County is all over the place. A 3600 sq ft house on 1 acre built in 1989 has a tax of 4200/yr. A few blocks away a 2100 ft house on 1/4 acre built in 2005 has a tax of 4400/yr.
So much for taxing on replacement cost! 🙂
Guy Johnson
3niner, “since late 2006”? Wow! You are a longtime reader. Thank you for reading the blog, and thank you for your comment.
Gary
3niner,
Regarding the property tax situation, there are significant disparities (also noted by Sully) that sometimes show up due to rapidly changing values versus reassessment schedules, plus the effects of a 3% cap on annual tax increases for many owner-occupied residential homes. The velocity of change in home values is the biggest culprit in the disparities, with changes in ownership an additional factor.
I dug up some numbers that compare property taxes among different counties throughout the country. The nonprofit Tax Foundation analyzed 1,817 U.S. counties for property taxes in the period 2005-2007. In that study, “Median Property Taxes Paid” ranged from $7908 down to $115, and Washoe County ranked #462 at $1738/year. The high end of those rankings was in New York and New Jersey, and the low end was practically owned by Louisiana.
More significantly, “Property Tax as Percent of Home Value” ranged from 3.0% down to 0.1%, and Washoe County looked really cheap on that chart, ranking #1471 at 0.5%. So if property tax is contributing to the decline in home prices here in Washoe County, the same effect is being felt across the country, but it pales when compared to all the other factors, many of which just happen to be worse in Nevada.
Here are the links where you can get the raw data, as a Microsoft Excel file or as an Adobe Acrobat file.
diablo
smarten is a jobless bum. He sells panama jack hats down on the pier in key west fl.. total bum folks! 😉