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LAS VEGAS-Occupancy levels in the Las Vegas Valley apartment market at mid-year stood at 93.7%, down from 96% at mid-year 2006, according to a new report from Applied Analysis, a locally based research and advisory firm. Average asking rents, meanwhile, stood at $0.98 per sf per month at mid-year 2007, up from $0.94 at mid-year 2006.

Applied Analysis principal Brian Gordon says the rise in vacancy and the slower rent growth is in part due to increased competition from individually owned units (single-family homes and condominiums) that have entered the market in the form of rentals. “Recent declines in occupancies and slowdowns in rental rate growth are principally attributable to a short-term correction under way in the for-sale residential market,” he says. “The timing of major resort openings has also contributed to the softer-than-average performance.”

That having been said, he adds that the jobs are well on their way. “Continued strength in the tourism industry, including its development pipeline, is expected to move the market forward generating tens of thousands of new jobs, stimulating continued population in-migration and ultimately increasing demand for housing. As such, all sectors of the housing market will likely benefit, including the for-sale and apartment product types.”

Michael Belnick, a local apartment specialist who tracks the market on a quarterly basis, reports that 148 apartment properties changed hands in the Las Vegas valley through the first half of the year. Through the first half of 2006, 273 properties changes hands. While in the first half of 2005, 472 properties changed hands.

Much of the drop off has been in the sales of fourplexes, which generally make up between two-thirds and three-quarters of the total sales market by number of properties. First-half fourplex sales are down 52% compared to 2006. Sales of properties in the five- to 99-unit range also are down significantly, falling 34% compared to 2006.

Belnick tells GlobeSt.com that sales of smaller properties are down because sellers are asking too much relative to the rents that can be achieved, and buyers are having a hard time obtaining financing in today’s tightened lending market. As part of the decline, the average per-unit sales price for fourplexes fell 1.1% this year to $107,700 while the average per-unit sales price for five- to 99-unit properties fell 5% to $79,300.

In the largest apartment category, properties with more than 100 units, property sales also have slowed over the past couple of years but not as rapidly. Twenty three properties changed hands through the first half of 2007, down from 28 in the first half of 2006 and 45 in the first half of 2005. The average price per unit, however, has risen. The average sale price per unit in the first half of 2007 was $111,400 per unit, which compares to $102,900 in the first half of 2006 and $79,000 in the first half of 2005.

Belnick says the larger properties continue to sell at higher and higher rates because more dollars are chasing larger, institutional-grade properties; because the larger buyers have more cash to throw around, making financing easier; and because institutional-grade buyers see the long-term upside to be had from the expected surge in employment due to a surge in new resort development.

“The players in [the 100+ unit market] are primarily cash buyers who understand replacement values and the future demographics of Las Vegas,” he writes. “They seem to understand the impact of $50 billion of new construction in the next five years and that catches their attention.”

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