Jeremy Aguero of Applied Analysis writes for the Business Press here in Las Vegas and tackles local real estate market issues on a daily basis. His firm is the leading authority here in Las Vegas when it comes to housing trends and the economics of the homebuilding industry.

In his latest article, he points out how land values have fallen 25% in the first quarter 2008 year-over-year. What exactly does this mean? Does this mean that land values are truly 25% less across the board? ABSOLUTELY NOT!

What will happen: The mass media will get a hold of this fact that closings, not land values, have gone done by this amount. To the less experienced, this will indicate to folks that prices are falling drastically and we are nowhere near the bottom.

What should happen: The experts need to rule the day, like Jeremy. In this article, Jeremy points out that the lag time between contract and closings is quite a bit and this is a reflection of what pricing was coming in at during the last half of last year – right smack in the middle of the one of the worst credit crisis in the history of our country. Also, it is important to point out that these closings, not all but some, were not being done as true, non-distressed transactions. Many times, these closings were under great duress and they should not be reflective of the market in general.

LOW volume: Another key point in today’s market is the shear lack of volume. With SOOOOO very few transactions taking place, it is clear that buyers and sellers are not on the same page. Sellers lived through the run-up and know there is a land shortage here in Las Vegas. Buyers, especially those from out of town, didn’t live through the high time and don’t completely understand local market dynamics here in Las Vegas. Because of this, they oftentimes want to use other markets like the Phoenix market as their yardstick. They want to get dirt for nearly zero land residual and all the fixed costs from finished lots at a discount as well. Just not happening.

There have been only 5, that’s right FIVE, finished lot transactions that have taken place in the Las Vegas valley over the last 18 months. Compare that with other land-plenty markets and it is a pittance. Those 5 deals also were ALL a reflection of public homebuilding companies wanting to record a realized transaction before their fiscal year end to be able to book those losses against the massive profits realized in 2005 and 2006. Hence, those transactions had less to do with market conditions and more to do with realizing losses against past profits.

To be sure, this 25% dip is not going in the right direction if your are long in land like I am, but don’t let this fool you into thinking that these transactions are setting the market…they are not…