A Good Bet? Residential Real Estate in Las Vegas Is on Fire. Residents and Investors Alike See Real Estate as the Smartest Bet in Town. but Can the Trend Last-Or Is Vegas One of Those Bubbles Everyone Is Talking About?

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THE AIR IS DRY AND OFTEN SCORCHING. THE view is utterly monochromatic--various terra cotta shades of rock, dirt and dust, framed by mountains. If there is water, it's nowhere in sight. And because the residential terrain is so flat, acres and acres of land look like just a few blocks. And guess what: Every month, 8,000 people move in and 2,000 people move out.

Just about everything you can think of is under construction: highways, hospitals, doctors' offices, warehouses, more houses, more hotels, more condominiums, more office buildings, more gas stations, more stores. There are street addresses so new they haven't been listed in GPS Magellan Navigator yet. This is Las Vegas. Real estate here is sizzling. Sales and prices are so hot that some people are worried that, if ever there was a housing bubble, Las Vegas is it.

Across the nation, average home prices shot up 12.5 percent from the first quarter of 2004 through the first quarter of this year. The figures, from the Office of Federal Housing Enterprise Oversight's (OFHEO's) House Price Index, reveal Nevada housing posted the largest gains, with a four-quarter increase of 31.2 percent.

OFHEO Chief Economist Patrick Lawler believes the overall figures "show the rise in house prices continues at an extremely strong pace and raises the potential for declines in some areas later on."

Maybe so. But players entrenched in the heat of the Las Vegas real estate market don't see those declines headed their way. Steve Bottfeld, vice president of Marketing Solutions, Las Vegas, a consumer research and marketing firm, notes that Las Vegas has led the nation in job growth more than any other city in the last 10 years, and that job growth in Las Vegas was roughly 4.9 percent in 2004.

Take, for example, the ever-expanding World Market Center, headed for a total ware-housing space of 7 million square feet. It's intended to not just rival but overtake High Point, North Carolina, as the largest furniture display center in the world.

At the National Association of Realtors (NAR), Chicago, Chief Economist David Lereah isn't expecting a decline of any type in the Las Vegas market. "Households in California are uprooting and moving to Las Vegas. They're moving from $600,000 homes in California to $280,000 homes in Las Vegas. It's half the price. That's not a balloon waiting to burst," says Lereah.

Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), says that the situation bears watching, but not necessarily anxiety. "Are there some local markets where some risks have emerged? I think so, but the risks are layered and not at all severe," he says.

Fannie Mae's chief economist, David Berson, so far, agrees. While there may be some indicators to watch in Las Vegas, such as the steep rise in home prices and the high proportion of investor-held …