Jeff Simpson notes that earlier predictions didn't factor in tougher lending standards

With casino resort companies doing record-setting business, and six major resort projects under construction on the Strip, it might seem surprising that the biggest business news story in Las Vegas revolves around the slumping real estate market.

Of course, it's not surprising if you are looking to sell your house. Or if you have less-than-stellar credit and are looking to buy a home.

Our valley's top real estate experts have long been predicting a short slump with minor price corrections of less than 10 percent.

The folks I talked to counted on our dynamic economy, a continuing influx of new residents and the coming wave of Strip resort development to keep the slump short and relatively harmless.

I believed them, and wrote in January that I expected the sluggish real estate market to improve by the end of this year.

I was wrong, and was too optimistic. Two things I failed to consider have had a dramatic impact on the Las Vegas real estate market.

First is the overall tightening of credit, and second is the crash of the subprime mortgage market.

That one-two punch limited the ability of many people to buy houses or condominiums.

Lenders went out of business after folks who bought homes beyond their means were unable to make payments. That scared the financial markets, which quickly tightened credit requirements.

With the availability of credit limited, and with investors bailing out on the Las Vegas market in favor of greener pastures, the inventory of homes ballooned.

Those who wished to sell their homes were unable to. Folks resisted lowering their prices, but as the inventory on the resale market grew to a record 30,000 single-family homes, town houses and condos , and with homebuilders aggressively cutting new home prices, something had to give.

And that was home values.

As Sun and In Business reporter Brian Wargo reports in today's Sun, the median price of resale homes fell $10,000 in one month, a 3.3 percent drop from June and 6.3 percent below the all-time high of $315,000 in June 2006.

With the glut of homes on the market, and a significant gap between what Las Vegans can afford and have the credit available to buy, experts told Wargo that there's still a long way to go before prices stop dropping and the inventory starts shrinking.

One top real estate analyst predicted that the median price of homes in the valley could drop as much as 25 percent from the 2006 peak, to as low as $236,250.

Respected Las Vegas analyst Larry Murphy, president of SalesTraq, told Wargo that one bad month doesn't necessarily mean that a major correction is under way, but also said he doesn't expect prices to begin rising again until 2010 at the earliest.

"It looks to me that we are trending downward and we have not found the bot tom yet, but I don't know how anybody would know where it's going," Murphy said. "We are not going to see a recovery until the prices stop decreasing and the inventory stops increasing."

One sad thing about the real estate slump is that the pain extends far beyond the frenzied investors who bought more than they could afford, or the subprime mortgage lenders who fraudulently or recklessly loaned money that wouldn't get paid back unless home prices kept appreciating.

The people I feel sorry for are the regular folks. Their home is often their biggest investment, and they've been failed by a market that didn't rein in the aggressive businesses that gambled on continuously increasing prices.