Why Has The RED HOT Vegas Market Slowed So Much?
I'm investing in Vegas, and have noticed that the market has slowed way down. I've gone to visit my properties and have seen at least five other properties on the block that are for sale or rent. These are brand new homes in 350k - 600k range. Most have never been lived in. Friends of mine have had their brand new 440k houses on the market at market price for over 2 months with no Sale. My call volume has come to a crashing halt. I'm starting to get a little worried.
Can anyone shed some light on the situation in Vegas. Is it time to unload and take profits or do you think investors are getting overly excited and the market will improve.
As a side note I don't think the California Market is slowing like in Vegas, Some friends in the business tell me consumers are still over paying, and over bidding.
I've had plenty of LV realtors tell me they could not believe it has lasted this long. I think the prices are going to come down and then level off. It can't go up any longer. The city doesn't have the high tech jobs to support such prices. LV is a union town. Most of the investors (IMHO) drove the prices up. I was going to buy a home about 2 months ago in LV and decided to wait. It was a total sellers market, and people were in crazy bid wars for these tiny homes. I'll probably come back in the next year or so to buy, I think that will be the best time.
Personally I think the big growth has come to an end. I don't think it's going to crash, but I think it will come down and level out. If investors start getting worried and seling, I'd be curious to see what happens out there.
1800 sq ft homes in Alliante asking 400+k is crazy (considering the same homes were 175k 14 months ago), and I can't believe people are going to shell out the money like they were 9 months back. And they aren't, they are sitting empty.
From www.salestraq.com:
In the resale market, listing inventory has risen to over 7,000 homes
compared to just over 4,000 same time last year. Buyers are no longer offering above listed
price, and multiple offers are a rarity these days. Homes are no longer being snatched up
overnight as they once were; homes are now taking several weeks, on average, before they are sold.
The median price of a resale home in Las Vegas now stands at $230,000, up 41% from the
same month
one year ago!
Mike
slcpunk,
I get your point and I am not disagreeing with you as I don't invest in LV.
In our market (San Diego) that 1800 sq. ft. SFR would be a bargain. Last week the front page of the San Diego Union Tribune had a story that there was a 720 sq. ft. bungalow in the North Park section of town that was involved in a bidding war and the price had just topped $500K. Now that's what I call real crazy.
I know they are two completely different markets. Just thought the comparison was interesting.
Dave
[addsig]
I am witnessing the same thing here in Atlantic City/area. Prices are inflated and the only job market here is 13 Casinos! I have a long buyer list, but short on homes( profit wise) Everyone is getting top dollar!!!
And from the contrarian's viewpoint:
Just wait till interest rates start climbing, and all the ARM borrowers get the notice that their payments are going UP.
Think there might be some panic and subsequent foreclosure notices going out?
Me too!
THAT'S opportunity time for the REI who's patient and isn't himself under the gun on now-costly notes.
John Merchant
What part of Las Vegas do you reside?
i live in the Green Valley / Silverado Ranch area of Las Vegas and property is still moving fast here.
I believe the market has slowed down a little compared to the craziness of the past several months, but i don't think it will plateau for some time. It is about supply and demand. there is more inventory on the market right now and the demand is still strong, but with prices escalating as much as they have, along with rising interest rates, a lot of first time home buyers are being priced out.
i bought my house in 2002 for $160k, i just had it appraised a few weeks ago for $310k, and i haven't done a thing to it. if you asked me to pay $310k for my house now i would laugh at you, but that's what's happening in vegas right now.
look to the future, look at all the building projects that are in the planning. supposedly they want to manhattanize las vegas with a number luxurious strip condos, not to mention all the casino projects under way.
in my opinion, as long as we don't run out of water, the casinos keep building and the vegas economy stays strong, i see a bright future for this city in the desert.
scr2001,
Having been through the market collapse in Las Vegas in the early sixties and California in the early nineties, I would say there were more millionaire real estate investors made after the collapse than before it happened.
When I first arrived in Las Vegas in 58, there were about 35,000 people, as I watched it grow I kept thinking it has to stop, when Decatur was a place you packed a lunch before you drove out to the edge of the city, hard to believe but true.
I used to get calls from the California people offering me their houses for $100K, which the same house is now worth $900K.
They do not make land anymore, so watch the market, bide your time, strike when the opportunity arises, Las Vegas will continue to grow, when they had the gasoline crisis we offered gas to the people who came to Las Vegas, this city can overcome about any situation, I still wonder where the gas came from.
John $Cash$ Locke
Quote:
On 2004-06-28 22:29, desertrat wrote:
What part of Las Vegas do you reside?
i live in the Green Valley / Silverado Ranch area of Las Vegas and property is still moving fast here.
I believe the market has slowed down a little compared to the craziness of the past several months, but i don't think it will plateau for some time. It is about supply and demand. there is more inventory on the market right now and the demand is still strong, but with prices escalating as much as they have, along with rising interest rates, a lot of first time home buyers are being priced out.
i bought my house in 2002 for $160k, i just had it appraised a few weeks ago for $310k, and i haven't done a thing to it. if you asked me to pay $310k for my house now i would laugh at you, but that's what's happening in vegas right now.
look to the future, look at all the building projects that are in the planning. supposedly they want to manhattanize las vegas with a number luxurious strip condos, not to mention all the casino projects under way.
in my opinion, as long as we don't run out of water, the casinos keep building and the vegas economy stays strong, i see a bright future for this city in the desert.
I think the city wil continue to do just fine. But I also think the big growth spurt is over. Personally I think it will level out a bit for a while and prices may dip a bit. Then return to the normal appreciation. Just my humble opinion.
I also am curious to see what happens when the rates go up. There are a lot of investors there with empty homes right now already.
I was looking in the Green Valley, Summerlin, Alliante areas. But I was not going to buy a home in such a way at the time. No inspection, pay all closing costs, overbid with cash...not a kind of market I wanted to buy in. Plus I felt in my gut that it was a suckers time to buy. That is was the end of the big rush. I think I was right (for me anyway) and that the next 18 months might be a great time to get a home.
Good luck in LV. It's so much more different in the neigborhoods than people imagine. Very nice.
Is it time to unload and take profits or do you think investors are getting overly excited and the market will improve
A healthy market is not that goes up more or less in line with incomes for the area. A healthy market is not one that goes up as fast as LV has been rising at different periods.
Even ignoring that and much of the conversation so far...
I am not sure that selling and taking the profits will make much sense. The transaction overheads of selling (and later buying again) plus the tax event means that you are better off riding out a down turn then selling in many cases.
You need to run the numbers. You need to decide if you are going to use a 1031 sale to delay the tax impact. Overall you need to decide if it ever makes sense to sell vs. just holding and using refinancing to tap the equity every now and then.
Real estate is not like stock, etc. The switching costs are high and you have the tenant to pay the holding costs if you focus on keeping the cash flow in line.
John
[addsig]
slcpunk
The home for 440k was 2150sf. I think he must have bought it for 310k.
dealfinder:
Well people keep saying that Vegas was the next California, so to me 440 for 2150sf home in aliante is crazy, but a house like that in San D. would cost a lot more.
lafinancial:
Your Fired!!!! hahahahaha. Go atlantic city....
JohnMerchant:
I'm waiting for that also.
desertrat:
These home are in the NW, 95/durango area and Aliante. I don't think water will run out, Lake Mead is HUGE!!!
Thanks Everybody.
[ Edited by scr2001 on Date 06/29/2004 ]
I was told that Lake Mead is lower than it has been for a while. Is this true?
The guy that bought in Alliante said his home was 175ish new. Homes similar are asking around 400k now (not moving though). He thought that was too much to ask and thought he probably coud get 350k for his.
Either way, there is too much money pumped into that desert. If a water problem arises, they'll find a way to fix it!! lol
Good luck. 8-)
Yup, I think the runs about over. It's what I have been waiting for, actually. Good times ahead for those that planned ahead, I think.
http://moneycentral.msn.com/content/invest/extra/P87483.asp?Printer
I'm going to close on my first investment property in 2 weeks(which happens to be in Vegas). I bought it preconstruction 8 months ago & its appreciated almost 50%. This is totally absurd to me. My brother moved out there 2 yrs ago & his house appreciated a ridiculous amount, so that's why we bought this other property. He says there's something like 10,000 new people coming into town each month (and they're losing 2000), so the demand for a place to live is definitely there. There's only a finite amount of buildable land in Vegas, so that will continue to drive the prices. I assume it will slow in the future & maybe come off a bit. I just wonder if there's a bubble situation. Interest rate hikes will contribute to the situation. Right now it still seems very hot (real estate, not temperature). Most new developments are limiting investors & putting deed restrictions in the contract. The North west area (summerlin) has appreciated more than others, so other areas are still lagging behind a little, I think.
Just my thoughts.
Vegas is special. Has always been so. It experienced a wide spike and now the spike has changed and broadened and holding about 10% down. The population pressure continues but not at any level other then labors. The difference is that the labors are being followed by their families. I talked to a Coyote and he says that they are discounting for family groups. That means the volume is continuing. The problem is that there is no housing at that level for the incoming labors.
Interesting thing. At the service jobs, there has been no advance in wages as there are so many asking for the jobs. A fringe asset is the Spanish speaking population in California as it moves up the ladder and now comes to Vegas to play and game. It is a very large plus to be in a service job in Vegas and speak Spanish, even with an off accent fron Central America.
Prices are holding, at the lower levels and the need is still increasing, at the lower levels.
If I were a developer I would look for about 20 minutes out and start ding bat building single family or combined clusters, or townhouses.
The statistics show the above. So do not give up on the place. Just draw your sites down to the lower numbers.
Water is a problem and it is the major problem throughout the Southwest. I include California. So far Seawater conversion is just now being considered and the plants are small and on a trial basis only. My god Gray Water systems here in the San Fernando Valley are still unacceptable and poor Burbank who tried it to water out the walkway from Burbank to Woodland hills, has had the fun of installing the piping and alas still no water. They are using the good water and hope to convert some time in the future. Only in LaLa land.
Cheers Lucius
It's funny you brought this up about Vegas. One thing I never understood is why prices are going so high with all the available land. When you drive into or out of town, there's nothing but raw land. Am I missing something?
puppup,
It may have to do with "buildable" land.
By the way,
what kind of deed restrictions can builders put in contracts?
Alan
A lot of the land near the mountains in Vegas is protected.
Deed restrictions can include a non-assignable clause or owner occupied clause for 2 years. Either way, you're not able to sell or rent it out for 2 yrs.