I usually get chuckles in presentation when I show a slide with Market Stability in reference to Las Vegas. Well, I am not referring to past pricing stability; everyone knows what happened. I am referring to future price and rent stability which are important factors for a long term investment like real estate. So, let me explain.
At right is a graph showing long term rent terms in Las Vegas. To me, rents have essential been flat for several years. What is surprising about this is that in the last two years we have had a large number of single family homes come onto the rental market. However, despite a virtual torrent of homes, rents are still unchanged. I infer two things from this data. One, that there is an ongoing strong demand for single family homes (condos do not share the same stability at all). Two, this is the result of some research, a large percentage of residents in Las Vegas live in rental homes. When I checked similar sized cities I saw 10 to 15% of single family are likely rentals (the tax mailing address is different than the property address). In some subdivisions in Las Vegas, I have found many subdivisions in good areas with over 50% rentals. I think this reflects the nature of Las Vegas. In any case, it does not appear that single family home saturation is likely.
In 2009, 49% of single family home purchases were with cash! The majority of these purchases were by investors and internationals. Of the financed properties purchased by investors, most had to put down a minimum of 20% since only an 80% LVT loans are available. Cash buyers and investors with 20% down and getting a positive cash flow do not default. I believe that within in two years, Las Vegas will have one of the most stable ownership markets in the country.
Today, you can get nice homes for $85/SqFt. I've talked to builders and the best they can really do is about $110/SqFt to $120/SqFt. And these are not homes with any upgrades. Replacements value insurance is generally about $130/SqFt to $140/SqFt. So, today you can buy homes at less than the replacement cost.
Another webpage goes into details about Las Vegas's land shortage so I will be brief here. Only 11% of the state of Nevada is in private hands; the rest is federally owned. All the land around Las Vegas is federally owned. So, there is limited room for expansion. All the buildable land in the valley is less than 30,000 acres and a good part of that is not useable for homes. I believe that as Las Vegas starts to expand again, prices will go up.
Casinos are being built in many parts of the world. There are some concerns about this cutting into the long term Las Vegas visitors. I believe that this will not be the case. When the Atlantic city casinos came on line, Las Vegas visitors increased. A report I read stated that people, who would never have considered flying to Las Vegas were willing to drive to a near by casino. Once they spent some time in a casino and enjoyed it, they wanted to experience the real thing and can to Las Vegas. So, I think Las Vegas entertainment business will increased and thus increase demand for works and rental single family homes.
Las Vegas is near to both Las Angles and San Diego. Between the two cities, approximately 2.5M people will reach retirement age in the next two years. If 1% choose to sell their expensive California homes and retire in Las Vegas, it would be more homes than are currently for sale. The continued tax increases in California and the drop in value of 401Ks combined with the drop in prices in single family home will make Las Vegas even more attractive.
many things can go wrong but I do not believe they are likely. Below are some of the potential issues that investors have suggested.
Contact me if you are considering buying or selling Las Vegas real estate. You will be glad you did.
...Eric
Eric Fernwood
RE/MAX CENTRAL
8400 W. Sahara Ave
Las Vegas NV 89117
Email: EricFernwood@gmail.com
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