Las Vegas’s Housing Market: Back to the Future! By Roy Cooke
It’s almost like old times! New construction is jumping in Las Vegas. Many significant construction projects have been restarted and completed, and the cranes are moving again all over town. New major mega-resorts are starting construction, and the MGM Arena is being completed behind New York, New York.
And of major importance, Faraday will break ground in early 2016 on a new plant to build electric cars in North Las Vegas with the first cars coming off the line in early 2017. The economic diversity from gaming will help Las Vegas immensely. It’s been a long arduous economic fight for Las Vegas, once ground zero in the Great Recession, to get back on the path to normality. Or, more accurately, what passes for normality in Las Vegas.
We have a very distinctive city. The entertainment, gambling, lights, 24/7 environment, and all that money that flows into our little section of the world makes Las Vegas an amazing place. And it’s going to get even more amazing.
The Genting Group is building a massive mega resort on the old Stardust property that will add 6500+ rooms and cost over $4 billion to build. It’s scheduled for completion in mid-2018. And while construction hasn’t started, they are pushing the earth around on the 35 acre site just north of the Fashion Show Mall where the New Frontier once stood. James Packer, Australia’s casino tycoon has received permit approval to build a 3.4 million square-foot mega-resort there. The MGM-AEG Sports Arena will start hosting world-class sporting events in mid-2016, bringing additional tourism to the town.
This developmental growth is bringing back much needed jobs. Nevada is currently 11th in employment growth since July 2009, the official end of the recession. Additionally, the major project growth is a sign that large investors are viewing Las Vegas as a strong investment opportunity.
New homes are sprouting up all over town to accommodate the projected population growth. The “new home premium,” the price that new homes sell for over a comparable resale, is usually between 15-20%.
Single family home prices are increasing, albeit at a slower rate than the 2013 surge. Existing single-family homes are currently at about the same price level as 2004. Repo’s and short sales are down to around 800 per month from a high of over 4,000. The distressed property market has shrunk to less than 18% of sales. The number of Las Vegas homes “underwater” to their mortgage is down to about 20% from a high of 70%. Additionally, the average days on the market in Q2 of 2015 were 54.6, a more typical number and a credible sign that the Las Vegas housing market has stabilized. The Las Vegas homes market is slowly working its way through its difficulties with the end in sight!
Investors are still at over 60% of the market with 3870 investor bought homes against 2428 owner-occupant homes purchased in Q1 2015. It’s a good sign for the future that investors still feel Las Vegas Real Estate is a sound investment, but its sad fact that homeownership, the cornerstone of the American dream, is down to about 50% in Las Vegas from a high of 65%.
The American political class hasn’t accommodated the necessary legal changes in bank and lending policies to accommodate for the housing disaster, mostly created by them, for the millions of hardworking homeowners who have lost their homes. That fact both has and does have huge impact on the city of Las Vegas and its residents! Homeowners who lost their homes in the 2009 downturn are still struggling to find available financing to rebuild their lives.
Those unfortunate circumstances for many Las Vegas residents have provided the boom in housing rentals. Rents are continuously going up and the number of rental properties is at an all-time high. The ROI for renting single family homes is strong, much better than traditional investments and has the potential for appreciation.
Interest rates are likely to slowly rise, though the Fed has assured the country that it will be an unhurried process. It’s a good news, bad news consequence. The reason rates are rising is that the economy is improving and helping Real Estate appreciate, but higher rates also tend to slow down the appreciation.
All in all, Las Vegas is coming out of the devastation from being “ground zero” in the Great Recession. It’s been a long struggle, and we’re not 100% home yet. But the future of Las Vegas looks bright; we’re winning the economic war. Major investment, job growth, population increases and affordable housing are the fundamentals of a Real Estate market, and we have them all.
Viva Las Vegas’s, our best days are ahead!
*All information via The Lied Real Estate Institute
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