Las Vegas real estate market report

Not all Las Vegas real estate isbeing sold for the same price and it isn’t just the location or the size that dictates the price!  Investors are currently flooding into the market looking for the real deals and they are finding them.  Some Las Vegas home Buyers are finding real deals with prices that comparable homes were selling for at or near Las Vegas real estate boom prices.  My Banks and individuals are selling well below the current average in an effort to sell their property NOW.  This has resulted in some properties below the $250,000 mark receiving multiple bids.

With the increase in full and all material costs, these homes are selling for below what it would COST (without profit) to reproduce them.  What this means is that investors are buying at record lows and stand to reap the benefit as the real estate market in Las Vegas once again changes course with new employment opportunities that are scheduled to come on line as the massive $33 Billion dollars of casino expansions come on line in 2009.

Recently Ben Bernanke recently said that the Fed. would start increasing the prime rate. This will result in an increase in mortgage loans. NOW is the time to jump in and purchase homes in Las Vegas before interest rate increases and while these deals last.

The Greater Las Vegas Association of Realtors is reporting that there has been a substantial jump in homes under contract last month.  Buyers are now making their move. I believe this could spell the bottom of the market that everyone has been waiting for.

It’s time to get busy buying a home.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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Yes, the world of finance is in a tail spin and some Las Vegas condo projects are in trouble but it seems that many Las Vegas projects are above the financing waste land that has swept over the U.S. real estate markets.

This last week I noticed another condominium project has bitten the dust due to the slow market and terrible financing availability.   Stephanie Village has completed an $8 million dollar club house and infrastructure improvements and is now closed for business.  This is the second project to shut down in Henderson in as many months with Vantage Lofts being the first.  One has to ask what will happen to these partially completed projects?

But not all in Las Vegas is doom and gloom.  Las Vegas City last week gave its approval to a non-binding agreement with Forrest City to 1) Acquire land for a casino in the new 61 acre development site the city owns.  2) Build Las Vegas City a new city hall and lease it back at a much reduced rate.  3) Develop a new public transit facility close to the new City Hall.

This would allow the City to assemble approximately 20 contiguous acres of land surrounding the old City hall which would be a very valuable asset for a possible casino project with frontage on Las Vegas Blvd.  This would also guarantee a new casino on the 61 acre development site.  Together two new casino projects with the renovation of the Lady Luck and the expansion and renovation of the Golden Nugget, the new Entertainment District could all make Downtown a must see for people visiting Las Vegas and revitalize the downtown areas.  Besides the new casino on the 61 acre site there will be a new fine arts center, a world class brain institute (under construction),  the world diamond center tower,  the World Furniture Market (3rd phase under construction) and many other buildings.

The City also has not given up on building a new major sports stadium off Main Street between the Stratosphere and Downtown.  Also this month the Streamline Towers Condominium project will start closing its units with their new owners.  Mean while to the south of the new Justice Center Juhl Condominiums continues work on its building complex.  The structure on this project has been fully erected and it is bustling with subcontractors of almost every trade.

Goldman Sachs completed its purchase of the Stratosphere in January and there are murmurings on the street that it will seek to expand and renovate its new purchase using the 12 acres of undeveloped lands it acquired in the purchase.

Just to the north of the 61 acres is the Moulin Rouge, an historic site of the first segregated Casino for people of color back when whites only could stay on the Strip.  This site has recently received preliminary approval from the City for a total new casino/hotel package with tower.

So it looks like old Las Vegas may become New Las Vegas in the next four to six years!

Looking at the County (Strip)  I remember when I was a child the rumors that Elvis Presley really didn’t die but secretly vanished in order to live his life outside the lime light.  Well it looks like Elvis may never die!  FX has announced plans to build a new casino based on the Kings persona on the corner of the Strip and Harmon.  This puts it across from City Center and Planet Hollywood and surrounded by the MGM Grand.  Not bad company Elvis!

Las Vegas Sands has its fingers in a three new projects.

Currently under construction is the new high end condo tower along with luxury retail right along Las Vegas Blvd.  They are also involved in a new major sports arena to be build with frontage along Koval which is the first road east of Las Vegas Blvd.  The third project just announced yesterday is a brand new 1.2 million sq. ft. convention center along with making room for an additional 7,000 new rooms.  This facility would be built on the east side of Koval. 

What I find interesting about all of this is that while the national press is busy saying how bad the residential real estate market currently is in Las Vegas they fail to see the $38 billion dollars of construction currently happening on the Strip which will completely dry up the residential real estate inventories as they finish construction and start hiring new workers.  Supply of homes in Las Vegas will be in short supply in 3 years, AGAIN.

Some Buyers and investors are beginning to see the future and coming back to purchase while prices are dirt cheap.  We are starting to see a lot more buying activity in the residential markets right now.  Many properties in the lower price ranges are beginning to once again receive multiple offers.  It looks like the market here may now be changing.  Historically the Las Vegas real estate market has made fast adjustments to market conditions and this market swing seems to be no different.

If you have any questions please give me a call, Max 702-334-2200

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

Technorati Tags: Casinos, projects, public transportation

Well the GLVAR came out with their February figures and it looks like there is a POSSIBILITY (rumor) that the market is showing signs of bottoming out.  Inventory levels are down (fact), numbers of homes under contract are up slightly (fact) and home sales are up slightly(fact).

However Standard & Poor’s/Case Shiller report still show prices falling in Las Vegas (rumor).  Why is this rumor rather than fact? Because approximately 40% of the current housing sales are REO bank auction properties.  These properties are sold as is, generally in need of major repairs and are substandard homes that will have to have renovation and redecorating done to them in order to bring them back to a standard in which they can be resold on the open market.  According to Case Shiller we are off 19% in price from January 2007 to January 2008 and this includes REO auction sales. So by the time these properties are renovated and put back on the market they may sell for 10 to 15% more than they sold at auction for.  Without knowing this the average Buyer thinks they can come along and buy a pristine home at 20% below a year ago which generally is not true.

The recovery in the Las Vegas real estate market will come in conjunction with the completion of $39 Billion dollars worth of improvements on the Las Vegas Strip (truth).  This will ad approximately 46,000 new hotel rooms (false) to the strip and create 276,000 new jobs (false) in Las Vegas.  The number of rooms to be completed between now and 2010 is more likely to be in the realm of 20,000 units creating 4 jobs per room or 80,000 new jobs (rumor).  These jobs are based on not only hotel workers but casino, convention, entertainment, right down to the added grocery bagers that will be needed to service all the new workers on the Strip. Approximately 50% (truth) of these workers will end up buying their home with 2 income workers per home this would mean approximately 20,000 will be absorbed which should be enough to dry up any excess inventories.  It is not enough to drive the huge building boom during the speculation era of just a few years ago.

Many future projects on the Strip may be put on hold or canceled (rumor and truth).  Because of tight financing it looks like old water park site has once again been put up for sale (fact).  This site was once proposed for the  tallest building in the western hemisphere.  The land is owned by Ausie James Packer. Mean while the old site of the New Frontier with recently Clark County project approval to built a expanded version of the New York Plaza Hotel (rumor) may postpone construction until the commercial financing markets settle down. Look for other projects to take longer to move forward as a more measured expansion of the Strip. 

The international tourism will be up over the next few years as foreign currencies buy more U.S. dollars (fact) and this should make Las Vegas a major world stop.  The Las Vegas Convention and Visitors Bureau has just launched a multi million dollar advertising campaign to attract these target travelers (truth). As the numbers on international travel start to show in the market reports and the financial markets settle look for development to once again resume on the Strip (rumor) this will be in about 2010.

Foreclosure on the major projects on the Strip will stop construction and leave empty partially completed mega Casino/hotels (false).  The financiers of these projects understand that if the project is not completed they may not have an asset to sell.  An unfinished project can result in much higher costs to restart and yield them a much lower selling price. A current example of this is the Cosmopolitan whose financier is Deutsch Bank (truth).  The Bank is currently foreclosing on the project but has guaranteed payment to the contractor to continue construction.  If the Bank takes it back, construction will still be completed. Failing to complete a project of this size is not a possibility.

Projects like City Center, Echelon, Fountainbleau, Aliante Station, Canery East, Encore and ”M” will all be brought to completion (truth).

All current under construction expansion to existing properties will also be completed including Ceasars, Palazzo, Planet Hollywood, South Point, and Hard Rock (truth).

As soon as the commercial financing is available the postponed projects will resume development (false).  Las Vegas has always been a city of “If we build it they will come.”  But with all the new rooms coming on line in the next few years there is a little nervousness on the street as to weather they can be filled and generate the needed revenue.  The industry wants a 90% or higher occupancy rate and if that is not reached you will see new development slow (rumor).  Some still appear to be moving forward such as FX’s project across the street from City Center with a planned Elvis themed property.

The Las Vegas housing market will boom in 2010 and prices will return to their 2005 levels (false).  Look for inventories to return to normal levels and prices to rise approximately 10% from their 2008 levels (rumor).  It will take until 2012 for prices to return to their 2005 levels (rumor).

If we have or are about to reach or residential real estate bottom in Las Vegas then it may be a good time to buy.  I bought a home last weekend to rent out.  I guess that lets you know where I stand.

If your interested in talking or have questions please give me a call. Max Schmidt 702-334-2200

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

Technorati Tags: Las Vegas homes, Las Vegas market bottom,

I tend to spend a great deal of time looking at development on the Strip.  The reason for this is that this area provides such huge employment growth opportunity.  Employment growth is what drives residential real estate development and pricing.  With great positive employment growth of 4 to 5% you find an active appreciating residential real estate market.  With all the development going on down on the Strip this translates into many new jobs and people looking for housing.

This mourning I found out that the 6 billion dollar Plaza Project scheduled for the site that the New Frontier once stood has been rumored to be postponed.  This means that owners and guests at the Trump Hotel will be looking at a dirt lot with an unobstructed view of the Wynn property, a Trump luxury competitor. Trumps units have begun to close with its owners.

But on the same day Las Vegas County Commission gave final approval to the Plaza project. It may be true that construction could be postponed but give Elad Groups deep pockets it would be purly their decision to postpone and not due to commercial financing.

The number of Las Vegas visitors are off 10% in the last few months compared to the previous year.  With all the sky cranes hovering above the strip the possibility of the postponement of the the Plaza sends a clear message to many of us in Las Vegas. 

The Strip maybe over building in an economic downturn (recession) period in the U.S.  We all know that the dollars that flow into our city are discretionary.  The Las Vegas Visitors Bureau moved up an $11 million dollar advertising campaign to help boost visitor attendance.  The target audience is less on U.S. visitor but more on the international market because of the weak dollar and better economies of many foreign countries.

It is also notable that Bruce Eichner developer of the massive Cosmopolitan project has been unable to finalize his bailout deal with Hyatt.  Although Hyatt and another investor already have large capital investments in the project cost over runs may almost double its total from $2 billion to nearly $4 billion.

  In the mean time Deutsche Bank has continued to guarantee payment to the contractor on the project to insure no work stoppages.  Deutsche has also notified all involved that it is proceeding with foreclosure on the project. 

 This foreclosure notice is definitely a move to put pressure on all development Investors to decide if they will continue or loose their investment. 

In the mean time approximately 80% of the first tower condo units have been sold with a non-refundable 20% deposit.  If Deutsche repossess the project do they also take possession of the deposits? Are they required to honor the existing contracts with the condo Buyers? Can they keep the deposits and reset the sales price of the units to the Buyers?   All this is yet to be revealed, but it is clear to me that the project will be finished.  It is to far into the development to stop it even if it becomes an expensive white elephant.  If Deutsche does foreclose it is clear who the most likely Buyer would be as MGM surrounds it with the Belagio and Project City Center.  MGM will not overpay for the project and Deutsche will be picking up the difference.

In other happenings Goldman-Sachs finalized its purchase of the Stratospher, I would not be surprised if its plans may be a little slow in coming as its location will be affected more by slower tourism.  It may very well hunker down and wait out this recession before announcing expansion plans.

The Sahara has gained approval for a new tower and remodeling plans from the Clark County Commission.  Now it must find financing!

Fountainblue is well underway with erecting its steel and seems to be on schedule.

Echelon is quietly proceeding with construction of its $4 billion dollar complex on the old site of the Stardust.

Encore at the Wynn has topped of its project and its new sign is hung. It is scheduled to open in 2009.

Just west of the strip Palms recently opened its new Condo/Tel tower.

Planet Hollywood is under construction of its twin timeshare towers.

Caesars Palace is building an additional room tower on its project.

The newly opened Pallazo is building a condo/hotel tower on its site currently.

Further South on the strip the South Point Casino is building a new expansion on its resort.

The “M” at the extreme south end of the Strip is erecting steel for its new resort.

Also just off the Strip “Hard Rock” has begun its major expansion and remodel.

In other areas The Cannery East is finishing its steel erection on South Boulder Hwy.

The latest Stations Casino at Aliante is proceeding with its interior finishes.

On Fremont Street the Gold Nugget continues with its tower expansion.

The Moulin Rouge has gained approval from the City of Las Vegas for its new tower and casino on the old historic site. But now they must find financing!

It looks like for the most part if the project is not currently under construction it may be delayed until visitor numbers rise and financing becomes available.  This could mean that many projects may be looking at start dates of 3 to 5 years beyond what they had planned.  Some players in this mega game will not be able to hold the land that long while others will be eager to land bank anything that comes up especially at discounted prices.

All this translates into a more reasonable increase in new rooms on the Strip and a slowing of expansion for now.

So what does this mean for the guy buying a house in Las Vegas?

First off it means that job growth will not hit the unreasonable stratospheric heights of 6.5% or higher that some have predicted.  Slower job growth translates into slower absorption of residential inventory.  So if you are a Seller it could take longer to get to a point to sell your home.

In the past I have said that everything should turn around by 2010 and I still believe that to be true.  But I believe job growth in 2010 will be 4 to 5% which is still a large increase.  I still believe that prices will stabilize in late 2008 or early 2009 and start rising in late 2009.  I have never been in favor of short term investments in real estate but I feel for those willing to buy and hold we are in an excellent market to make that deal.  If your interested in buying a home here I have many tools that can help you determine if you are making the proper decision for your needs.  Just give me a call.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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It appears the the Pinnacle will never peak.  The dual tower condo project 1 mile west of the Strip on Tropicana has been called off.  Look for this zoned high-rise ground to be looked at by casino developers.  It is located across from the Orleans and is just down the street from the Wild Wild West which is slated for Major redevelopment by Stations Group.  Once Stations starts its new facility this real estate will catch the eye of other gaming developers.

Vantage Lofts in Henderson, an upscale mid-rise project with wonderful views of the valley has temporarily suspended construction while the deal with their uncooperative mezzanine lender.  This project is in various phases of development but will definitely finish as the first phase of its 3 phases is 90% completed now.

The Cosmopolitan has found it cash infusion with needed new partners.  This project located between the MGM’s giant City Center and Bellagio never missed a beat in its construction schedule but found itself in a financial crisis as have many high-rise builders in Las Vegas with softer markets and tougher financing.

Speaking of financing and high rises.  It appears that it may be a lot tougher to get that condo you put your money on 2 years ago closed if you need to in the next 6 months or so as many major lenders have instigated much more stringent financing guide lines to invest in Las Vegas high rises.  A few have quit lending on this product altogether.  Get started early if your contract will require you to close soon.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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Almost everyone in the U.S. is familiar with the roller coaster at the New York New York here in Las Vegas.  Many people who purchased property here in Las Vegas were not aware that they were buying a ticket on a different roller coaster, the Las Vegas real estate roller coaster.  So let us all climb on board and see what this ride may look like.

From about 2003 through 2005 real estate in Las Vegas roared up a steep slope of appreciation powered by speculators, slowing as it crested at its peek in 2006 with an approximate increase of 50%. 

 Most of 2007 was slow decline as the depreciation momentum built pressured by the nations highest foreclosure rate, real estate auctions and people needing to sell no matter what.  With the news around the globe decrying the Las Vegas bubble is bursting it was inevitable that the coaster would accelerate in its downward plunge. The last quarter of 2007 the coaster quickly gained speed and the year ended with a 15.3% average home price depreciation in the Las Vegas real estate market.

In January 2008 repossessions actually exceeded all sales in the Valley and sales for the month were the lowest reported since the 1990’s.  Not surprising another large real estate auction was announced for Bank owned (Real Estate Owned) R.E.O. properties to take place in March.  It seems we are now in full speed free fall in our roller coaster ride.  But when does this coaster inevitably reach the bottom and when does it once again turn up?

With many variables in the market it is hard to say for certain but looking at the variable can give us some sense of what will key a change in our market.

1) If congress passes its second proposed economic relief act (it is an election year) and it includes either or both of the following provisions. This could vastly change the Las Vegas real estate landscape. a) A tax credit of up to $10,000 for first time home buyers to purchase a home. b) The ability of Bankruptcy Judges to modify the terms and conditions of a mortgage loan.  Keep in mind that the Mortgage Bankers Association will fight a bloody fight to stop Bankruptcy modification.  It is also note worthy to mention the the National Home Builders Association has suspended all political contributions to candidates because 1st time home purchase tax credit or the Bankruptcy modification was not in the first economic relief bill.

2) The price of resale home reaches below the $100 per square foot average it cost to build in Las Vegas.  This price includes the price of the lot and is an average price. Some areas such as Summerlin and Anthem are much more because of land costs but looking at the over all picture once the price of resale homes are 15% lower than the cost to replicate them without builders markup, you have a sure fire reason to jump right back into the market and buy.  Ultimately the existing housing stocks will dry up because of job growth and population growth.  It is only a matter of time until once again housing will be in demand and with even minimal inflation rates the cost of building will continue to rise. This will bring investors back to the market and will provide many more positive cash flows for landlords willing to purchase as long term investments.  This would be health investment for the market.

3) Employment growth is anticipated to take off in early 2010 but if some or the current major Strip building projects were to open early this may spur an early bottoming to the real estate market as demand for housing will increase.  There are incentives for the major properties to push their scheduled opening up early if possible.  a) The saving of interest costs on construction loans. b) The earlier addition of revenue streams to offset costs. c) The ability to hire workers before all the other properties open resulting in a better employment pool to choose from resulting in better quality workers.

4) A total turn about in the mortgage industry.  This is a little like suggesting that their will be total peace in the Middle East.  The financing world is all about who you eat, families with homes, smaller banks, hedge funds, and multi-national financial institutions.  The climate of the financing world is much more like a pack of lions praying on anything they can devour than doing the right thing. Greed is the definition of morals for most in this industry.  The motto seems to be win at any cost.  But the tower of cards this greed has built is falling apart.  It is estimated that looking beyond the $200 billion dollars the Mortgage Industry has already written off its books they may well need to write off another $1 trillion in bad debt.  My personal opinion is if they could look under the rock where they hid their morals 20 years ago, gain a little compassion for their fellow man, they may find they could actually help stop this free fall in real estate pricing. This could be accomplished through REAL loan modifications on a massive scale, not the public relations schemes they have dressed up and put in the window with the help of the current U.S. president.  But for this devouring lion pack to change its ways means it would have to put away its prides greed and this is NOT going to happen.

5) Less likely is that the government will buy the defaulting sub-prime and Alt “A” loans and rewrite them into modified loans. It is simply beyond governments function and ability to become the mortgage holder for this much risk and exposure to the average American Tax Payer.

 So when will the roller coaster stop its free fall?  I believe it will happen very soon in Las Vegas and I am putting my money on that bet. Call me if you need to know what is happening in the market.

Max Schmidt 702-334-2200

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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The New Frontier was imploded a few months ago making way for a new class of Mega resort.  This project will be the most opulent yet.  The developers are designing this to cater to the wealthy client, not your average Joe.

The 15 million square foot facility will include: 348,000 square feet of shopping, 134,500 square feet of restaurants, 175,900 square feet of casino space, 4,100 hotel rooms, 2,100 condos in its 7 towers on the 34 acre site.

It has an estimated opening in 2012. This could add as an additional 24,000 jobs to the local economy in 2012.

Fashioned after the famous Plaza Hotel in New York the architecture should bring a new twist to the Las Vegas “Strip” with its French Renaissance influence.

The combination of the Wynn Projects, the Echelon project, the Venetian projects surrounding this site will make this area of the strip a major draw for tourists.

The north Strip is up for more development both currently with the Fontainebleau under construction and two more in on the drawing board.  There are a few properties still up for grabs such as the Riviera and next door the La Concha property.  Their is also the Maxim site just north of Circus Circus and some empty land still owned by MGM-Mirage on the southwest corner of Shara and Las Vegas Blvd.  Look for these to announce development very shortly.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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According to Mayor Oscar Goodman: “This will be an important part of Union Park, along with the Lou Ruvo Brain Institute, the Smith Center for the Performing Arts, the Charlie Palmer Hotel, and the Access Medical-Kimpton Hotel projects, that together will create an exciting experience for everyone who visits or does business there…”

This project will create thousands of new jobs outside the gaming industry thereby further diversifying the Las Vegas economy. 

This massive 50 story, million square foot tower will include public retail space, class A office condominiums and ultra-luxury residential condominiums will top the structure.

Other projects in the area include the massive World Market Center which is expanding rapidly since its ultra-successful opening 3 years ago.  The Luxury Outlet Mall which is the most successful facility of its type in the United States. 

The Union Park area (aka “the 61 acres”) is located directly west of Fremont Street and is being developed into a high density planned city of the future and cultural center for Las Vegas.  This development is augmented by other rapid development currently taking place in the City and along the Las Vegas “Strip.”

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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With the gaming industry posting record profits, record visitors and record construction it looks like there is no end to the possibilities and opportunities for this world class city.  For 2007 will go down in history as the year that Las Vegas hit the 2 million residents mark, the year that saw the implosions of the famous Stardust and New Frontier Casinos.  It was also the year that a record number of historic business and land deals took place that will forever impact and change this city in the future. 

Private equity firms

Several public gaming companies were bought out by private equity Companies this year including Harrah’s and Stations Casinos.  This allows these companies to ditch the need to report profits on a quarterly basis to their stock holders in favor of larger investments in the properties with short term losses in favor of much larger and longer term profits in the long term.  This will result in a better long term investment decisions in these properties resulting ultimately in more business and better income over the long haul.  This is good for Las Vegas and its future.

The “Sky Crane” has become the Las Vegas bird of choice recently.  At one point this year there were 45 cranes planted in the Las Vegas Tera fir-ma.  These cranes are mostly concentrate along the “Strip” and are flying construction materials to an estimated $33 billion dollars of improvements on the Las Vegas Strip.  If you added up every dollar EVER spent on construction on the Las Vegas Strip it would not add up to  the $33 billion dollars in construction that is currently transforming this playground. Las Vegas is being transformed from cheap hotels, trough buffets and tacky shows to the culinary capital of the world, one of the worlds best shopping stops, the new Broadway and center of world class entertainment, a world luxury getaway including posh hotel rooms, spas and retreats.  From the worlds finest night spots, its outstanding outdoor recreational opportunities Las Vegas is DOING what most cities only dream and talk about Las Vegas is transforming itself into the city of the future. The massive expansion on the Las Vegas Strip has caused some projects in the Valley to be placed on hold because of the lack of available commercial contractors and their work force.  Some areas of the valley are in desperate need of better shopping and professional business space but these will have to wait until possibly as late as 2010 while some of these massive Strip properties are completed. But their are approximately 5 more properties to start construction and others still to announce their development plans an the Strip.

If you haven’t been to Las Vegas in the past 5 years you might have trouble recognizing it and it will continue to change even more dramatically over the next 5 years.  There are currently 2 majors sports (20,000 to 22,000 seats) arena in the works for Las Vegas, the last major development project to expand the airport is underway which includes plans to extend the monorail to the terminals.  A new international airport to the south will have all approvals by that time and will start construction.  New water resources have been acquired under the Colorado River water pact and further resources are in the works to bring the needed water into the valley to support the needed growth.  Downtown their is a new gaslight district taking shape and of course the worlds biggest furniture mart construction continues. Right next door the Lou Rowe Brain Institute is under construction and this year will see a new Symphony and Preform Arts Center and the start of construction of the World Diamond Center. The first High Speed mag-lev train is under its EPA environmental study currently and will whisk passengers initially from Victor-ville California to Las Vegas at speed around 125 miles per hour.  A new high-speed transportation system will take residents from the far reaches of the valley to its core.  Close in desirable locations will continue to be redeveloped into high density medium and high rise communities with shopping and community amenities making them desirable places for local residents as well as second home owners to live, work and play.

The GREEN Las Vegas

Most of the world views Las Vegas as a city of excess and hardly the model city for conservation.  If you think this perhaps your right but consider the following.  Las Vegas this year opened the worlds 2 biggest electric solar generation facilities.  The State of Nevada has dictated that 5% of its total energy generation must come from solar in the next 5 years. It also saw the opening of the largest manufacturing facility for commercial thermal electric generation equipment in the United States. 

The Las Vegas Valley used less water last year than it did in 2000 even though it increased the total number of homes by more than 20% in the same period.  All those fountains and lakes down on the Strip use recycled and filtered water from their respective hotels.  And Las Vegas continues to forge ahead with smaller lot sizes for single family homes and a building requirement for no front yard grass on new homes as well as water saving plumbing fixtures to continue to conserve fresh water. The water district has the most successful “Cash for grass” programs in the country which pays residents to remove their grass and replace it with water tolerant plants.  Las Vegas is also zoning higher density projects which optimizes water use with less landscaping per residential unit further cutting water usage.

Project City Center under construction right now will be the largest “Certified Green Building Complex” in the world.  This project must not only be Green when completed but must use Green construction practices with recycling and material specifications. This project has required an investment by MGM-Mirage with local contractors to create Green contractor services and suppliers that previously did not exist in Las Vegas.

Getting guests out of their cars and on public transportation is a major effort to help the visitor enjoy themselves here in Las Vegas and to that end both the monorail and the new double deck-er buses have been operation on the Strip.  This means a fun novel ride with views and a clean safe faster experience for these riders.  The local transit authority has plans to expand the monorail on both sides of Las Vegas Blvd. and extend it from the Airport to Downtown Fremont Street.  Also in the works is a new ground based transit corridor system which is essentially a private road for a hybrid city bus/train (Max) system. This would allow the Max units to travel at speeds up to 60 miles per hour in gridlocked areas and pull up to platforms where passengers have already purchased their tickets allowing for much shorter stops and faster transit times.  This Max system is under planning development all over the Las Vegas Valley including the Strip and Downtown.

The Bad Stuff, or is it?

The Las Vegas Valley is running out of land.  I know it looks like the desert goes on for ever but this valley is surrounded by federally protected wild life preserves, Indian reservations, military and nuclear ranges, national monuments and parks.  The experts vary in their time tables from 7 to 12 years but they all agree that Las Vegas is going to run out of land and when it does any new development will require at least a 45 minute commute by car into the Valley.  For this reason land in Las Vegas has gone for premium prices over the last 5 years and the pressure will continue to build on this limited precious asset.  This is also the reason that the better locations in the valley will continue to tear out their older sections and redevelop into much more desirable areas. 

Las Vegas was the foreclosure capital of the U.S. this last year and will probably be again in 2008. In an investigative report delivered to the Senate Banking Committee it is estimated that more Sub-prime loans will reset in 2008 than reset in 2007 resulting in a higher number of foreclosures if the mortgage industry does nothing to curb the trend.  Since the announcement of the “HOPE NOW” program, a voluntary program by the mortgage industry it has reported that it has resulted in a resolution of 1% of the total number of applications it has received.  Further more with the tightening of lending requirements and the drop in property values here in the Valley (approx. 15%) it does not look like many of the people who need to refinance are going to be able too.  Add to this the passing of the Mortgage Relief Act which would absolve borrowers of any tax consequences of allowing their home to be repossessed. All this may result in even more foreclosures in this market.  We all need to keep in mind that much of the repossessed real estate available in the Las Vegas market today is a direct result of real estate speculation.  This speculation was fueled by a short term FLIP,  not a buy and hold investment strategy.  These speculators were not prepared for a market reversal that could have been foreseen in what was happening with the mortgage industry and watching the job growth projections for Las Vegas.  These what I call SHEEP flippers, because they follow the masses, and got fleeced (pun intended). They now owe more than their property is worth and have loans resetting that are raising their payments by as much as 60%.  Therefore we will continue to see allot of property being foreclosed and then sold at the new lower prices.

In 2007 employment growth here in Las Vegas was slightly lower than the national average.  Because of the loss in residential construction and closing of so many old casino properties unemployment was slightly higher than the national average.  In 2008 things will only change slightly, look for most everything on the employment front to only change slightly as the Palazzo Casino opens along with several other smaller properties and expansions. But hold on because in 2009 and 2010 things will really heat up in the employment growth sector as many new major properties open their doors.  It is estimated that conservatively this will require over 100,000 new employees to support these new facilities once again drying up available housing stocks and causing appreciation in the market place.

Right now we have approximately 28,000 homes for sale on the MLS (down from a 30,000 unit high). In a normal balanced market we should have approximately 15,000 units. On average over the  last 20 years Las Vegas real estate has averaged a 5% increase year over year.  If residential property drops in value a total of 18% from its high in 2006 it would normally take it 42 months to regain that value from the lowest value point.  If 2008 ends up being the lowest value (trough) and 2009 and 2010 bring the market back because of the huge need for housing (employment growth) we could easily see a 9% per year valuation gain for holding the property (leasing it out) for 24 months.  And this is just what the government requires as a minimum time period for long term capital gains or 1031 exchange.

This is a Soft Sellers Market

When the residential real estate market goes soft, people get interesting. Even though there is an abundance of opportunity most people won’t take action. Because by nature, most people follow the ‘herd’ mentality. They believe that for almost anything to be the ‘right’ thing to do, a great many people need to be doing it. This reasoning could not be further from the truth.   The secret that Savvy investors don’t want you to know is, when the markets are soft the playing field is being ‘reset.’ Short-term opportunities are removed for people such as the Flippers and an great opportunity gets created for the seasoned investors who know how things really work.

In my last article I urged my readers to start buying while the market was still favorable to the Buyer.  If you look in the right places you will find the deal NOW that you thought you would have to wait for.

This last week I received an email from one of my readers that I would like to share with you.  We will call him T.S. to respect his privacy.

“Max, You are right on.

We moved to Las Vegas at the end of 2006 and decided to rent and wait to see what the market would do.   We are currently in escrow on a 3,400 sf home the was originally purchased for $720,000 in 2006, foreclosed in June 2007 for $590,000.  Our Price is $420,000.  So your right, if you look around, deals are out there.  We have been looking for 12 months for the right home and the right price, I think we found it.”

The problem with waiting for the ‘herd.’

If you are the only Buyer making an offer, do you think you can negotiate a better price than if their are others making an offer on the same property?  Do you think you are the only person waiting for the Las Vegas market to bottom out?  What do you think will occur when the Greater Las Vegas Board of Realtors start reporting that sales are starting to jump way up? Do you think that all the other Buyers waiting in the wings will stay their waiting for you to find your perfect home or investment?  If you think that the Sellers attitudes will not immediately change then you are being naive.  Sellers want every dime they can get from the sale of their property and if they see the market is changing their attitudes will change just as fast.

The Bottom Line

Buy before the third quarter of this year or before the press starts announcing the heavy demand for employees at the new resorts and their opening dates.  This employment growth will make national news as it is projected at as high as 14% growth in job creation which is VERY unusual. If you haven’t secured your investment or home by then, your going to be paying more than you could have.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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If you purchased your home in the years 2004 through 2007 and you live in Las Vegas you may be in an unfortunate group of people that now find themselves in the position of having more invested in their homes than they can currently sell it for.

Many of you may be in a position where your mortgage interest rates and payments are rising further putting the squeeze on your living expenses.  This cash crunch creates much real financial pain and may push you to the point of just giving the house up to the bank. Before you make such a life changing decision, that will affect your credit and financial security for many years to come, you may want to take a look at a little history.

BAD NEWS 

Edward Glaeser a professor of economics at Harvard University and a Manhattan Institute senior fellow has a different view on this housing adjustment when he wrote in an article for the The New York Sun.

Glaeser wrote that for every 10% rise in a boom cycle prices fell 5% historically. If we look at Las Vegas we had approximately a 50% increase in our last 4 year boom cycle.  But also if you take an average normal appreciation curve for Las Vegas you find that home prices over the last 20 years have averaged 5% appreciation in our market.  We refer to this 5% appreciation as a baseline. So if the boom increased prices 50% and the baseline would have normally increased prices by 20% (5 yrs. X 5%) our market is over inflated by 30%.

Using Professor Glaesers estimates of price adjustment we should see a drop in real estate prices of 15% but we have one more problem to throw into this mix.  One of the main reasons home prices boomed in Las Vegas was that we had investors from all over the planet buying on speculation, hoping to make some fast cash by buying homes and then reselling them almost immediately. This created a false market which caused more homes to be built than there were people to buy and live in them.  We find these homes now on the MLS as vacant homes.  For this example let’s use the current December 2007 figures when approximately 28,000 homes are listed on the Las Vegas MLS and approximately 40% were vacant.  The vacant homes indicate excess supply and that number is 11,200 now throw in New home inventory and repossession or REO inventory and you have about 15,000 homes that are unoccupied in the market place.  What you also need to know is that the repossession will continue to climb through the 4th quarter of 2008.  The number of vacant homes will probably not change very much as people give back their homes and then rent in Las Vegas.  People are not loosing their jobs so they must find housing even though they give back their home.

Now you need to know that the valley has about 740,000 homes in it right now according to the Clark County Assessor and that nationally a healthy real estate market has 2% of its housing stock for sale at any time.  This would mean that Las Vegas if it were healthy would have 14,800 homes for sale.  If we currently have 28,000 homes listed on the MLS and we have more new, REO and for sale by owner homes on the market it is safe to say we have twice as much inventory on the market as we should in a normal market.  That is why some economic forecaster are saying that the Las Vegas Market could loose as much as 30% of value before the market bottoms out and starts to climb once again.

Let’s use the worst case of a 30% drop in Las Vegas real estate values and take a look at what is ahead in the near future in Las Vegas.

 GOOD NEWS

Every economist in the United State understands that job growth (employment) is the biggest major factor in driving housing and its affordability.  If housing is tight then prices rise.

In Las Vegas employment experts can calculate the increase in employment by the number of hotel rooms added to the area.  Historically the ration is 6 new jobs per room in Las Vegas.

The good news is that we only have about 15,000 homes that are excess inventory and we are about to have major job growth in the Valley due to $36 Billion dollars of development on the “Strip.” Las Vegas is projected to bring on line approximately 12,000 rooms from December 2007 through December 2008. That will translate to 70,000 new jobs here in the Valley.  If we use the lowest housing to job ratios of 33.8% in 1995 when interest rates were 9.25% we find that this surge in employment will cause a conservative demand for over 23,000 homes.  So at the end of 2008 we should be short 8,000 homes that will need to be built to accommodate our new work force.  In 2009 an additional 16,000 hotel rooms will come on line creating another 96,000 jobs and the need for a conservative 32,000 more homes.

The builders in the valley have the available lots to build on to meet this demand but they developed these lots at 2005 prices and have to carry interest on them for an additional 2 to 3 years increasing their price.  This will mean the new homes will be built on lots that cost more than in 2005 and even if construction costs are lower will still require 2006 pricing in order to strengthen the week home builders after being plundered by this latest price adjustment.  Don’t look for the 2007 prices builders used to liquidate excess inventories in late 2008, they will have vanished.

Bottom Line 

Bottom line is that the surge in growth that we are about to get over the next 2 years should not only bring us back to within 5% of the high point in 2006 prices but might increase the cost of a single family home 5 to 10% over those highs.  This will not be a real estate boom but simply a recovery of values.

It is also projected by local economists that we will actually have a shortage of employable workers by 2010. This leads to more competition for experienced workers and results in higher paying jobs.  This should help ease that tight budget and give you a little more cash to enjoy life.

So if you can meet your mortgage payments for the next 12 months, do it.  Short of a national catastrophe it looks like you may be looking back in 2009 and saying “Wow, am I glad I kept my home.”

The two worst things you can have on your credit is a repossession or a bankruptcy.

Hang on things are going to get better.

For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.

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