I read a "report" on Smartmoney that determined Overvalued and Undervalued Homes in 152 Markets.
I go insane over these statistics when in reality the Las Vegas Market is quite unique - as many other sunbelt markets are! They based their statistics on: When home prices outrun wages, real estate becomes overvalued; when incomes rise faster, it's undervalued. This equation becomes flawed when you take out simple market driven equations such as: supply & demand, land scarcity, the economy, job growth, population growth, and I can march on this all day long etc etc etc
1) Developable land is at a premium in the valley.
2) Something like 40% of our residential real estate is owned by: vacationers/2nd property owners/investment-rentals. This skews the wage theory because most often than not (in this area) we are dealing with property owners who do not make "wages" in our economy such as retirees, out of state owners or multiple property owners
3) Wages for Las Vegas are way off because of tip compliance deals that unions & casinos have with the IRS. For example: A cocktail waitress that earns in reality 90-110K a year looks like they only make $7-14 an hour on paper which puts them at the poverty level and can even qualify for things like food stamps and medicaid.
4) Still have over 7000+ new residents/month. Those residents begin renting, generally. There is a shortage of rentals from apartment to condo conversions and single family homes that were rentals and sold because of the last several years of appreciation. This is pushing rental prices UP.
5) Strong economy with the formation of new jobs with strong growth potential - in fact the sunbelt dominates the top 10
6) Impending boomer retirement. They want to be near: sun, golf, transportation hubs, culture, theater, fine dining, hospitals. They aren't falling for the middle of the desert scams: they want it all and it better be turnkey! They are already taking advantage of low rates and buying their property and holding until their retirement.
While Las Vegas DOES have much supply with low demand right now, I do believe this is only a temporary situation with buiding permits scaling back to 5-15 year lows each month. In most cases the closed new construction vs permits pulled is about 2.5:1 ratio.
This is excellent news for our inventory problem in the resale sector. Prices are holding steady and stagnant. One must be careful when they read articles about Las Vegas "LIST" prices going down. Those are list prices, not closed sale prices.
Has anyone seen an actual good chart in these articles about where depreciation/drops in prices are actually occurring? Where the manufacturing sector is, mainly Michigan. Places that never had seen the outrageous appreciation of late.
I have been saying to the Chicken Littles for YEARS that the big "overvalued market" correction will not happen at the magnitude they describe, if it happens it will be a slight correction followed by more growth. I do predict that the implosion will occur from the midwest to the northeast. Boomers bought houses in the sunbelt, they eventually have to sell their primaries someday!
Nevada is still a great place to buy and relocate to! Over 7K still move to Las Vegas each month and take advantage of low (and capped 3% OO, 8% NOO) property taxes, no income taxes, sun, great communities, entertainment and job opportunities.
Renee:
Your timing is perfect. Thanks for the comment on Don't invest in Texa, but consider moving there. My next one will target "special" cities that do not follow the affordability factor index. You guessed it, Vegas is one of those "exempt" cities.
Colleen: we just have to keep fighting forces that are bigger than us! It is unfortunate that so many buyers are sitting on the sideline waiting for prices to go down. Builders are already scaling back on incentives. This is one indication of a slight turn!
Brian: I really enjoyed your blog. It was very thoughtful and brutally honest! If you need any help with Vegas stats, drop me a line!
Colleen: Marco Island fits the general profile as a "special" market but there are many "special markets" like it in Florida. I have to do some more research but I think that fits the "conditional exemption". Stay tuned.
Renee: I may take you up on that! Will call.
Renee..... some great points here. Since I am not a realtor, I don't pay attention to the prices and inventory as much as a realtor would. Just like you wouldn't know the specifics of what rates are today, what they were 2 weeks ago. You will just have a general idea.
And I really liked what you had to say about the market and where you think it will be in 6 months to a year. I have the same opinion and I think the media can really get stats and such really twisted.
Again....good post and some very good information here.
Eddy: Hopefully your investors will hold for at least twelve months! I do expect a slight dip in December but once spring rolls around it is my humble opinion that the winds are changing...
Jeff: Thanks for your reply. I sent you an email.
Brian: When you are ready, I am waiting for your call :)
Everyone else: thank you for responding!
Michael: I have heard Hawaiians call us the "9th Island", keep me in mind ;)
Kay: absolutely! Our market is the same. Under 250k OK, between 250-500 forget-about-it. Over 500k is hit and miss.
I wish I still lived there. I think Arizona is going to have a big corection, but Vegas will always be a magnet. Lots of Boomers will move there, especially the ones that want to work part time. There is always work for them and the Casino industry loves them.
Michael and Kay basically summed up the blog I was to write tonight in a much less loquatious manner.
It's all about the "special" !
Oh, hell...I still may write it
Renee, I posted and referred to the same article on another site for another reason but I did hear a report on NPR (go figure!) that mentioned what the Las Vegas Chamber of Commerce doesnt want you to know is that there are just as many residents leaving the city each year as moving in. so the 7,000 number is skewed. Personally, I love LV but five days in a row is the longest I've ever been able to last there!
Gene: Population is increasing steadily . View Migration Trends. Many people do move out but even more move in. We are a transient economy where everyone is from somewhere else.
Chris: Absolutely!