We have seen the Las Vegas, NV high rise real estate market have a phenomenal (and scary) jump in inventory in
the last several months. For several reasons:
- Too many speculators in that market. They want to close n flip. They are not interested in holding, renting or living in them. Each time a building closes, we see an increase of inventory.
- Mortgage market madness has reduced the amount of loan products available to jumbo, second, vacation or investor type property owners. The ones who have very little money down and marginal credit, that is. So the buyer pool for both resales and new went kaput. Loud and hard too.
Here are the high rise stats:
Rentals:
- 297 Listed 10/18/2007
- 29 Under Contract 10/18/2007
- 29 Leased in September
- 9.9 Months Inventory
- Monthly Rates: Low: $1195; Median: $2900; High: $19000
Resales:
- 864 Listed 10/18/2007
- 69 Under Contract 10/18/2007
- 12 Closed 9/17-10/17/2007
- 72 Months Inventory
Resale inventory is down from 108 months inventory one month ago. The troubling thing about this is that 72 months of inventory is still a lot of inventory. The rental inventory is staggering when you compare it to the entire market of rentals that hovers around 3 months of inventory.
I think it is apparent that many purchases are completely speculative = not enough demand for living in. Some rent prices just barely cover the owner's HOA.
Since July speculators have been bailing from their new construction high rise escrows because of lack of mortgage products for funding. They are also leaving their steep deposits at the builder and not looking back.
Unless demand for high rise LIVING increases over speculation, we will be seeing a major correction in this part of our market. We have a little over 14000 units under construction with another 50000+ more on the drawing board. Every time a building closes, we see 20-50% of that building go on the market.
The beautiful part about this is that when you put the pen to the paper for land and development costs, it costs about $1800/square foot. You can buy right now with the median price being in the mid 500's for a square foot. Will deflated dollar against foreign currency be able to bail us out? Is Las Vegas unique enough to attract those foreign investors? How many licks does it take to get to the center of a tootsie roll tootsie pop?
Was I right or was I right? Read the bottom where I wrote: "What Joe Needs to Know". Almost a year ago, unedited. Even though I wrote it for condotel buyers, the same principle applies to the high rises.
Renee, Five hundred per square foot is indeed "cheap." Here in San Diego the going price for high-rise condos is around $750 per. Speculators bailing out is OK by me, but this truly represents a good buying opportuniity for bono fide investors.
Bill Roberts
Here in Austin we are trying to get $650 a Sqft for the expensive unit. We are still around $390 or so on a whole, but we are still having a great condo boom here. I feel people are getting scared, because of the rest of the country, but even in Austin's slow times we never really crashed. I just hope more people move to Austin to really enjoy this beautiful part of the country,
J.
Bill: Unfortunately we do not have San Diego weather :( I am believing the biggest correction we will see is in this market.
Jeff: I do realize that about Austin. The beautiful thing is when a market gets heated, investors have been selling and coming here. Haven't heard from Austin yet :)
Renee:
Thanks for the update. That is some interesting numbers. I wonder how long it will take to chatch up wiith the over build.
Sharon: You definitely get it :)
Lisa: I did have one of those listings and it was priced 20% under market. We did try to throw it in front of investors (foreign and otherwise) and we did end up with a bidding war between but no foreign lookers or takers :( I think the absolute best way for absorption and investment to take hold is to have foreign currency buy these things and escrow the rent $$$ until the dollar has a higher value.
Alan: There needs to be a demand for living in or utilizing these places for second/vacation properties. Too many investment purchasers. To answer your question on catching up with the over build: How many licks does it take to get to the center of a tootsie pop? Hope you don't mind answering questions with questions, thank you so much for stopping by :)
Renee,
Good stats and analysis. The high-rise inventory number at 72 months is scary. Your prediction of a major correction in this segment will evidently happen, probably sooner rather than later. And about 14,000 more units are under way, unbelievable.