We believe that the only bubble that will be seen in the near and foreseeable future in the Las Vegas real estate market will be in the champagne glasses of the home buyers and investors who continue to buy real estate in the Valley in unprecedented numbers. Here’s why:
· Las Vegas has doubled its population every decade since World War II; in the decade of the 1990s, Las Vegas added nine new residents every hour; and, in 2004, the region bettered that astonishing pace by adding 11 new residents every hour (that’s one about every 5 minutes and 30 seconds.
· Federal government figures released recently reveal that U.S. housing prices jumped by 13.4 percent for the 12-month period ending June 30, the largest increase in more than 25 years. And Government officials see no end in sight. The report quoted Office of Federal Housing Enterprise Oversight (OFHEO) chief economist Patrick Lawler saying, "There is no evidence of prices topping out. On the contrary, house price inflation continues to accelerate.
· Unemployment is below 4% and is dropping rapidly.
· In addition to Las Vegas being the fastest growing city in the United States for the past ten years, Nevada will be the nation's fastest growing state for the next two and half decades and by 2030 will have more than 4 million residents -- more than twice as many as in 2000, according to a U.S. Census Bureau population growth released this April. View some of our great homes for sale in Las Vegas.
· "Las Vegas: Is Boom Overextended?" was the headline on the June 20, 1955, issue of Life magazine. Fifty years and and 130,000 hotel rooms later another boom is echoing across Las Vegas Valley as the market adjusts to demand for affordable housing.
· Las Vegas consistently pulls families, second-home, and retirement refugees from California who look for a better value and a way to bank some of their home equity.
· A recent report from the Public Policy Institute of California found that high rents and rising home prices have one in four Californians thinking about moving out of state or to another town. Of California's 36 million population, about 7 million are 55 years of age or older and more than a million will hit that age in the next five years, Sullivan said. All of them pay state income tax. Moving to Las Vegas would save them about 10 percent of their annual income.
· Casinos backed by Wall Street are spending billions of dollars expanding. From downtown, where hundreds of millions of dollars are being spent renovating such downtown icons as the Golden Nugget and the Lady Luck, past MGM’s $5 billion City Center and Boyd’s $750 million South Coast, ending at the twin $2 billion casinos being built at the Strip and St. Rose Parkway, hotel and casino development planned to be completed by 2009 approaches $15 billion.
· There were more small businesses started in Las Vegas in 2005 than anywhere in the country.
· Apartment complexes are being snapped up by investors and converted to condos for sale in Las Vegas at a faster rate than new units are being built, which is putting upward pressure on rental rates.
· The apartment market reached a 95.1 percent valley-wide occupancy rate in the second quarter, despite a 6.3 percent increase in monthly rents during the last 12 months.
· Analysts estimate that apartment rent growth will range from 8 to 10 percent by the close of 2005.
· On November 22, 2005, the Las Vegas Review Journal reported that in the past year, Las Vegas businesses have added 61,000 jobs. 61,000 jobs! How many families does that represent? How many individuals? More to the point, ask yourself what impact the creation of these new jobs, many of which, if not the majority of which, went to new residents of the Las Vegas metro area, had on the demand for housing in the Valley?
This level of job growth is four times the national average, no other state even came close to Las Vegas’ job growth performance.
Gaming and hospitality added the most jobs with 16,500, which was to be expected. Additionally, professional and business services companies added 13,600 jobs, a strong second place showing. This is extremely significant in that it provides empirical proof that the diversification of Las Vegas’ economy, which can only stabilize and strengthen the market for real estate for sale in Las Vegas, is rapidly proceeding.
These new employment figures further strengthen our position that if there is a bubble in the Las Vegas real estate market, it is a protective bubble derived from the Valley’s unique demographics and geography, a bubble of stability, not one of irrational speculation.
Despite these facts, we believe that investor’s expectations must be adjusted. It is almost a certainty that the recent year to year 52% median home price increase that homeowners and investors alike experienced in 2004 is unlikely to be repeated. Ever.
Advise your buyers to scale back their expectations and dreams of get-rich-quick returns. It is likely that those meteoric gains will be replaced with merely stratospheric returns.
Real estate buyers of Las Vegas homes for sale have become spoiled, with the leverage of mortgages, those 52% gains yielded some buyers cash on cash returns of several hundred per cent in one year.
No investment ever goes up in a straight line, and it seems that prices had gotten ahead of themselves a bit and are taking a breather. But, Las Vegas’ population and economic growth is marching on inexorably, and can only lead to one result; continued real estate price appreciation.
After all, condo conversions represent entry level, necessity housing. And while there seems to be no let up in site, historically it has been necessity housing that has been most price inelastic.
So, advise your buyers to take a deep breath along with a reality check. Manage their expectations. Inform them that they may have to hold their properties longer than thirteen months to see the considerable gains they became accustomed to. So, maybe it will take 23 months to see stratospheric returns. Dare them to find an investment with a higher likelihood. Tell them to search homes for sale by zip codes in Las Vegas.
Thirteen months, twenty three months or thirty months, a strong case can be made that Las Vegas real estate, with its terrific likelihood of appreciation and the not-to-be-found-elsewhere safety net of its restricted geography and compelling demographics, represent one of the surest, safest bets to be made anywhere.
One of the surest, safest bets anywhere? Found in Las Vegas? A little ironic, isn’t it?