Las Vegas Real Estate Investments - Is the Boom Over or Just Getting Started?

Real estate investors flocked to Las Vegas during the first six months of 2004 and drove prices up an unprecedented 35% in some parts of the Valley according to top Century 21 agent Diann Tonnesen. And she predicts that the beginning of 2005 will see more of the same.

Las Vegas, NV (PRWEB) December 7, 2004 -- A scarcity of vacant land for developers to build on and a continuing influx of over 6,000 new residents a month quickly turned the Las Vegas real estate market into a battlefield last spring. Buyers found themselves in multiple offer situations as they competed against up to ten other hopefuls for a dwindling supply of homes. Much of this money was being shifted out of the California market where rental income had hit a ceiling due to the high prices, and savvy investors were liquidating their properties in order to take advantage of the better cash returns Las Vegas and Henderson real estate investments could offer. Most new home builders quickly placed a moratorium on investor purchases to prevent future competition from buyers who "flipped" their new home purchases and cashed in on quick profits.

It is estimated that more Las Vegas homes sold for over list price in just a few months last spring than in the previous five years combined. In July the Bureau of Land Management auctioned off 1940 acres of unimproved land in Henderson for a record shattering $287,000 per acre to Focus Property Group. In order to make its winning bid Focus joined forces with seven homebuilders who will develop the parcel as a master planned community. The homebuilders included KB Home, Toll Brothers, Woodside Homes, Kimball Hill Homes, Pardee Homes, Meritage Homes and Beazer Homes.

In late July and August, however, the dramatic upward surge rapidly ceased as new homes (purchased by investors who were under contract before the moratorium was implemented) finished construction and went back on the market. In addition, local residents who had already toyed with the idea of moving out of state decided to cash in on the bonanza profits as well. Through the end of October the supply of Las Vegas homes for sale increased steadily, investor purchases settled back to a normal pace and prices even decreased slightly as the market stabilized.

But the big international real estate investors are already zeroing in on the newest "hot buy" in the valley - luxury Las Vegas high rise condos and condotels. Downtown Las Vegas is becoming urbanized and major developers from all over the world have over 80 new Las Vegas preconstruction condo projects on the books. Many sites have already sold out and have not yet broken ground. "Las Vegas has barely scratched the surface of the luxury condo market," said Bruce Langson, a Las Vegas native and developer of Las Vegas Central. He said there's a 20,000-unit deficit of Las Vegas condos at this time. Even famous actors like Leonardo DiCaprio are purchasing units for their own private residences as they become available.

Springtime also promises to be interesting on the Las Vegas new homes front again. The vacant land crunch is still in effect for the new home builders and as of the end of November the supply of new homes is once more diminishing as the investor owned properties are finally selling off. Focus Property Group will not be able to begin sales on its latest project until 2006. Plus the baby boomers are coming into their own, and Las Vegas is their number one retirement destination. So look for another burst of excitement in a few months as the dynamic Las Vegas real estate market takes another leap in pricing.

Economist says housing market won't collapse

Nevada prices could stagnate instead

By JOHN G. EDWARDS
REVIEW-JOURNAL

Fears that Nevada's swollen housing prices may come crashing down any time soon may not necessarily come true, an FDIC analyst said Wednesday.

"A boom does not necessarily equate with a bubble," Rich Brown, chief economist of the Federal Deposit Insurance Corp., said during a conference call with reporters.

Brown said housing appreciation rates, such as the 50 percent-plus increase Nevada recorded in the third quarter of 2004, are not sustainable. But he suggested prices may stagnate for the next several years rather than collapse.

"Fundamentals are going to have to catch up, and home prices are going to slow," Brown said.

Recent home-price busts have occurred in areas in which the local economy tanked, but Nevada's economy shows no signs of slowing.

Housing prices slumped in oil-patch states when crude oil prices collapsed in 1986, he pointed out. Southern California and the Northeast, similarly, had home prices plunge during severe recessions in early 1990 and 1991.

Still, FDIC officials pointed to signs that the Nevada and Las Vegas housing markets are starting to descend from a peak.

"The Greater Las Vegas Association of Realtors reported that the inventory of homes listed for sale grew from a few thousand in early 2004 to nearly 16,000 in September, prompting one of the area's major home builders (Pulte Homes) to reduce asking prices in October," the agency said in its Nevada profile.

The skyrocketing housing prices are a negative for buyers, the FDIC pointed out, because the typical middle-income family cannot afford to buy a midpriced home in the Las Vegas area.

Home-price affordability plunged 27 percent in the Las Vegas area, said Catherine Phillips-Olsen, San Francisco region manager for the FDIC.

At the same time, demand for apartments outpaced the number of new units coming to the market, driving vacancy rates lower and rents higher, Property and Portfolio Research reported.

On a positive note, the FDIC reported that Nevada's economic growth continues to surge.

"The gaming industry, of course, is attracting a lot of visitors, and the retirees going into the area are contributing as well," Phillips-Olsen said.

Nevada also recorded a 4.5 percent year-over-year growth in jobs. Las Vegas posted a 4.9 percent gain, tops in the country, and Reno came in sixth at 3.9 percent.

"Every sector is showing positive growth (in Nevada)," Phillips-Olsen said.

Statewide, construction added 11,000 jobs during the period, three-quarters of which were in the Las Vegas area.

Nevada ranks second nationally for construction expansion, with Arizona in first place, Phillips-Olsen said.

Nevada-based banks, meanwhile, are growing more reliant on commercial real estate loans and construction and development loans. The median or middle commercial real estate loan concentration at Nevada banks was 421 percent compared with capital or net worth in the third quarter, up from 391 percent last year. That's the fourth-highest concentration of any state.

Construction and development loans as related to capital rose to 137 percent from 120 percent a year ago, the second highest among states.

Phillips-Olsen acknowledged that the focus of real estate lending is understandable in the state, but she said bankers in Nevada should watch it closely, just as banks in the Farm Belt monitor their level of agricultural lending.

A New Real-Estate Agent Must Sometimes Fire Clients

By RITA FUDOSAN

January 11, 2005 -- My first year in real estate has been frantically busy. I feel as if I've been on a hamster wheel, rigged to run at an accelerated pace. So far I love the job. I love houses. I love doing things to houses. I love looking at them, thinking about them and getting other people to think about them. I especially love getting paid for this. So far, I have not made a mint. My sales and listings have been good for a novice, but most have been in a low price range.

It's been a year of firsts and steep learning curves. I experienced both in December, when I had to fire clients for the first time. It may be a rite of passage most seasoned real-estate agents must undergo. The pain of the experience is matched only by the value of the lesson I learned from it.

These buyers were referrals (among my first), and they told me they could spend up to $1 million. I was excited and eager to work hard to find the right home for them. Of all my clients, they had the most financial clout to buy a property. But it takes more than money in this real-estate market to buy a house. You also need the right mindset. Despite knowing that their target market in northeast New Jersey was very competitive, they never thought any house they saw was worth the asking price. It wasn't until they bid on five homes that they bid enough to win. Each time, I'd say, "That's just not enough to be competitive," and each time, they'd reply, "Well, that's all we think the home is worth." Then, when the house sold to someone else, I'd send them the sale price with a note: "See? Someone else was willing to pay $75,000 more than you were. It was worth it to someone."

The worst part was that they could easily afford any of the homes they bid on and lost. Finally, in October, a house they long had admired came on the market in Summit, N.J. It was listed for $1,199,000, more than their stated price limit. Until then, the most they'd bid on any home was $850,000 (on a house that sold for $910,000). They had about $950,000 in cash from the sale of a condo in New York City, but they didn't want a mortgage. I thought that was silly because they wouldn't have mortgage interest to deduct on their income taxes, but that's what they wanted. That is, until they saw the Millburn house. They wanted it badly enough that they knuckled under and got approval for a mortgage. They bid over the asking price and won. It was unbelievable.

The Trial

Then the inspection process began. The home had been lovingly cared for, restored and updated. It wasn't perfect -- no home is -- but it was a beautiful and well-maintained home. Unfortunately, after the initial inspection, the sellers -- a realtor and her husband -- refused to allow any additional inspections. These kinds of bumps happen along the way, and I wasn't concerned. I knew we could work it out. Buyers have the right to check out anything that worries them during the inspection period. But as I tried to explain this to the wife by phone, her husband grabbed the receiver and yelled: "They can't come back in here. If they want the house, that's it. Tell them to buy it. We want this finished right now."

He was out of line, but until we could get a more reasonable response, we had to cancel the inspectors we'd lined up. I reminded the sellers that we were still within the inspection period, and they relented. They even apologized. But the damage had been done. My clients withdrew from the deal over the inspection issues because "their trust had been violated," they said. I had not foreseen their indignation. I encouraged them to look past it and complete their inspections, but they refused. I explained that sellers get emotional and sometimes act inappropriately. That's why it's important to have an agent as the intermediary (but in this case, of course, the seller was her own agent). I reminded my clients how much they loved the house and how much time they'd already invested in it. The house was in immaculate condition, and it wasn't as if they'd have to marry the sellers. But they were adamant. The deal was kaput.

Inspection Overload

Next, they bid on a house in the nearby town of Short Hills, N.J., but once again, they refused to make a competitive offer. There were six bids; ours was second from the bottom. I explained they were back to their old habit of bidding too low. "We think we have a good understanding of the market, and our bid was extremely competitive," they replied. I pointed out that if it had been, they'd have won.

We moved on to another home in Summit. They refused to offer above the asking price and lost in the first round of bidding. Something must have clicked -- or so I thought -- because they increased their initial bid and won. I thought they'd finally learned their lesson. But once again, the house, which was in extremely good condition, went on trial. My clients insisted their lawyer insert adversarial language and demands into the contract. I begged them to reconsider but to no avail. The stage was set for the deal to sour. The sellers hated them from the start. Four additional inspectors were brought in, costing much time and money. This house was only $810,000 -- they could afford to renovate it to match their tastes if they wanted to.

At one of the inspections, my buyers wanted to bring family members to see the new digs. Under other circumstances, this might not have been a problem, but the sellers gnashed their teeth each time the buyers came to the house. The listing agent said she didn't think it was a good idea because the emotional climate of the deal was so shaky. The sellers didn't even want the buyers in the house. I called the buyers to explain. "We can bring whomever we want into that house," they said. I said, "No, you can't. It's not your house yet. You have to ask permission." They said they were bringing their family anyway. The relatives tagged along, were denied entry and ended up sitting in their car.

Things went from bad to worse. By the time my clients submitted their laundry list of inspection issues, the sellers would have done anything to oust them from the deal. My buyers asked for many fixes that were legitimate, but a lot of items were minor. My favorite: "Have gutters cleaned of leaves and other debris." Within minutes of receiving the list, the sellers replied they would not address anything. Though the house needed little in the way of substantial repairs, my clients walked away -- again.

Moving On

I thought: I can't help these people anymore. They don't listen to my advice. They create bad feelings. They are wasting my time. So I called them, and without getting into specifics -- Why bother when they always felt that they were in the right? -- I simply said that I felt they needed a fresh start with someone new. They barely said a word. Just "OK," and "I see," and "Goodbye." They definitely did not say thank you.

I felt terrible. I hardly slept that night. I felt disappointed. This could have been a very large commission. I felt annoyed. These clients made such bad decisions every step of the way.

I also felt relieved. I am rid of these people. Still, I felt a bit guilty. They were not bad folks. Under different circumstances, we might have been friends. They were never mean or unpleasant, just incredibly stubborn, arrogant and misguided.

I know there will be more like this along the way, but this was my first experience. Like so many of my clients, I held on to what I wanted to believe rather than what was reality. I probably should have cut these buyers loose much earlier in the process. Next time I will. This is life in real estate. It's dramatic and challenging, and, one day, it might actually be lucrative, too.

-- Rita Fudosan is the pen name of a real-estate agent in Essex County, N.J.

High Rises Changing the Las Vegas Skyline

(Jan. 5) -- The look of the Las Vegas skyline is quickly changing as high-rise condominium towers pop-up everywhere. Among the new projects, Donald Trump will build a second 64-story condo-hotel on the Frontier Hotel/Casino property.

Build it and they will come. Developers have known that to be true in Las Vegas for some time, but now that thought is on the rise. It's being called the Manhattanization of Las Vegas -- people choosing to live up rather than out.

Grant Garcia is the executive vice president of the SoHo Lofts being built near Las Vegas Boulevard and Charleston. "We're looking at a December 2005 completion, which makes us the first high-rise in downtown Las Vegas," says Garcia.

The SoHo lofts may be the first, but they definitely won't be the last. Right now, 45 residential high-rise projects are planned along the Las Vegas Strip and downtown. The SoHo Lofts, Panorama Towers and the Hilton Grand Vacation are already under construction. Others like Sky, Krystal Sands and Streamline are enticing potential buyers to place their reservations early.

"We started pre-selling in February," said Garcia. And out of the 120 units at SoHo Lofts, all but seven have been sold. And the high-rise boom is not only attracting Las Vegans, but also out of towners like Vince Karlen.

"Las Vegas is the city that never sleeps and for a young guy and college student it has a lot of appeal," says Karlen. But he's not looking for himself, he came to find his mother a condo and likes what the high-rise communities offer. "The house that we have right now is a bit too big, to much maintenance, so something a little smaller, more manageable is definitely a big advantage," says Karlen.

The question is whether there are enough people, like Karlen, to support so many new high rises. Eyewitness News asked Keith Schwer who heads the Center of Business and Economic Research at UNLV. "The answer to that will be determined by the sources of supply and demand," said Schwer.

Schwer says, for now, it appears demand exceeds supply. One reason is because high rising living is appealing to people outside the valley. Schwer says the majority of those buying condos are out of towners, with lots of disposable income, looking to invest in a second or third home.

Schwer predicts that soon those from other countries will also want to buy a piece of Las Vegas, and that's what the developers of SoHo Lofts are banking on, they have several other high-rise complexes scheduled for downtown.

Not everyone is excited about the onslaught of new high-rise buildings. Three weeks ago, the Las Vegas City Council shot down a proposal to build a 28-story condo project near Martin Luther King and Alta because they said it would not fit in well with the residential neighborhood.

Late Wednesday afternoon, the county commission adopted an ordinance that would control the tallest and biggest high rise complexes. They won't be allowed in residential neighborhoods, only along the Strip, Boulder Highway and the Beltway.

The county hopes to meet again in 60 days for additional changes to the ordinance.