‘On The Deflation Side’ Of The Las Vegas Housing Bubble
The Review Journal has these updates from Las Vegas. “While several construction projects in Las Vegas have failed to secure adequate financing, not all lenders have turned bearish on the declining real estate market. Jeremy Aguero, principal of a research firm in Las Vegas, said the financing of Sullivan Square separates it from a flurry of proposed developments that lacked the wherewithal to proceed beyond the drawing board.”
“‘I think the capital markets have tightened up substantially lately,’ Aguero said. ‘The broader markets, venture capital and private money coming in has taken a step back, a wait-and-see toward Las Vegas and how much money they’re willing to put into the high-rise market. With the escalation in the price of land and construction and per-square-foot pricing, the upside of the reward is not what it was 24 months ago,’ Aguero also said.”
“Gaming industry investors found themselves snorkeling in July, as casino company stocks closed down for the third month in a row. Bear Stearns analyst Joe Greff said gaming stocks have been on a downturn since at least mid-May because of broad concerns that the industry is weakening.”
“Gaming analyst Matthew Jacob with Wall Street-based Majestic Research, said evidence is accumulating that weaknesses in consumer spending are beginning to bleed into spending patterns at casinos.
“The timing doesn’t seem right for Ian Peltier to be developing a high-end custom home community on the lower slopes of Black Mountain in Henderson.”
“A reduced pace of home construction is expected in four of five U.S. regions covered in McGraw Hill’s Construction Outlook 2006. The West is forecast to drop 9 percent from a very healthy 2005 as overpriced housing markets in that region are affected by reduced demand arising from higher mortgage rates.”
“Dennis Smith, president of Home Builders Research, said it’s not a good time to be opening a new home subdivision in Las Vegas, which is on the deflation side of the housing bubble right now.”
“‘If you had your choice between doing it now and a year ago, I’d do it a year ago,’ he said.”
“For some custom home builders, especially smaller builders, the time line for development may have played out, Smith said. ‘The clock’s ticking on financing, investors want a return. So it’s basically at the point of either pull the permits and start construction or he sits tight,’ Smith said. ‘Some larger builders are basically sitting tight and selling what they’ve got. They’ve been told not to go out and buy new land right now.’”
“Pulte Homes, the second-largest home builder in Las Vegas, is showing discipline by aggressively changing its strategy on land acquisition and speculative building, Susquehanna Financial Group home building analyst Stephen East said.”
“‘On the land side, there is virtually a moratorium on new land purchases,’ he said. Pulte CEO Richard Dugas commented that the company has land positions it ‘can capitalize on for years.’”