Markets ‘Getting Antsy’ About Las Vegas
The Review Journal has this update from Las Vegas. “Some owners at Spanish View Towers high-rise condominium in southwest Las Vegas Valley are getting antsy as construction of the $800 million project has been halted for the past three weeks.”
“A couple who asked not to be identified said they want their $219,000 deposit returned after being told their million-dollar unit would not be finished until August 2007. When they bought in May 2005, the completion date was set for this month. ‘We just want out,’ the owner said. ‘It’ll be two years before it’s finished.’”
“David Pourbaba, developer of Sky Las Vegas on the Strip, said the market loses credibility when projects run into trouble.”
“‘One thing about people that start construction, and this is the old trick in the book, some of these guys start construction with their own money, but they don’t do much. They just start some work toward this and that so they can get more buyers in because most of the banks ask for a particular percentage of presold units before they release funds,’ Pourbaba said.”
“‘If you need 60 percent and you’re only at 48 percent, you take the chance of starting and hoping you get the other 12 percent right away. It happens sometimes and it can backfire as it has in other cases where lawsuits are filed,’ he said.”
“Some buyers have filed lawsuits trying to force the developer to build the project. Attorney Mandy Shavinsky said she doesn’t know what Nevada courts will do in those cases, but she doubts they can force a developer with limited funds to build something at a gigantic loss.”
In Business Las Vegas. “Even in summer’s hellfire heat, an estimated 5,000 to 8,000 people will continue to move here each month. So why does Wall Street think the sky is falling?”
“Lukewarm earnings results for locals casino operators Station Casinos and Boyd Gaming Corp. have some analysts all a-quiver about whether the supercharged Las Vegas economy is finally sputtering. Station Casinos, the dominant locals operator and the company poised to profit the most from Las Vegas’ continued job and population growth, has found itself in the wrong place at the wrong time. The company on Tuesday reported a 34 percent decline in profit.”
“Station executives say they are frustrated that their company has become a hotbed of speculation by short-sellers. CFO Glenn Christenson said the company is bullish on the long-term growth in the locals market. The company recently said locals casinos are expected to win some $3.8 billion from gamblers by 2010, up from previous estimates of $3.5 billion.”
“Executives at Boyd Gaming, which has also been bit by the short-selling bug, attempted to reassure investors Tuesday after reporting (a) 79 percent decrease in profit.”
“Stephen Bottfeld, who gauges the Las Vegas market, said his polling of the home buying public has uncovered some troubling signs. Only one-third of those who purchased homes believe that economic conditions will improve.”
“That’s important because it’s a 12 percent drop from the first quarter and the lowest level of consumer confidence he has recorded in the history of the survey dating to 1994. ‘It did not get this bad the quarter after 9/11,’ Bottfeld said. ‘That means we have a buying public that is very leery of what is going on economically.’”
“He said, however, even if the country goes into recession, he believes the Las Vegas economy and its housing market will remain healthy given its job growth.”
“With the region running out of land, Bottfeld offered another prediction. ‘Within the next decade, there will be no more single family home tracts built in the Las Vegas Valley,’ Bottfeld said. ‘I think personally it will be seven years. Land costs are driving this Valley vertical. You can’t afford to build single-family homes on land that costs $700,000, $800,000 or $1.2 million an acre.’”
Why ANYONE would buy a place in a dumpy and HOT place like Las Vegas is beyond me. I just got back from a trip down there. They can have it.
Total sh@thole. I agree.
Agree!
well I live here. And so do 1,400,000 others. Thanks for coming by and dropping some doe!
Vegas is a gret place but i must tell you, that California real estate money has screwed up houisng here.
I read recently that many Californians were scamming the Cal govt. by having a property and address here so they didn’t pay taxes in Cali… Of course now the government is wise and they owe millions….Sounds like a little oncoming real estate pressure (more tax sales)
Now ! When someone says 4-6000 people are STILL coming to Vegas to live. That may be true and it may not! What is true about that number is this. Every month the DMV issues 4-6000, Nevada licenses to once out of state drivers. What is not in this number is the number of people who came, spent and went BUST and left. Those figures are not calculated.
Also, 25 yrs ago 4-5000 new drivers licenses issued was a large number versus a 300,000 population.
There will be some great bargains in town one day. If you don’t believe me stop by Goldfield Nv.or Virginia City, NV., up north if you need soome real perspective of a BOOM BUST!
I lived in LV my whole life until 2 years ago when I finally cashed out and left. I grew up watching it go from a nice family friendly place to a complete shi*thole mess. If any of you need me to help talk you out of moving there, let me know.
whats the crime/gang/teennage thug scene like in vegas, I’m seeing more and more anecdotal stories about increases in gangs and very violent robberies perpertrated by young kids, I wonder if the national crime decrease of the last ten years is starting to reverse.
Yes the crime/gang problem is growing. The thing with Vegas is that it’s saturated throughout town, even in the nicest areas. Here’s an article about the rampant growth of gang crime in LV.
Where’s LvLandlord??? Probably off licking his wounds….
I thought Florida was bad. This sounds even worse. I thought casinos profited in downturns, from desperation or people trying to party their troubles away. Wonder what would happen to Vegas in the event of a massive blackout?
Good story, though. I just learned some more about development and pre-construction sales. Why anyone would part with a huge deposit like that couple did without seeing some bricks and mortar is beyond me. But, now I understand why the KB home development up the road from me looks like it does: barren, dusty land, a few earthmovers, walls, front gate with faux facade, basketball court, clubhouse, a model and a couple of half built homes, with people dressed in yellow KB Home shirts carrying arrows and sandwich boards at the entrance, desperately waving at the traffic going by. Ugly beyond belief. Been that way for a year or more.
Tell those yellow-shirted azzwipes to “get a real f**kin job!” Then politely wave back at them.
This running out of buildable land cr@p is getting out of hand. -IF- LV land ever started costing $1.2m/acre they’d suddenly discover a whole loot (not a mispelling) more of it. Doesn’t anybody know how to use Google Earth? Anyone who thinks BLM land isn’t” real” land is deluding themselves. LV runs on 3 direct injection supplies of subsidy; cheap electricity, cheap water and near monoply gambling. Project those three into the future and draw your own conclusions.
The water isn’t getting any cheaper though. Last I heard they were trying to “steal” water rights from White Pine county.
Actually, their electrical grid is linked to CA, so the price spikes with CA prices. Water is getting harder to
stealfind, and CA permits more in-state gambling every year. If government funding becomes gets tough in CA, how long until a full-blown Las Vegas gambling establishment is created that isn’t such a drive across the desert. Combine all that with free land like you said, and this will end badly.Oh wait, what am I talking about. I really meant “it’s different in Las Vegas.”
I also have to challenge the “5,000 - 8,000″ new residents a month. They get this data from the DMV. But how does the DMV know who has moved out? Do they even count that?
Even the article admits many leave. Check out how many houses are for rent in LV. And one post in the past week revealed an estimated 40% of the 20,000 houses for resale are vacant.
Here’s an interesting story for you. My sister rents a house in Las Vegas from a CA landlord couple. These landlords bought up a couple other houses on the same street around the same time (last summer) and rent thoses as well.
My sister says that at first they had a amicable relationship with them. However, recently the landlords’ tune has turned sour, with threats of eviction from being one day late on the rent (they even admitted that they need the rent in the bank before the mortgage withdrawls it LOL).
My guess is that they bought with the intent to rent the properties and ride the appreciation boom they thought would continue past summer 2005, but since their “guaranteed appreciation” hasn’t materialized, they’re looking to bail on the properties.
Sounds like they’re in trouble. You’re sister should play with them and threaten not to pay next months rent.
Your sister should pack up and leave for better digs. Ugh. Life is too short for aggravation of this kind. We moved and while it was tough, it was very worthwhile.
i was a landlord and yes i start eviction proceedings when you are one day late.
Joe, UNLV maintains a website of all the Clark County economic date “http://cber.unlv.edu/county.html” I know the bubble has popped in Las Vegas, but it is not or will not be “ground zero”. According to June UNLV Nunbers
New Residents drivers license June 6,819 -7.9% from 05
These new residents seem to be staying based on:
Active Residential Electric meter count 703,203 +5.2% from 05
Total Employment 918,900 +5.4 from 05
Unemployment rate 4.3% was 4.2% in 05
New Home Sales 3,034 +6.9% from 05
Existing Home Sales 4,271 -25.9% from 05
Taxable Sales $3,009,119,433 +5.9% from 05
Gaming Revenue $962,818,273 +10.7% from 05
Everything bad about the real estate bubble seems to have started in Vegas, and I am waiting for a 20% correction in prices by Labor Day, but as I compare Vegas to other bubble cities like Phoenix or Boise, I think the pain will be much greater elsewhere.
That number made me suspicious too. I did a quick look for the estimated population change since 2000 for Vegas and I couldn’t find anything that got close to an additional 5K-8K.
You do get about 5K if you consider all of Clark County, but the city’s share of Clark County is about 1/3. Even if the city is growing at twice the pace of the rest of the county, its nowhere near 5K.
Robert Cote:
The buildable land story was created by the insiders in town. Property has traded higher than $1.2 million an acre. I believe what was once industrial , wharehouse, & railroad environmental problem property for 100 hundred years became, HIGH RISE CONDO just off the “strip” or casino expansion property, for Metro living!
None of this is proven. But what is not unproven is that $2 -5 million per acre for this property makes these projects economically unfeasible unless more mindless Californians drop a $1/2 to 1 million per 1600 sq.ft. unit Just to own a luxury suites and gaze out at freeways, neonlights and bats circling the Luxor lamp!
Now I also red last year PULTE paid over $5 million for 5 acres in Summerlin, it blew our socks off. My first thoughts were since when did Summerlin become the strip?
911 was a shock for Vegas it had never experienced a slow down..now we are primed for real “double trouble” if i may quote Barrons from last week!
Los Angeles real estate investor Tom Barrick oversees Colony Capital, a $6 billion private-equity fund that operates quote from Fortune Magazine Oct, 2005
“And he sees the bubble deflating soon” Barrack thinks the catalyst will be a trend that few others are talking about, s steep rise in the price of building materials and labor. Construction costs have spiked 30% in the past 9 months (remeber this was Oct, 2005). Shortages of labor and lumber and invreases in the price of oil, needed to produce everything from plastic piping to insulation to shingles.
The slump will show up first in speculative hot spots like Miami and Las Vegas, where condo developers are preselling their projects for what look like big profits. WHEN they actually build the units over the next year or two, he predicts they will end up spending more than the units are selling for. At this point most of the developers will try to raise prices. BUT most of these buyers are speculators. They will either sue the developer to get the original price or get their deposits back and walk away. The developers will then put the units back on the market, and the glut of vacant condos will drive prices down. It’s the busted deals caused by construction costs that will cause a turn in the market.
This was written Oct 31, 2005. By now, the developers have seen the writing on the wall, and are shutting down completely
I’ve been talking about STN on this blog for 2 months now. See this Barron’s article, it shows a graph of LV median prices to STN’s stock price.
did you post about station over at HP?
I hope you’re not an SEC attorney.
Possession is 9/10s of the law. Once you’ve handed over your money, it isn’t yours anymore. I have a feeling a lot of people won’t be getting their money back, because it has been spent.
I think attorneys will make out big time on this bust.
‘It’ll be two years before it’s finished.’
Here’s the sixty-four-thousand dollar question: What will a “million dollar” condo in LV be worth in two years?
“He said, however, even if the country goes into recession, he believes the Las Vegas economy and its housing market will remain healthy given its job growth.”
GET REAL!!! How many new jobs are there ‘flipping burgers’ or being a ‘dealer’ at the casinos?
Just where does this character think the jobs are coming from??
‘The company recently said locals casinos are expected to win some $3.8 billion from gamblers by 2010, up from previous estimates of $3.5 billion.’
Nice of the industry to set up special casinos to take money from locals. Any wonder they are pessimistic about the economy?
In Business Las Vegas. “Even in summer’s hellfire heat, an estimated 5,000 to 8,000 people will continue to move here each month. So why does Wall Street think the sky is falling?”
Is anyone bothered by this 5-8000 a month number moving to LV?
This number is bogus (see comment above). The get this number from the number of licenses turned into the DMV, but the DMV doesn’t track outbound residents turning in licenses in other states.
Sounds like the same BS we hear in Florida about 1,000 people moving to the state every day. And it doesn’t square with the number of counties that are losing school enrollment for the first time in decades.
Wall Street and Las Vegas. I love it. From one gaming institution to another.
The following is a web address of charts on money supply(PDF).
http://research.stlouisfed.org/publications/mt/page6.pdf
Look at the plunge of M1 that is occureing. The liquidity is being flushed out, and fast. I have long thought 4 years from the peak(05), but the speed of these events makes me think possibly less(although down longer).
Risk is comeing back, and the beast is damn hungry, try not to look like food……p
M1 is the most narrow of the money supply measures. M3 is the broadest, and has been reconstructed for us:
http://www.nowandfutures.com/key_stats.html
It’s still expanding, and quite rapidly. Make no mistake, liquidity is NOT contracting. But, I agree with you on the issue of risk. It would appear that sentiment is broadly shifting from risk tolerance to risk aversion, in which event liquidity almost becomes irrelevant. After all, banks cannot be forced to lend, and people cannnot be forced to borrow.
New term: “Going Enron”, like “Going Postal”, except in this case, it’s the builders and developers and specuvestors scamming money from the public, who can’t get it back because the rug gets pulled out from under them, whether that’s through the decline in value or the outright theft of pre-construction deposits.
Lots of businesses “Going Enron” on the public.
what I don’t understand is why the heck would any intelligent buyer pay a $219,000 deposit on a $1,000,000 condo? doesn’t make sense.
Everything has its cycles. LV just went through a big boom. Whether it’s going to crash down or just ebb for a while is beside the point. A slowdown is in the works.
LV has three markets: business travel and conventions, pleasure travel, and locals.
The biz travel is still doing well. The pleasure travel is flatlining due to some consumers feeling the pinch and because casino-style gambling is pretty much available everywhere and anywhere now. The “locals” market has a real chance to fall off a cliff as LV declines as it digests the boom of the past 10 years.
That’s why I find it disingenuous for Station execs to get all huffy about their stock price falling. Their stock went up 10-fold in a short period of time. Since their market is “locals”, how can they expect their own business to keep skyrocketing when the locals are hurting. Station’s business is basically to fleece the local population. Once you’ve already shorn these sheep to the skin, you at least have to wait for the wool to grow back before you shear them again. Simple agronomics really.
i always liked the station casions properties,if that stocks down 34%,it might be a good buy….any comments
“He said, however, even if the country goes into recession, he believes the Las Vegas economy and its housing market will remain healthy given its job growth.”
“With the region running out of land, Bottfeld offered another prediction. ‘Within the next decade, there will be no more single family home tracts built in the Las Vegas Valley,’ Bottfeld said. ‘I think personally it will be seven years. Land costs are driving this Valley vertical. You can’t afford to build single-family homes on land that costs $700,000, $800,000 or $1.2 million an acre.’”
OMG hahah these past few statements just make me LMAO.
First off, even if the local Vegas economy remains healthy if an economic downturn, there is still the problem of real estate sales. If there are no more dumb investors out here buying properties right and left, that only leaves the locals to buy. And the locals usually only make 30-40K on average in a healthy economy here. Since when can a person making that amount of money afford a $200-300K starter home (slightly less if you’re in the Vegas ghetto)? If they have a family, it isn’t likely going to happen. If only locals end up buying these homes, prices have to come down.
And this running out of land thing. Any fool with eyes in thier head can look out the window of their hotel and see miles of vacant land outside of Vegas. Anyone that has ever driven from Vegas from out of state can also see hundreds of miles of empty desert. Once the investors lose interest in this place, land prices will drop. But seriously, there is no land shortage.
And the majority of the Station casino’s big spending locals are those who have recently liberated thier home equity money. I wonder what’s going to happen when that money finally runs dry?
I have a question for anybody living in Las Vegas. I’m reading the latest fortune magazine and in the back is an advertisement for The Pinnacle. The information is at http://www.thepinnaclelasvegas.com.
This think looks completely over the top. Are they building it? Does anybody know if they are actually having success selling the units? This has “out of control boom” written all over it. But then again 5,000 people per week are going to Vegas. Those $9 an hour casino jobs must really be paying off for all the illegals that plan to buy at the Pinnacle.
I am thinking that Vegas not only has a RE bubble, but a gambling bubble as well. As the fake money poured in, the gouging began and the new casinos emerged. I am looking forward to some better deals and better comps on the strip in the near future