‘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.’”
‘there is virtually a moratorium on new land purchases’
This explains why there was a 50% drop at the BLM auction recently. How low will it go at the next one?
I thought they weren’t making anymore land?
The median list price in LV is $337,000. Traditionally you need a $100k income to afford this. Go into the Vegas suburbs and look around. Sure the area is growing by a gazillion people per minute, but none of them can afford anything close to the median priced house. It’s either “Helicopter Ben” to rescue “Easy Al” or those units will have a 50% price cut. Of course, Ben telegraphed his solution with the discontinuation of M3 in January. Has there ever been an easier investment than short USD right now?
Ill take that bet shawn/
current price $85.11
I say 79.35 will not be broken before 93.
6 for you 8 for me!
You can double your bet to me if USD closes abve 99 before it takes out $79.35!
What do you say?
But they are running out of land in LV????!?!?!?
“Faites vos jeux! RIen ne va plus!”
any good casinos to short that haven’t declined yet?
UNLV tracks Clark County Economic Data.
Gaming Revenue May-06 $962,616,273 $824,198,735 $869,739,132 16.8% 10.7%
Gaming Revenue up 10.7% for May 2006 over May 2005. I know vegas is overbuilt, and there will be pain, but there a lot of opinions on Vegas falling apart, and these numbers are very, very strong.
Also, June employment stands at 918,900 Up +5.4% from June 05.
and unemplyment rate is 4.3% vs 4.2 last year.
I would like to see these numbers from Phoenix, or San Diego or any other city before you destroy Las Vegas.
How many of those jobs are low wage - maids, gardeners, waiters, etc…??
You’ve got a point. Gambling is an escapism behavior so shorting casinos is not a 100% sure bet (he he pun intended).
I think LV will be behind PHX and SD for pain, but ahead of Reno and most of LA/SF.
they all became realtors and they can’t claim unemployment..even though they can’t sell a house now!
lv_landlord - Are you lost in the desert without water?
does anyone remember “superstar” cities?
Big-city home prices are not out of line with the rest of the country, says a study.
“‘If you had your choice between doing it now and a year ago, I’d do it a year ago,’ he said.”
Uncanny hindsight!!
it’s always 20-20, you know!
Hindsight is for rear facing orifices.
Just has lunch with a major supplier from Taiwan.
This person is a major supplier/over sea’s manufacture to a major supplier to a company that sells products into Home Depot and Lowe’s. Person said business has been off for this and last quarter. The supplier into Home Depot and Lowe’s is looking at how to get some of the “lost revenue” back.
We also commented that the Taiwan business person did not seem as jovial as in the past.
Sorry no names, this company is very well known in the Housing Industry.
“…the Taiwan business person did not seem as jovial as in the past.”
I’m noticing that a lot of people I know, all property owners, are not as jovial as they were a year ago.
The people across the street just lst 50 THOUSAND dollars on resale value over the last year. Maybe 100. Who’s crying now?
I hate to see people get hurt, but they bought 30 years ago, so I don’t feel bad.
Amazing that anyone would continue building in Las Vegas, although who knows, maybe it will boom during the downturn, gambling usually does well in bad times.
I’ve never heard that.
-
This is called the “Double-Down”.
I lived in LV during the two most recent recessions. If the national news hadn’t mentioned that those recessions were going on, we never would have known. But I suspect that this time around will be different.
yep 911 was a wake up call on that Az Cowboy
Books, beer, and tabacco seem to pick up in bad times.
Gambling is like booze. You drink when everything is just going fine. You drink even more when it’s going badl. The only problem is that instead of drinking champagne, you drink 4 six packs of Budweiser piss. Arhh!
Gambling will crash with the end of the conundrum and the end of the home equity ATM machine. The return of risk premiums to asset prices will be accompanied by a restoration of gambling to its rightful status as a vice, rather than an industry.
Received the following spam from a Vegas realtor:
How to MAKE MONEY at the time of your new home purchase…..
You don’t need to attend a seminar and waste your afternoon, you don’t need to buy a 12 disc CD and DVD package on investing, you don’t need to be angry at you neighbor or work associate who bought in 2003 and has$200,000 in equity and new hummer. What you do need to do is listen very carefully.
The boom in Las Vega isn’t over. Were scheduled to double in size within the next 6 years! That’s a population of over 4 million in Las Vegas by 2112.If you think housing is expensive now, wait another year or two and see what you’ll be paying then.
The reason prices are low right now is because all the short-term investors are selling their investments and cashing out. They bought with little or no money down and cant afford to pay hundreds of dollars from their own pocket to cover their mortgage payments. After the short-term “flipper” investors sell out, the market will correct its self again and return to our normal high appreciation. Most professionals say that it will happen within the next 12 months.
The buyers that are buying now in Las Vegas are the homeowners. The homeowners that are moving here from other parts of the country because of the great economy and still affordable housing we have in Las Vegas. These new buyers are putting 20% or more down payment and are comfortable buying a home that’s $400,000-$800,000. This, combined with the accelerated population growth is going make our Real Estate market
one of the most expensive in the country within the years to come.
All you have to do is adjust your thinking a little. Before, you could buy anywhere and make 15-50% appreciation in a year. You made your money off of appreciation. Now, you need to buy wisely and make your money at acquisition. Most resale homes are over priced.The homes that are priced right are usually sold within 30-60 days.
If I could find you a new home with as quick as a 15day move in, thousand of upgrades included, a low interest rate, and reduced thousands of dollars for a quick sale, would you be interested? Here’s how, new homebuilders have what’s called a “fall-out”. This means that they had a buyer, but for some reason they couldn’t buy. The builder has to sell this home ASAP, before the end of the quarter because it makes their profit margin drop.
It takes a lot of phone calls, connections, and gas, for me to find a good deal. If you let me know exactly what your looking for, and the timeframe. I’ll find you a home with instant equity…. This is how you can make money at the time of purchase.
If you ready, send me a e-mail or call me….I can get started looking for the perfect deal for you, NOW! Before you miss the boat again.
I think the boat is named Titanic. I will pass.
“NOW! Before you miss the boat again.”
Wow, just like buying after Cisco hit $ 80. CSCO just went up ten times, don’t miss the rocket ship again.
what a bunch of crock!!! The homes are overpriced by a factor of 2 - 3.
Gee:
Mr Dugas of Pulte Homes (the CEO ) ? OR the underemployed Las Vegas Realtor ?
I ‘ll side with Mr Dugas comments ” moratorium”
OT………Food for thought on American interest rates
http://au.biz.yahoo.com/060801/33/tqbr.html
Interesting. I’ve said this before, you’ll be hearing more from Paulson, he’s the new big swinging dick at the Treasury, brought to you by Goldman Sachs. He’ll be dictating to the Fed, and this is his first pronouncement. Notice his statement about “entitlement programs”. Pucker up, everybody. There goes Medicare, Medicaid and Social Security as we know it. But of course. We have to fund the entitlement programs for the hedge funds, who contribute nothing to the enconomy, except to game it in their favor.
But the bacon will keep coming in for the buddies at the Pentagon! The arms business “entitlements programs” and other corporate bums will have no problems. Socialism for the rich. Au revoir middle class!
I guess America is not worth defending then.
Why arent you defending America in Iraq?
Why?
In the immortal words of the Roman Senate:
“F-CK THE POOR!”
“‘If you had your choice between doing it now and a year ago, I’d do it a year ago,’ he said.”
That is fabulous. All this guy has to do is figure out how to perfect the flux capacitor. I would recommend he get on a toiled, just like Doc did in the movie. When he fells he either ends up inventing the necessary time travel device or falling into the sh#tter. That seems about right to me.
You can buy time travel machines on e-Bay. Really. I saw it on NAPOLEON DYNAMITE.
It ain’t the flux capacitor you have to worry about - it’s finding a way to generate 1.21 jigawatts!
There are two just awful articles up on bankrate.com right now - what’s up with that???
“Be patient: Home buyers will return”
http://tinyurl.com/pj38m
and
“Housing booms don’t always lead to busts”
http://tinyurl.com/r2b4y
Holden Lewis used to post here. He probably still lurks. I have not doubt that there have been housing booms that didn’t end in busts.
But this one sure as heck ain’t one of those.
I’ll try this again: There are two just awful articles up on bankrate.com right now - what’s up with this??? irresponsible journalism!
http://tinyurl.com/pj38m
and
http://tinyurl.com/r2b4y
LV Casinos will have or will be opening big Casinos/resorts in Far East. That will cut down on LV employment. Wont be any needs to have more staff due to declining Asian clients. Just another sign of the times we live in.
I doubt the rather large gaming industry already in existence in East Asia will let them in.
They already have….LVS and Wynn and others are opening up in Macau and I’m sure mainland China is probably not far behind.
sorry, LVS already opened up in Macau
How many fools are moving to Las Vegas? Double the size? How are the current roads going to do that? This is ludicrous. Oh yeah, all the rich baby boomers are going there instead of Florida. Build a lot of big custom homes for empty nesting rich boomer fools that can get another voodoo no down lose your ass $1M loan. LOL
Cat got your tongue, LV Landlord?
Must’ve happened when you and kitty were diving for the same dumpster scraps.
Did I see Suzanne running away and around the corner from the dumpster? I heard that she only eats non-fat garbage.
wow casinos- thats pin action
who won’t get hit in the downturn ?
McGraw Hills, Engineering News Record-July 31, had a story about the groundbreaking of a new $7 billion casino/hotel/retail/residential project called CityCenter. It’s located between the Bellagio and the Monte Carlo. According to the article, the job will require 7,200 craft workers during peak building, one-third of southern Nevada’s total skilled construction work force. The 18 million square foot development is billed as the largest privately financed construction project in US history. CityCenter is scheduled to open in late 2009.
skilled = union
Didn’t want anyone to think there’s only 21,600 construction workers in LV.
Hey, they can have CityCenter and all the rest of it. Las Vegas is one UGLY town!
Las Vegas is going to get a lot of competition from places like Macao, China or Internet gambling outfits in the Caribeans. The chineese “communists” (Ah! Ah! Ah!) have real BIG BIG BIG plans for gambling. Long live the revolution! “Faites vos jeux! Rien ne va plus!”
So I guess most Las Vegas tourists must be from Macao, China, or the Carribean instead of Anywhere, America? Or it must be cheaper to travel and lodge all the way over to Macao, China, or th e Carribean than to go to Las Vegas from Anywhere, America?
Many of the big-time gamblers in Vegas have long been from overseas. Mom and Pop will obviously still go there, but they’re not going to be blowing $100k per hand at the blackjack table.
I’m kinda surprised there aren’t more gambling meccas worldwide than there are.
The casinos in Vegas are definitely slowing down. Places that were absolutely packed are now just packed. LOL
Simmsssays …Inventive Ways to Stay Cool
http://www.americaninventorspot.com/inventive_keep_cool
OT but I saw the most stupendous TV show last night–set in a car dealership in Las Vegas. Skeazy car salesmen and these pathetic people who 1) returned the same car salesman who sold them a used car they were upside-down on and needed major repairs; 2) rolled that old loan into a new loan for another used car. The wife kept crying. They came in wanting a new car for about 500/month–they left with a used car for $700/month!!!!!! They never not-one-time negotiated the actual price of the car! The mind boggles…
I just kept thinking of that SNL skit: Don’t Buy Stuff You Can’t Afford!
http://www.themortgagereports.com/2006/02/dont_buy_stuff_.html