Condo ‘Highrollers Folding’ In Las Vegas
The LA Times reports on the condo bust in Las Vegas. “In the last several months, at least seven marquee Las Vegas condo projects have either been canceled or put on hold, causing a dust storm of rumors to swirl through the city and elsewhere as investors wonder if this is a harbinger of a slowdown.”
“The reasons for the projects’ retreats don’t bode well for the larger picture: lack of buyer interest and escalating land, construction and labor costs.”
“Speculators have played a role in the current high-rise slowdown. Buyers looking to flip units for a profit, rather than make Las Vegas a first or second home, flooded the market in 2004, raising prices. Most are expected to sell the units when the projects open their doors, some as early as this summer, said (developer) Bruce Hiatt. At least 20% to 30% of the units were sold to speculators.”
“Then about six months ago, speculator interest shifted to other markets, which created a shortage of buyers for the latest Vegas projects. Rising prices and a glut of condos contributed to the exodus. ‘The market needs more first, second and third-home buyers, rather than flippers,’ Hiatt said.”
“To launch most condo and condo-hotel projects, a percentage of the units typically are pre-sold by developers to help finance the construction. The Curve ran into trouble when the developers couldn’t sell their pre-construction target of 75% of the units, said Paula James, Curve’s vice president.”
“With the sales office now dark and the well-dressed sales force gone, the company has returned deposits to the 97 buyers with a note saying sorry.”
“Without question, the change of course of the marquee players has rumors flying that investor exuberance for high-rise luxury projects is on the wane. ‘It raises everyone’s eyebrows when this happens,’ said (consultant) John Restrepo. For now, with apologies to the city’s well-known marketing slogan, real estate investors elsewhere are hoping that what happens in Vegas stays in Vegas.”
‘The planned casino, boutique hotel and sprawling residential project, backed by actor George Clooney and partners, was to include 11 towers on 25 acres. Today, its future is anybody’s guess.’
If the Related Group can’t make a 11 tower, 25 acre project work, who can?
Today, its future is anybody’s guess.
The future of “Las Ramblas” was never in doubt. Might as well have been a 2001 dot-com IPO.
At the very least, people got money back. Congratulations to the builders. At least the money was not borrowed and spent on some other project.
‘About 61,000 condo units in the city are under construction or planned for future development. About 45,400 of them are planned for the Greater Las Vegas Valley, which includes the boom cities of Henderson, North Las Vegas and Summerlin, according to Gordon. About 15,600 units are under construction today and will open in the next five years.’
You’re right, the fortunate ones had projects cancelled, but it looks like several thousand won’t be so lucky.
The bankruptcy work that will be generated from all this will be a bubble in itself.
I would urge anyone reading this blog who is in law school or going to law school to specialize in banrkuptcy law. It’s interesting and you will be working for years to come.
Txchick57,
I totally agree with you. I am about to finish my last year of law school. My focus is bankruptcy and real estate. The two complement each other - when one goes up the other goes down.
BTW - I love reading your posts.
It is true, more condo tower projects were proposed than can be supported by the current market. Here’s another article on the subject:
http://www.lvbusinesspress.com/articles/2006/04/11/news/news01.txt
With more than half of the projects being cancelled, that means that what we have left is the right number of luxery condos. It is what the market will bear.
No one has said anywhere that the price of luxery condos will come down in Las Vegas. Only that fewer of them will be built. This is in no way an indication of a bubble bursting.
does a “luxery” unit have granite countertops?
With more than half of the projects being cancelled, that means that what we have left is the right number of luxery condos. It is what the market will bear.
On what basis do you make this ridiculous assertion? You might as well have said that overbuilding never occurs.
Ok here is the Las Vegas Condo skinny:
Condo highrises take big money to build….$150 miilion plus!
Lenders began to require a minimum of 75% scheduled costs with price contracts. Cement, steel, lumber, copper and other raw materials were in short supply (due to bubble) and were rising exponentially. Those deals that did get done barely broke even - risking the repayment of the debt even when 100% presold!
Bottom line no sub-contractors “could ” risk price protection and the bankers couldn’t fund without some knowledge of the real end costs!
A Standstill….
While condo unit buyers who bought in early invested their capital are now getting their money back and facing higher reininvestment costs!..So they are sueing!………..Land tie up! defaults coming!
Not an indication of a bubble bursting? What would convince you, a neon sign on the side of the belagio? Go back to your bong.
I need to add you to the list of people who are on something. See yesterdays articles.
> No one has said anywhere that the price of luxery condos will come down in Las Vegas.
——————–
Then let me be the first:
The price of luxury codos will come down in Las Vegas.
There ya go; go forth and be enlightened.
You sound like the spin I use to use for military recruiting numbers. I needed 35,00 more troops but only 15,000 came in , so we lowerewd our number to 15,000 and said we hit our recruiting goals by 100%.
The venue for the Apr. 26 faceoff was the annual Milken Institute Global Conference in Los Angeles. Zell immediately dismissed inflation figures showing relatively benign 2% to 3% growth. “If you’re trying to build, you’re looking at 30% increases in construction costs in the past 24 months,” he said. The financier believes inflation will continue to hold real estate prices up. “I don’t think there’s bubble or any area with oversupply,” he said, before hedging by naming a few markets — Las Vegas, San Diego, and Phoenix — where he thought high-end condos were overbuilt.
http://tinyurl.com/j5fpa
Interesting in that Zell believes the Las Vegas Luxury market is in a bubble!
I guess anyone looking for a good deal on a Vegas condo should check back in a couple of years. 61,000 units planned? Crazy.
Read this from the OC Register’s Lansner about a housing bear’s thoughts on the market…
http://tinyurl.com/lzgbg
Jon’s been heavily editing posts.
People get really wound up when they are first confronted with the mass delusion that OC prices have been sustainable.
The get a little “upset”.
The truth will set you free but first it will piss you off.
OT - The following is on today’s NY Times web site:
“When Mike McDonald and Jill Martenson bought their little Craftsman house on Locksley Street in Oakland, Calif., in 1999 for $325,000, the couple knew it needed a lot of work. He and his wife pulled off the vinyl siding, threw away the plastic shutters and stripped layers of paint off the interior Douglas fir woodwork…
This month they sold the house for $1.15 million, $155,000 over the asking price. “Whether it is the hot real estate market or my brilliance, I don’t know,” he said. ”
Is anyone still getting 10% over asking in Oakland Ca?
At least he is considering the option that…
“Investing genius is a rising market”
That is one of the first quotes I have seen that admit it is better to be lucky than good.
People in the BA will pay “sky’s-the-limit” style if they see something that’s “just right.” Infinite Indulgence. They like to say, “I knew it was the home for me the second I set foot in it.” From there, it’s just a matter of finding the right progressive loan product.
In short, I do believe the 10% over bid; this despite the fact that the east bay is showing signs of the “rolling bust” that’s well on it’s way in Sacto & surroundings and is heading back towards it’s BA epicenter.
To LV Landlord-Hey Genius you spelled luxury wrong.
That being said, I have been spending every other week recently in Vegas getting ready for a job transfer there and it is wild what is going on. It is a tale of 2 markets. 1)You have these large condo developments going up in the most awful locations(next to highway ramps and casino parking lots) and any one with a logical mind and any common sense can see the market is in trouble here as listings are going through the roof and in this mostly blue collar community home prices to incomes are clearly out of whack. Even the local TV news station reported that home prices are expected to fall 13% in the next 2 years. 2)In spite of the obvious, there are still many people(LV Landlord?) who you hear discussing RE like it is still the pot of gold, totally oblivious of what is going on. Never before have so many been so wrong. In 1 year there will be alot of pain,
Hey Genius you spelled luxury wrong.
Oops, I did. Twice. My bad.
Even the local TV news station reported that home prices are expected to fall 13% in the next 2 years.
I missed that one. There are opinions all over the place where Las Vegas is concerned. Personally, I think there is going to be a second wave of hyper-appreciation in a year or two.
I made a bet with somebody last year (Vegas Viewer?) that Las Vegas would be down 10% by April. It didn’t happen, and that guy disappeared. I guess he just couldn’t stand losing.
I still say one can get a hotel room for 50 to 100 bucks ,so why buy a second home in Vegas? The only other market might be the baby boomers ,but who knows how many would really want to live in Vegas in a condo .
You can get a free weekend in Vegas if you are willing to sit through a timeshare lecture.
The people that can truly afford to drop that kind of ridiculous money on a “luxury” condo can all get larger suites comped by any major casino.
Second, homes very rarely make economic sense.
Back in January I did an analysis for a condo in Jackson Hole.
To break even without appreciation it would take 26 years of 2 weeks of vacation per year. Who wants to vacation in the same spot every year? Not me.
Reminds me of a joke I recently heard:
Do you know what happened to all the millionaires in Jackson Hole?
.
.
.
.
.
.
They got run out of town by all the billionaires.
It seems the only thing for sale in Jax Hole are 5000 sq foot cabin-mansions on an acre with a stream running through it for 2.5 mil.
Nah, it was a dinky $250K condo in at the base of the ski resort.
Yeah, I think its clear that most of this activity was to try to capture some quick appreciation down the road. Hey a quick, easy and”guaranteed” 100K profit in 1 year with almost no money down is a powerful inducement (what better city to gamble in), once again though when it suddenly ends you are going to have alot of empty condo buildings who no one can afford or choose to live in. Which draws another interesting question, what happens if it turns out these are just speculative investments(as I believe they are) what will happen to all the vacant glass towers in Las Vegas?
You can also get “comped” a pleasant way to spend a weekend!
“I still say one can get a hotel room for 50 to 100 bucks ,so why buy a second home in Vegas?”
Well, for those of us who travel there on business frequently, it is sometimes difficult/expensive to get a room in a convenient location. I have arrived in LV several times to find that the cheapest room in town is $500/night - and in a crappy hotel at that.
I would consider paying $125,000 for a nice condo in LV. And I may get a chance in the next few years
I do not see why anyone would want a vacation condo in Vegas. I used to go to Vegas once a month (I counted cards to supplement my income — hard and boring way to make money) and the rooms were always comp’d. Even now that I play poker and have to pay for my own room, I still cannot imagine wanting to go back to a condo when I am done gambling.
I guess I don’t need to stay in a $500.00 a night room because I’m never in the room much anyway .To me Vegas is a gambling place and maybe a eating place . I actually owned a three unit in the North section there years ago . In those days one could actually make money from rents .
Obviously, you guys missed this when I posted it last week.
http://www.reviewjournal.com/lvrj_home/2006/Apr-23-Sun-2006/business/6951665.html
INSIDE GAMING: Vegas needs condos to match the competition
The development of condominium projects here may be a game of catch-up, a new report out of Applied Analysis, a Las Vegas-based financial think tank, shows. Out of the top U.S. markets, Las Vegas ranked 22nd in share of the total housing market that are condominiums. Topping the list were West Palm Beach (almost 30 percent), Honolulu, Fort Lauderdale, Miami, northern New Jersey and New York City. But even Detroit, Boston and Houston led Las Vegas (with barely 5 percent condos). Developers say with its high income, boomer residents and visitors, Las Vegas should be near the top, not the bottom.
A word of caution: Why do you not question the source “Applied Analysis, a Las Vegas-based financial think tank”? See this report enlargement.
http://tinyurl.com/eg4tl
Housing prices are flat, high-rise condo projects are canceling sales, and now land values have dropped by almost half in Las Vegas, local research firm Applied Analysis reported.
The average price for an acre of vacant land in the valley was $376,200 in the fourth quarter, down 47 percent from the previous quarter and down 28 percent from the same quarter a year ago.
So why don’t you look up the firm - which is a staunch supporter of LV with a significant amount of revenues generated by the LV business community and the city of LV? For a proud supporter of the city they are heding their bets!
Isn’t anybody going to ask me why Las Vegas doesn’t have enough condos?
Because I know the answer, I really do. Go ahead, ask me.
Pass
No thanks, card shark.
I just ate my lunch and I would like to retain it. I need to gain a little weight.
It’s not what you think. You’ll be surprised by the answer. Really, you will.
I’ll give you a hint. It involves the mob…
Are you brushing up on your hurry-up until the carny comes to town?
why?
Oh, thanks for asking! I was hoping somebody would.
It was construction defect lawsuits that killed the condo market in Las Vegas. Back in the ’80s. It took 20 years to recover.
That’s it???
Heh, teaches me to ever ask “why?” again.
How is mafia related? Were they the cause of the “construction defects”?
C’mon, inject some drama, or something–sopranos style.
Sorry, I wish it was more interesting, but that’s it. The demand for condos was pretty minimal to begin with. For years you could buy a house in Las Vegas for under $100,000, so why would anybody want a condo? There were a few notable exceptions — Royal Crest, Greenbriar Townhomes and University Crest were built in the 70’s. But for the most part, hardly any condos were built during the 80’s and 90’s. The ones that were, were built by less established companies who didn’t do a very good job and didn’t survive the construction defect lawsuits.
Did the mob provide defective building materials? I don’t know. I made that part up because everybody was ignoring me. But it’s possible and even likely. There was a lot of that kind of thing going on in Las Vegas 20 years ago.
Great LVLandlord…I hope you are putting your money where your mouth is and buying up all the condos you can get your hands on!!! No one I talk to would ever buy and live in a condo out here on the strip….everyone knows the closer to the strip you live the more you put your life at risk! BTW…it is MUCH cheeper to rent a nice house in a great neighborhood with big backyard a pool……
LVL, in your first three sentences you made the most sense you’ve ever made. Those points are still relevant:
* There still is minimal demand for condos in LV.
* These luxury condos still outprice better equipped homes.
In a year, decent houses will again be available for $100K, and really nice ones for $350K. No need for condos.
Even the developers admit speculation as high as 75%, which probably means the true figure is closer to 95%.
As with anywhere else in the country, nothing has fundamentally changed since the nineties. Therefore, after the madness has subsided, everything will go back to somewhat less than it was before. Or, in LV’s case, a lot less.
tj - actually, I agree with you on your second point. I wouldn’t buy one of those high price tower condos. It’s not my thing at all. For the amount of money you could spend on a fancy condo, you could buy two nice houses in decent neighborhoods, with yards and garages. I’m a great believer in yards and garages.
I do own several condos, but they are of the more modest, ground-level variety.
I don’t see decent homes selling for $100,000 again, though. That ship has sailed. In the past 5 years, Las Vegas has completely changed. Unfortunately, I don’t think affordable housing is in our future. It’s just not that kind of place any more.
“I don’t see decent homes selling for $100,000 again, though. That ship has sailed. In the past 5 years, Las Vegas has completely changed. Unfortunately, I don’t think affordable housing is in our future. It’s just not that kind of place any more.”
What kind of place has it changed to in the last 5 years? OH Yah, even more service related jobs…HUMMM
OH, but wait, Las Vegas is different than….
LMFAO!!!!!!!!!!!!!!
In the past 5 years, Las Vegas has completely changed.
Okay, LVL, lay your cards on the table. How, exactly, has LV changed? Be specific.
I’ve spent a lot of time with family there every year for the past 17 and see nothing but more of the same — more casinos, more houses, more retail.
>”The market needs more first-, second- and third-home buyers…This
>will stabilize the market.”
THIRD home buyers? SECOND home buyers aren’t enough?
This is completely backwards. The market exists to serve the needs of people who participate in it, not the other way around. No buyers = no market.
Vegas inventory is increasing by 100-200 a week. The combination of high energy prices, high housing prices, and reduced tourism (see high energy prices) increases the pressure daily. I used to think we would see a long, gradual erosion of prices. Now I believe shocks to the system will cause prices to ‘gap down’ suddenly. I believe transactions, which are already decreasing, will dry up suddenly. Those deals that do get done will be at much lower prices. This is my forecast for the next 2 years. Yes, I am in Vegas, watching closely. No one is buying second homes here currently, the California flipper crowd has other things to worry about, like their jobs and filling the tank.
I agree diceman…listings piling up and no contracts. Funny thing is that the novice ’specuvestors’ and ’sheeple’ are talking and saying that we are just in a lull right now and they think it will bounce back at the end of summer…LMFAO!!!!
slightly off topic, here’s an update on orange county’s recently completed high rise condo project on michelson in irvine, ca.
Of approx. 232 units in the development, 76 (over 30%) are available for resale in the MLS and 31 are available for rent.
if you want to buy (or rent) there, at least you have a lot of units to choose from. just be prepared for the $1,100 monthly association fee and get rid of your pet, because pets aren’t allowed.
These high rises condo units are so close to the 405 Fwy and Jamboree that the traffic “DIN” is so loud you need ear plugs just to live there one hour. It is like a NASCAR race. OUCH!!!
The NAR spin right now is ” its a buyers market because of excess inventory “, but next year “the market will shoot up again “,”so get in now at the lower interest rates “. Any realtor that will sell buyers this way should be sued for inducing panic buying . When I went to real estate school they taught that inducing panic buying or selling was a no no . Why are the realtors getting away with these violations ? While case law seems to allows a certain amount of “sales puff” , panic selling or buying is not allowed . In addition ,predicting the future was not allowed either by most Real Etate Boards . When I was in the business appraisers were not allowed to give a future value to a current appraisal either ,( for example , adding value to a property based on something occuring in the future like talk of a Airport being built in the future , prices will only go up etc. etc.).
All this rah rah from the real estate people has contributed to feeding a false market . The boom started with lower interest rates and than it got totally out of hand .I was shocked when I read that 40 to 50% of the purchases in the USA in 2005 were from investors /flippers that are operating at about a 50% neg. cash flow .
This market is not sane . Make no mistake about that .
How can you tell me to get rid of Fido, Rover, and Fluffy? Just not fair. Especially for $1.3M to hear the fwy in my glorified apt (with granite countertops - I might add). LOL
How can you tell me to get rid of Fido, Rover, and Fluffy? Just not fair. Especially for $1.3M to hear the fwy in my glorified apt (with granite countertops - I might add). LOL