‘California Colonialism’ Brings Coastal Bubble To Las Vegas
An editorial from Las Vegas on housing costs. “We find that the residential market has been turned upside down. Once scarcity was the watchword; now we have a glut of properties, and the beginning of the employment sector’s softening. Everyone is talking about unemployed real estate agents, mortgage brokers and appraisers.”
“The Las Vegas residential market has been driven by money earned elsewhere and brought here. Outside dollars set prices here. The local wage scale had little to do with the cost of housing.”
“This is more than a tortured explanation for California colonialism. We have been caught in a conundrum. Las Vegas was an ideal destination when our housing prices were less than 80 percent of the cost in Southern California. For a long time, Las Vegas had coastal amenities and Midwestern prices. That was an important part of our allure. Now we have coastal amenities and prices that are darn close to the coast. It did not take an earthquake to give Las Vegas beachfront property, at least in cost.”
The Review Journal. “Add to April’s existing-home inventory a sizable number of new homes. About 7,000 converted condominiums sat on the market in April, and 4,000 new single-family homes and traditional condominiums were also for sale.”
“That brings the total backlog of properties for sale in Southern Nevada in April to 31,000.”
“Broker Bob Hamrick said the local MLS has added about 300 single-family homes a week in recent weeks. ‘Unless we see a downward change in those growing numbers, that will start to be concerning,’ Hamrick said.”
“Builders are offering steep incentives that can range from $10,000 to $100,000 in value, Murphy said. A handful of local builders is preparing to drop prices on homes as well, he added. And once new-home builders begin slashing prices, sellers of resale homes may have to follow with price breaks of their own, he said.”
“Homeowners who don’t have to sell now could pull their homes off the market or avoid listing altogether to wait for a tighter, more seller-friendly environment.”
“Linda Rheinberger, president of the Greater Las Vegas Association of Realtors, did just that herself, delisting an investment property this spring and repositioning it as a rental property. She said she’s advised clients who don’t absolutely have to sell to wait at least three months, when she believes local inventory will begin to drop.”
The Christian Science Monitor. “What’s most enticing about James Deans’ five-bedroom house is his willingness to deal on the price. ‘It’s $950,000, but a serious buyer can have it for $900,000,’ says Mr. Dean, who built the custom house himself.”
“Yes, some of the most torrid real estate markets in the country have become much friendlier for buyers. In cities like Las Vegas, sellers like Dean are now more than willing to negotiate. Real estate developers, when they aren’t dropping prices, are offering to help with closing costs or give buyers free upgrades such as large-screen televisions. Despite these plums, sales are slumping.”
“A record 20,515 unsold homes and condos are on the market. Despite the glut, however, developers are continuing to build. Almost 500 subdivisions in Las Vegas have active sales offices, according to Larry Murphy, president of a Las Vegas-based housing research company.”
“But after three years of steadily increasing home prices, developers are shrinking their profit margins by dropping prices, Mr. Murphy says. At a D.R. Horton development in a suburb of Las Vegas, a salesperson shows off a model home. It’s listed at $269,900. But for a ’serious’ buyer, it can be purchased for $249,900 or less, says the sales representative.”
“In April, Murphy found that KB Home, one of the largest builders in the city, lowered prices between $8,000 and $34,000 at 16 of its 38 subdivisions with sales offices.”
“The slower real estate market has hit almost all price levels in Las Vegas. In February, retiree Hank Franz put his home on the market for $275,000. Nearby, another seven homes have also been for sale. Last week, Mr. Franz lowered his price by $25,000. ‘The market is extremely sluggish,’ he says.”
“On the luxury side of the market, sales aren’t much better. Dean, the custom home builder, has five homes for sale, at close to $1 million apiece. Once he sells these houses, he says, his company, Triangle Construction, has the property to build another 18 homes.”
“Are there that many people who can afford million-dollar properties? ‘People with two incomes, or someone who sells their house in California for $1.5 million, can pay cash for the house and have $500,000 to live on,’ answers the builder.”
“Two years ago, new housing developments sold out six months in advance. Busloads of investors from other parts of the country toured construction sites and snapped up town houses and unfinished homes. Now, signs are up around town for those who need to sell their homes in a hurry to avoid foreclosure.”
“Says Murphy: ‘People speculating in the market, those who came to the party late, are finding that if they bought in 2005, by the time you get through with closing costs and brokerage fees, they are probably losing money.’”
The funniest thing lately is that Las Vegas as well as many other markets are experiencing price depreciation, however the RE “pros” still insist that prices will go up 5-10% this year, talk about livibg in denial!
ot legal question
I see some large realtors have mortgage and title connections in thier ads
how about inspection ?
if anyone in the chain misrepresents future or current value coulde people sue the whole bunch ?
I think Banks should offer an 80 year loan interest only loan. This would allow the real estate community to continue making large salaries, while unassuming individuals sign on to the biggest risk of their lives due to being hard sold that they are nothing without home ownership, meanwhile those who are intellegent enough to be able to slightly grasp the concept of the supply and demand curve are forced to postpone their lives ever more, to avoid knowingly signing on to get slaughtered. This entire system is a sham, everyone is going to pay for this, it will take down our economy, and everyone will get bitter just like after the last downturn.
Home ownership is highly over-rated. I owned a home for 10 years in a somewhat-less-than desireable neighborhood. It sucked from the day I moved in until the day I moved out.
When I saw that the market was hot in late ‘04, I sold the place very quickly for 2.5X what I paid for it. It wasn’t a fortune, but I’d also prepaid the mortgage for years. So now, I’m in the position of renting in an excellent area, my kids go to very good schools, the banks pay me instead of the other way around, and I borrow money at 0% to invest in CD’s. Much better, at least for now.
I originally intended to stretch and buy in this area, but as for now, I’ve lost interest in home ownership altogether. Since moving, I found this blog and what you can get for your money has greatly expanded.
I’m going to wait this out.
price_doubt, been saying this for years. Last night I sat on my porch and watched my neighbor mow his grass. I’m laughing all the way to the bank.
“What’s most enticing about James Deans’ five-bedroom house is his willingness to deal on the price. ‘It’s $950,000, but a serious buyer can have it for $900,000,’ says Mr. Dean, who built the custom house himself.”
Maybe a serious seller would price it so that serious buyers will actually nibble?
I was gonna say, a serious buyer won’t even pay half that.
Sounds like another James Dean is about to crash and burn.
only $50K drop, common buyers you can do much better than that, How about $300K drop.
For a long time, Las Vegas had coastal amenities and Midwestern prices.
Um, no. LV has never had coastal amenities. The most important coastal amenity, you see, is actually having a coast. Then this in turn gives you milder weather, which… oh, never mind, I might as well argue this with a brick wall.
You are correct. This is one of the dumbest pro-real estate comments I’ve heard in the bubble, and that’s saying a lot. Me? I’m going to buy a nice beachfront plot of land in Iowa where there’s still “coastal amenities AND Midwestern prices!”
I think the delusional author meant the coastal amenities as the Mandalay Bay pool. LMAO….
“Coastal amenities and Midwestern prices”? What in the world does that mean?
Last time I checked the only notable amenities that Vegas had were casinos, Vegas shows, and the like. Other than those, Vegas does not have the amenities of either the Coasts or the Midwest.
Aw come on, all you have to do is jump in your car and you can be on the beach in just 6 - 8 hours.
Obviously the coastal “amenity” is all that sand!
By “coastal amenities” he meant tan hookers.
LOL
Hey, they’ve got sand…Doesn’t that qualify as a ‘coastal amenity?’
And another thing. It’s hypocritical for anyone in Vegas to use California as a scapegoat for any of its problems. The reason, as math textbooks put it, is left as an exercise for the reader.
And in three months, when everyone puts his house on the market, what will happen to inventory?
Vegas truly buries the needle when it comes to people being stupid with money.
Whoops, I meant that for the comment below. I oughtta quit posting to this topic, but it’s too fun.
There seems to be a trend to “blame California” here and elsewhere. We have plenty of stupidity and equity locusts here, but we do not have an exclusive supply.
I don’t blame Californians, but the truth is Vegas is an outlier of the California market. Vegas will far father and harder than California, of course. I have been saying the same things as this article for the last two years.
Indeed - Vegas, Sacramento, Reading, Pheonix - all were affected by the run in prices in the SF / LA area, and people taking their “equity” outward to invest in properties.
“Linda Rheinberger, president of the Greater Las Vegas Association of Realtors, did just that herself, delisting an investment property this spring and repositioning it as a rental property. She said she’s advised clients who don’t absolutely have to sell to wait at least three months, when she believes local inventory will begin to drop.”
Excellent advice Linda…I can see why they elected you as president…The only things that are going to drop are prices and your credibility.
Yeah, I was thinking the same thing. Why would inventory drop in 3 months? This typifies the logic(or lack of logic) that has been commonplace during this whole bubble. RE people make statements such as this with no basis in reality or fact or cause and effect, I think it is just wishfull thinking.
What’s even stranger is the timing. In 3 months, it will be the end of the “buying season”. If the buying season sucks this bad, how will it be during the “off-season”?
It’s possible that inventory might actually drop (although not hugely likely). Unfortunately, transactions will drop even more. Time on market will be even longer then. Maybe she’s trying to spread out the pain over the next 3 or so years; just keep delaying your life and your sale until the “bubble is over”.
Last year, the buying season here in VA was completely cooked by mid-July. Especially around D.C., where nothing happens in August. People were counting on a Fall pickup (which happens) but then the inventory really exploded. So then they waited ’til this Spring . . . sigh . . . guess they’ll have to do it all over again.
Interesting. In Socal, the hot buying season is almost always May-August (sometimes includes September) That’s when like 50% of the transactions are settled. I always understood it had to do with getting into a school system before school started for kids.
Of course, I have heard of places where it’s the opposite (like Florida) where they have a snowbird migration in fall to spring.
WashDC and NoVA housing markets are traditionally dead in August because it turns into a tropical steambath, Congress shuts down and everyone takes their vacation then. The morning subway here is virtually empty in August. Only a fool would list their house in August in this area. Of course, there are a lot of fools trying to list their overpriced crackerboxes right about now…
Inventory’s going to drop becuase it’s an inverted year. Gary Twats said so!
Because in 3 months the air temperature will be around 110 in the shade and more buyers will want to move there for all those “coastal ammenities”.
Yeah. And what did she do rent her place out on a 3 month lease?
Inventory may indeed drop as seller figure out that they are not going to seel their homes for the inflated prices that they are asking. Those that do not have to sell may decide to wait it out. Of course that will only prolong the agony.
IMHO
JMS
Need a spell checker
sellers sell
I read the Review Journal this AM. I suspect they may be “cheer-leading” for the RE industry. For example, here’s an excerpt:
Lawrence Yun, a senior economist with the National Association of Realtors, said 17,000 resale listings aren’t excessive in a market of 2 million. For example, the Multiple Listing Service inside the city of Houston, which Yun said serves a population of 2.5 million, typically has around 30,000 resales online at one time. …
Yun called the 2,900 listings of April 2004 “unbelievably low,” and said even the 10,500-home inventory of a year ago was “still too low” for a metropolitan area the size of Las Vegas. …
The Las Vegas Valley adds as many as 7,000 residents a month, and Yun’s data show employers in the market created 47,000 jobs in the past 12 months. About a third of the city’s new residents will buy homes immediately, Yun said. Plus, existing residents who want to trade up their home equity or stop renting generate additional demand for properties.”
So the inventory is going crazy, sales are off, but all’s well???????
How’s life in cali?
The Sun, RJ and now CSM have all reported declining employment for the RE sector in LV. The supposed 7k a month inflow can turn on a dime. Ask Austin, Texas.
I agree…All these people coming in making $10/hour dealing are going to purchase 300k houses.
Lesse here Yunie my boy:
1) Las Vegas population is 2 million. I’m going to give him 2.5 million because he said “Las Vegas Valley”.
2) United States population is 296 million.
3) Las Vegas Valley is therefore about 0.84% of the US.
4) Las Vegas created 47,000 jobs in the past 12 months (according to Yun).
5) Therefore it follows that the US created 5,564,800 jobs in the past 12 months.
Please choose your own smartass comment:
A) My data shows Yun’s data to be highly suspect.
B) Whoah! Does Bernanke know about this?
C) The Bureau of Labor Statistics is only off by a factor of 5.
D) Perhaps “Las Vegas Valley” includes Los Angeles and San Diego?
Good article in WSJ today - section C “Is Easy Money Going Down the Drain?”
It seems the corrupt RE spokespeople have given up on spinning and coating the facts, and are now are just blatantly lying. “Houston, which Yun said serves a population of 2.5 million” — Houston’s population is more like 5 million. Is ths guy Yun trying to outdo his fellow comrade Lereah in the lie department?
OK, that’s it. I’m putting out an ABP for LV Landlord. Yoo hoo?!
Bwhahahahaha……….
She’s out there scooping up all the “deals”.
Mathematically somebodies got to be the greater fool.
The key is avoiding that position.
After all LV is based on people’s ignorance of math.
She has been VERY VERY QUIET!
Not a whole lot of Internet access when you’re in the slammer.
Can someone out there explain what a normal inventory to population ratio looks like. My CFO brother, whose Reno home went from 250K to 650K overnight, keeps telling me that 5000 inventory in a city of 250,000 is nothing and just appears bad against last years numbers at the peak of the boom. Reno seems to be Las Vegas’ smaller uglier twin. Think Danny Devito. Vegas had L.A. Reno had the Bay Area. Any thoughts?
Housing markets aside, I kind of like Reno. Smaller, frendlier, more laid back, cheaper. People don’t seem to be as obsessed with sucking every last dollar out of you. It’s like Vegas used to be.
Also it seems the economy is a little more diversified than Vegas’s is. Not by much, but a little.
The ratio of 1 house per 100 is a relatively high supply of houses.
So 5,000 per 250,000 people is alot. That’s 1 per 50.
Of those 50, maybe 10-20 are renting and 30-40 live in houses. 3 People per house means there is up to 10% of houses for sale.
Interesting ratios. How do you know this?
Housing Tracker web site for the inventory and any demographic site will give you the pop.
My CFO brother, whose Reno home went from 250K to 650K overnight, keeps telling me that 5000 inventory in a city of 250,000 is nothing and just appears bad against last years numbers at the peak of the boom.
While it is true that the difference in inventory does appear bad in contrast, If I were him, I would cash out right away. 400K invested in CD’s at today’s rates will buy perpetual rent in maintanence-free housing, freedom of movement, etc., assuming 20K annual rent.
The beauty of renting is that when bad neighbors move in, you can move right on out without having to sell a home.
Another thought: since Americans move so often, anyway, why buy, especially since it’s so much cheaper to rent in the best areas?
Let’s see.. buy in a mediocre area and be stuck with mobile boom boxes, barking dogs and what have you, or rent for about half the price in a more genteel neighborhood with good schools, respectful neighbors and no blasting music. Hmmm.
Reno is a Vegas wannabe….You only fly or drive thru there on your way to Taho…You might stop in to drop a few in the one arm bandit, but I cant imagine staying there on a vacation or god forbid, living there.
I’ve recently moved back to Reno to semi-retire after living there 30 years ago and being in CA during the interim. I don’t want to be too defensive, but I much prefer Reno to anywhere I’ve lived in Northern CA, and I certainly prefer it to LV. Reno is a very friendly city with proximity to Tahoe and CA without the crushing tax burden. The RE market here has been overheated, but nothing like LV or even the Central Valley of CA. I am renting now, but I will buy someday. Right now, house prices seemed to have doubled (as opposed to at least tripled in CA, which is why we sold there) in the past 5-6 years. So, some correction is inevitable, but I don’t think it will be as painful as Northern CA or LV. Because of the retirement, estate tax and inheritance tax benefits of NV, I expect we will see more boomers moving to Reno as they retire in the next 5-10 years.
This is a test Ben. I like the one armed bandits in Reno. Can drive to Genoa for golf or up toward Truckee for fishing.
Jesus, is there any bubble area anywhere that isn’t going to be bailed out by boomers? Give me a break!
I didn’t say the boomers were going to bail out anything. I think they will move to NV for the tax advantages, which are considerable.
Orange County, with a population of well over 2 million people, has 13,643 single family homes and condos for sale in the MLS.
With approx. 2,500 sales per month, this equates to over 5 months supply (actually 5.45 months) which is bordering on an oversupply situation.
So yes, 5,000 listings in an area with 250,000 people is maybe just a few too many.
Well, my tenant, who makes about 70K and has 2,000 in savings, plus a bunch of consumer and car debt, is now buying a 4 bedroom house in Irvine, with a buddy. Good luck dude.
Kind of like Tucson is the smaller and uglier twin of Phoenix.
In the meantime, foreclosures are “up sharply” here in Tucson:
http://www.azstarnet.com/business/131942
Kind of like Tucson is the smaller and uglier twin of Phoenix.
Whoah, whoah, whoah!
With all due respect, I lived in Tucson for over 20 years. The common sentiment (even amongst Phoenicians) was that Tucson was where everyone (who enjoyed the Sonoran desert) wanted to live, Phoenix was where you lived if you wanted a job.
MjM
Bingo. I love Tucson. I looked at Phoenix, no way.
Smaller, I’ll accept but ain’t nothin’ uglier than Phoenix these days. 114 degrees (in June!!) smog, clogged highways…But they do have jobs for now.
Every Vegas realtwhore likes to tout “7k people a month” moving to Las Vegas. What they don’t tell you is that 3 to 4k people also move out of Vegas every month.
And Californians are not soley to blame for this Vegas bubble. I’ve met plenty of New Yorkers, Washing DCers, and other East Coasters who have cashed out of their own housing markets to buy into this one.
And Vegas does not have “coastal amenities”…the closest thing it has to a coast is tiny Lake Mead filled with gigantic carp. And its still hot as hell out on the lake. I can see prices being high on the Las Vegas Strip just because it is such a huge tourist mecca, but there is no reason that starter homes and condos anywhere else in Vegas should start in the $200K+ range given the locals’ incomes.
Give it another year, and I predict most of these realtwhores will be out of business, and will be forced to go back to their old casino jobs, stripping, and prostitution.
” is that 3 to 4k people also move out of Vegas every month” ….and your source for this is????
The Real Estate School at UNLV tracks new Drivers License’s issued to out-of-state drivers every month. The 6000 to 7000 figure has held steay for over 40 months, and was over 6000 in April. The MGM Grand City Center project on the strip is a 7 Billion dollars project. Echeclon is another 4 Billion dollar project, and now the Stardust is to be torn down for a 1.2 billion dollar hotel. I agree the prices of houses in Vegas got ahead of themselves, and a correction is due for those ARMs and refi’s that are over their head, but I just can’t see employment sinking with these kinds of well funded projects.
Ah yes…the “If you build it, they will come” theory of economics…works like a charm. Just ask George Clooney:
http://vegasblog.latimes.com/vegas/2006/03/issues_for_cloo.html
Ben, OT question. Two parter.
Part one: It seems like people have had trouble with their post showing… I’m not seeing mine today and someone was having trouble Friday. Do you think there is excessive traffic?
Part two: Is the thread below about which city is ground zero the first thread to crack 200 posts?
Coastal amenities? Who are they kidding? Apparently plenty of suckers who bought into the neon allure of that outhouse city. The place is a pit. Try living there for awhile to get the full flavor of Toilet Town.
Coastal amentities, huh?
I’m renting in Alameda CA, right off the San Francisco Bay. Today’s high was 69F. High today in Vegas was 107F.
Almost 500 subdivisions in Las Vegas have active sales offices…
500!!! Wow, can anyone top that?
“But after three years of steadily increasing home prices, developers are shrinking their profit margins by dropping prices, Mr. Murphy says. At a D.R. Horton development in a suburb of Las Vegas, a salesperson shows off a model home. It’s listed at $269,900. But for a ’serious’ buyer, it can be purchased for $249,900 or less, says the sales representative.”
Ya shrinking profit margins…rather than making 300% they are only making 200%.
I love it, serious buyers may be able to get the home priced lower. so what, non-serious buyers will get the high price? I think anyone who is going to pay half a mil for a house is a serious buyer.
what they mean by coastal amenities is the shopping, clubs, entertainment and whatnot of las vegas. more coast(big city) than midwest(small city).
This is OT but I just had to share this ridiculous “market condition report” by a RealtWhore in Panama City Beach:
Now is the perfect time for Home Buyers. Prices have decreased significantly, anywhere from 5% to 30%, and many Sellers are motivated! As construction begins on the new International Airport, and housing sales inventory begins to decrease, it could easily turn to a Sellers Market soon. Fear of negative weather forecasts from the media should not be a factor for anyone, especially those who know environmental conditions affect all of us no matter where we live.
“..could easily turn into a sellers market soon..”
there is a lot of funny stuff on this blog but this has got to be one of the funniest.
I like her soothing words about the weather being a problem anywhere too- Panama Beach is in FLA I suppose? Start of hurricane season?
This reminds me of living in NY in the 80’s, when my house was broken into, everyone there said “It can happen anywhere.”
Right.
especially those who know environmental conditions affect all of us no matter where we live. ..
Yes! It takes a true visionary to understand that wheever you go, they have weather.
OK, so my hair dresser and her Entrepreneurial husband bought a 4000+ SQ ft home last year Southern Highlands (2005) paid (?)
Her next door neighbor who bought in 2002 for same type house paid 350K
Now he NEEDS to sell (wife died-no need for big house)
Hairdresser tells me that she AND other neighbors are pissed of at the realtor selling her neighbors house because they lowered the price 95K down to 800K. “Don’t you know what that is going to do to our comps?” she said she bitched to the realtor.
After laughing out loud (couldn’t help meself) I said the realtor was just doing her job to move the house. Then she proclaimed that the realtor hasn’t done anything to try and sell that house—there hasn’t been ONE open house yet!
Then, she told me that another neighbor called the realtor up and made her come to his house and write up a “ridiculous” offer of 650K” of which the owner refused.
Guess the realthores are getting it from both buyers and neighbors
If you have their address you can zillow it to see what they paid. They have the sales data right there.
BTW- 31K homes on the market
Great Birthday present
My hubby and I have been in Vegas for 2 years now, arrived from NYC at the “height” of the market. We chose to rent and were ridiculed by friends here for “missing out” and were told “Vegas may flatten but wont ever go down.” It was hard to make the decision to rent but now we are thrilled–and all we did was look at the market from an ECONOMIC standpoint. Realtors can say whatever they want, and so can homeowners but the facts and stats don’t lie. All those crazies with no down payment, IO ARMs are going to start jumping ship soon. It jusy stinks that it is taking so long for prices to truly adjust and it seems the press is a good 9 mos behind what is actally happening here. Hold out!!! it’ll pay off,
I live in the Vegas area, and have for 5 years. I have hated every minute of it. There is no culture, no class, no integrity. It is nothing but a collection of some of the crudest, rudest, most ignorant and appalling people inhabiting this planet. Greed permeates the air you breathe, and everything you contact. I’ve said it before, if the continent of North America has an armpit, it is named Nevada. If the continent has an anus, it is the Las Vegas Valley.
Hmm…I always thought it was Detroit. But I’m from Chicago so I kind of biased about that
Why are you still there? It’s your life–enjoy it. Seriously.
Up here Tacoma (rhymes with “aroma”…and for good reason) is considered a pit too.
Nah, that’s Dallas you’re talking about.
As a former lifelong resident, I can assure you Vegas is a sh*thole. Too bad they don’t tell the 6-7k people moving there every month. They must overlay the relocation brochures with images of Palm Springs with the strip photoshopped in. Anyways good luck with the move to somewhere normal.
The rankest place I have ever seen was down near Sebring, FL. True tar paper shacks and 120% humidity - bugs the size of baseballs.
btw - Isn’t much of NV non-buildable for another 10,000 years or so?
My parents moved to Hurricane, UT a few years ago. At the time it was a nice little community. Since, it’s turned into a traffic choked, crime-riddden, s@thole, inhabited mostly by California colonialists. They put their house up for sale today.