I am a reputed housing bear, but there are markets where I am very bullish. Everyone who wants a great long-term buy-and-hold property should be looking in Las Vegas, Nevada.
Irvine Home Address … 647 SPRINGBROOK #22 Irvine, CA 92614
Resale Home Price …… $359,000
Are you still feeling lucky tonight?
Throw the dice again… let it ride (let it ride)
Wanna do this one more time?
Hit me again… let it ride (let it ride)
Are you gonna play tonight?
Sleep with me, just right by your side
Gonna do this one more time
Hit me again… let it ride (let it ride)
Charlie Clouser — Let It Ride
For someone who writes bearishly about real estate almost daily, it will surprise some to hear me be completely and unabashedly bullish. I am very bullish on Las Vegas. I will put my money down there, and let it ride.
Booming Vegas or Real Estate Bust?
By Eric Fry — Aug 3, 2010, 2:03 PM
Over the weekend, your California editor jumped the border into Nevada. He took a spur-of-the-moment road trip to Las Vegas with his co-editor, Joel Bowman.
During their two-day romp in Sin City, neither editor engaged in any activities that needed to “stay in Vegas.” No drunken debauchery to report…or not report. No big-ticket gambling losses…or small-ticket moral lapses. Just the same old wholesome living with which they routinely bore themselves.
While most of the tourists were busy losing their money and sleeping off hangovers, your editors were busy gathering macro-economic data points. After all, Las Vegas may be famous for its ostentatious casinos, but it is infamous for its outrageous housing bust.
No city in the country throws a better housing bust than Vegas.
Although the residential real estate market in Las Vegas has been stabilizing for the last two years, home prices remain more than 50% below the peak levels of 2006. “In 2000,” the Las Vegas Sun reports, “the median price of existing homes was $134,500. That shot up to a high of $285,000 in 2006, but in 2010 prices have been running slightly more than $120,000.”
I want to take a moment to think about the numbers given above. In 2000, the average annual mortgage interest rate was 8.05%, and the stable median home price was $134,500 in Las Vegas. If you borrowed 80% of that amount ($107,600) the mortgage payment would have been $793.28. Today, a 30-year fixed rate mortgage can be obtained for 4.56%, and the median home price is $120,000. If you borrow 80% of that value today ($96,000) the mortgage payment would be $489.85.
The median home in Las Vegas — a 3 bedroom 2 bath detached property — can be owned for less than $500 per month.
It that isn't affordable, I don't know what is. The house is cheaper, and the cost of debt is much cheaper. Anyone living in Las Vegas who is choosing to rent when they could buy is a fool. Anyone thinking of investing in Las Vegas, now is the time — not because prices will come roaring back (they won't) but because the price-to-rent ratio is outstanding, and unless you are buying in the worst neighborhoods, I don't see how prices could go much lower. Unlike the inflated markets in California — the foolishly percieved safe havens — the property values in Las Vegas really can't go much lower, and although appreciation is years away, the rental stream makes ownership there very rewarding.
I personally plan to acquire all the Las Vegas real estate I can buy. And no, neither Ideal Home Brokers nor the mystery fund I might know something about is going to invest in cashflow properties there. I am not selling you on Las Vegas because I will profit from convincing you. I am bullish on Las Vegas real estate because I perceive it as the best buy-and-hold value we will see in our lifetimes.
I know it is hard for the kool aid intoxicated to get their minds around buying properties that will see no appreciation for ages, but realistically, there isn't going to be appreciation in any real estate market for ages. The best, and in my opinion, the only good reason to buy-and-hold real estate is for the rental cashflow. You want perpetual cashflow, not a cashless asset that requires taking on debt to convert to spending money.
Not surprisingly, mortgage defaults and foreclosures have been soaring over the last three years. “Since January 2007, Nevada has ranked No. 1 in the nation in foreclosure filings [as a percentage of total mortgages],” the Sun continues. “[Among cities], Las Vegas was ranked No. 1 in 2009 and will be near the top again in 2010.”
And to judge from a recent report by the New York Fed, Las Vegas will not be surrendering its “No. 1” position any time soon.
“Although the official home-ownership rate for Las Vegas is a respectable 58.6% as of August 2009,” DailyFinance observes, citing the Fed study, “the ‘effective’ rate is more like a dismal 15%… How is the ‘effective’ home-ownership rate different from the official one? The authors of the New York Fed study removed those homeowners who have negative equity – those who are ‘underwater’ and owe more on their mortgage than their home is worth.”
In other words, 58.6% of all Las Vegas residents may own a mortgage, but only 15% of them own a home.
The overhang of distressed mortgage debt is why a recovery will take forever in Las Vegas. All the debt must be extinguished. For those waiting for house prices to go up, the crushing weight of all the other homeowners who are giving up will keep foreclosure inventory high for many, many years. The one scenario that could make prices go lower is if interest rates move significantly higher before unemployment improves. With the entire housing stock trading at a 20%-40% discount to rental parity, a modest increase in interest rates won't significantly harm affordability like it will here.
The commercial real estate market in Las Vegas is almost as distressed as the residential market. Office vacancy rates have plummeted from about 8% in 2000 to 24% recently. Therefore, even if the Vegas real estate market is recovering, a lot more recovering will be required to restore stability…and rising prices.
Given your California editor’s familiarity with these macro-economic data points – and his unfamiliarity with Vegas itself – he expected to roll into a tawdry wasteland last Friday when he rolled off of I-15 onto Las Vegas Blvd. He expected to find clusters of low-budget tourists roaming the sidewalks of half-empty hotels. He expected to find deserted casinos in this gaudy patch of desert…and cut-rate pricing on everything.
But he found the exact opposite. The place was packed – every square inch of it – and priced for boom-time conditions.
On Day One of his visit – a Saturday – most of the best-known hotels on the Strip were either sold out or offering rooms at Midtown Manhattan prices. On Day Two, hotel room rates dropped sharply, but the crowds remained at capacity. All along the Strip, the casinos and restaurants were bustling, while the sidewalks and poolside lounge chairs were packed to capacity.
Finding a lounge chair anywhere close to Mandalay Bay’s wave pool required Green-Beret-style recon missions…or a lot of money. High-rolling hotel guests could chose to roll out $250 to $1,000 to rent a cabana…for one day!
The cabanas were full.
I have told people on many occasions that I strongly believe in the economic recovery of gaming and tourism in Las Vegas. Once the rest of the economy begins to improve, the unemployed start going back to work, and people have two nickles to rub together, they will put one of them in a Las Vegas slot machine. A reviving economy in Las Vegas will signal the end of the recession better than any government report.
Where is all this money coming from? How on earth could the sluggish US economy play host to such seeming prosperity?
Your editor has no decisive answer to these questions, but he does have indecisive guesses:
First up, he observed a very large percentage of “ESL” tourists. The crowded sidewalks featured almost every language on the planet. Apparently, Vegas appeals to foreigners.
Secondly, your editor suspects that Vegas has become a leading “staycation” beneficiary. Vacation destinations like Paris, Venice and Cairo are as expensive as they are distant. So why not go to Vegas, which enables tourists to visit the Eiffel Tower, the canals of Venice and the pyramids of Cairo…just by strolling from one end of the Strip to the other. Better still, these sites offer valet parking and free booze.
Whatever the exact causes, the Las Vegas economy appears to be recovering. Sin is still selling.
Drunken debauchery will always be popular. Once people can afford it again, Las Vegas will be there waiting to take their money.
One busy weekend does not necessarily make a trend. But the official numbers seem to support your editor’s first-hand impression. Tourist visits are on track to jump 3% this year to about 37.5 million, which would be the largest number of visits since 39.1 million tourists visited Sin City in 2007.
Vegas may not have returned to its peak prosperity, but neither has it descended into anything resembling a bust. Perhaps, therefore, the Vegas housing bust is drawing to a close…no matter what else is happening in the rest of the country.
As we noted in yesterday’s Reckoning, the weight of stubbornly high foreclosure rates – coupled with stubbornly high unemployment rates – continues to weigh on the national housing market.
I have written that Gaming Interests Could Save the Las Vegas Housing Market. Maybe someday I will raise the billion dollars required to save their housing market. I hope nobody there is holding their breath.
Art and science of distressed property investing
Finding a distressed property market is not difficult, and anyone who understands business math enough to compute a rate of return can measure which markets are a good deal in today's dollars. That is the science.
The art of distressed property investing is recognizing which of these markets the conditions are temporary and in which markets the distress is a long-term problem. I am bullish on Las Vegas because the local economy will recover there. The distress is temporary.
There are many distressed property markets where I am not bullish. Detroit, Michigan, may never recover. They may end up bulldozing a significant portion of their empty housing stock. Here in California, I wouldn't touch Bakersfield, Fresno, or Santa Maria. They are too far from major population centers to see spill-over economic growth, they are seeing varying degrees of demographic shifts and out-migration, the school systems are awful, and their local economies are not very diverse. The fringe markets within 90 miles of major population centers will recover eventually, but the overhead supply of foreclosures will take quite some time to work through.
In short, not every distressed market where the price-to-rent ratio is good is necessarily a good investment. Those markets where economic recovery is likely are the best investments, and Las Vegas is at the top of my list.
The extra breadwinner
Even the condos were put to work during the housing bubble. Properties both big and small were steady breadwinners for many families. I imagine they miss that extra income now that the housing ATM has been turned off. Some are still receiving the squatter's stimulus, but eventually that will run out as well. All these equity-stripping former owners will need to adjust to a new life based solely on their wage income. The horror of it is unimaginable.
- This property was purchased by the previous owner on 9/12/2001 for $237,000. The owner used a $225,000 first mortgage and a $12,000 down payment.
- On 2/21/2002 he obtained a stand-alone second for $24,000 which recouped his down payment and pulled $12,000 out to spend. Not bad for 5 months ownership.
- On 9/8/2003 he refinanced with a $240,000 first mortgage.
- On 9/8/2004 he obtained a $100,000 HELOC.
- On 8/15/2005 he got a HELOC for $141,000.
- Total property debt was $381,000.
-
Total mortgage equity withdrawal was $156,000. Not bad for a small condo.
- Total squatting time was about 1 year.
Foreclosure Record
Recording Date: 05/27/2010
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 02/18/2010
Document Type: Notice of Default
Foreclosure Record
Recording Date: 12/17/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 09/09/2009
Document Type: Notice of Default
The flipper has been wisely lowering price to find the market. The margin is getting pretty thin, and without any upgrades, the price may have to go even lower to find a buyer.
Irvine Home Address … 647 SPRINGBROOK #22 Irvine, CA 92614 
Resale Home Price … $359,000
Home Purchase Price … $311,000
Home Purchase Date …. 6/16/2010
Net Gain (Loss) ………. $26,460
Percent Change ………. 8.5%
Annual Appreciation … 89.3%
Cost of Ownership
————————————————-
$359,000 ………. Asking Price
$12,565 ………. 3.5% Down FHA Financing
4.60% …………… Mortgage Interest Rate
$346,435 ………. 30-Year Mortgage
$70,987 ………. Income Requirement
$1,776 ………. Monthly Mortgage Payment
$311 ………. Property Tax
$0 ………. Special Taxes and Levies (Mello Roos)
$30 ………. Homeowners Insurance
$335 ………. Homeowners Association Fees
============================================
$2,452 ………. Monthly Cash Outlays
-$287 ………. Tax Savings (% of Interest and Property Tax)
-$448 ………. Equity Hidden in Payment
$22 ………. Lost Income to Down Payment (net of taxes)
$45 ………. Maintenance and Replacement Reserves
============================================
$1,784 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$3,590 ………. Furnishing and Move In @1%
$3,590 ………. Closing Costs @1%
$3,464 ………… Interest Points @1% of Loan
$12,565 ………. Down Payment
============================================
$23,209 ………. Total Cash Costs
$27,300 ………… Emergency Cash Reserves
============================================
$50,509 ………. Total Savings Needed
Property Details for 647 SPRINGBROOK #22 Irvine, CA 92614
——————————————————————————
Beds: 2
Baths: 2 full 1 part baths
Home size: 1,100 sq ft
($326 / sq ft)
Lot Size: n/a
Year Built: 1985
Days on Market: 27
Listing Updated: 40382
MLS Number: S623642
Property Type: Condominium, Residential
Community: Woodbridge
Tract: Lr
——————————————————————————
HIGHLY SOUGHT AFTER END UNIT WITH VIEW OF GRRENBELT! No one above or below! This charming Cape Cod style home is located in the desireable Woodbrige area of Irvine. Open and spacious floorplan offers soaring ceilings and an abundance of natural light! Beautiful travertine flooring throughout the downstairs. Family room offers gas fireplace, The interior has been freshly painted with neutral colors. Inside laundry, Stainless steel appliances in kitchen wth breakfast bar. Large patio area with views of greenbelt and plenty of room to BBQ and entertain. Located in the highly sought after Irvine Unified School district and the Woodbridge Association features approximately 40 parks and pools, two 'landmark' lakes and swimming lagoons, two beach clubs, 24 tennis courts, plus many other recreational amenities!
desireable? GRRENBELT! That is really embarrassing to have a jarring misspelling in ALL CAPS.
“Nevada job market plummets from first to worst”
It’s quite possible that it’s going to be even worse.
So I can buy a condo on the beach in Florida or I can get a condo in a dump like Vegas. I see no appeal to Vegas whatsoever. I can spend thousands of dollars a year paying a mortgage rather than a few hundred on a hotel and be 10 steps from the casino? No, I want a condo that is off the strip so I can take taxi’s to where all the fun is.
Las Vegas? Come on – absolutely no point to owning anything out there. No intrinsic value to the occasional tourist at all. If you spend more than a couple weekends in Vegas each year then there is something wrong with you. I can totally see wanting to be near a beach or something, but not Vegas for crying out loud.
Vegas is a one-night town, done once every year or so.
I agree…I have friends with stable family + jobs in the area (healthcare) who are saving $300+/mo on their $150k 4bd/3ba foreclosure vs. renting. They were FHA buyers and were getting bumped by cash investors the entire way…this was the 19th property they put a bid on.
As an investor, not only are you doing well with cash flow, you can potentially retire here as those on fixed incomes will do better due to the lack of income tax. Kind of an extra “bonus” in 20 years or so.
I dunno, a four hour drive away and icky Las Vegas? Risk vs. Reward does not sound all that great.
Agree 110%. Worst of all is if you buy a vacation house there then you will feel obligated to go there all the time. Vegas is great every few years or so – but in a hotel and on the strip. As an occasional tourist the idea of staying over in some Joe Blow condo defeats the entire purpose. You don’t go to Vegas to relax in your own private retreat. You go to stay in the hotels, gamble late into the night, and be right in the center where all the action is and where people are urinating on the sidewalks and getting drunk. I can’t imagine how lame a trip to my own personal Vegas condo would be.
I agree.
That’s why I would buy a unit on the strip like in the City Center.
But those won’t ever be bargains.
I guess that’s what timeshares are for (do they even have any on the strip any more?)… heh.
This would be the only viable purchase – a bargain that is on the strip. And even then, you would have to go to Vegas A LOT. Timeshares strike me as a PITA when it is so easy to go on the internet and reserve a hotel room.
Seriously how many people go to Vegas THAT much? It takes me 3 years to forget why I haven’t gone in the past 3 years.
When you leave the strip, there is NOTHING. I take that back, I think I saw a Burger King somewhere.
BK? I’m surprised at the quality of your culinary taste :-p
I have a friend who owns a 1BR condo at the MGM Signature; while technically not ‘on the strip’ it’s a brief walk through an air conditioned walkway. It’s sort of like a timeshare, in that the room gets added to the inventory of available rentals when he’s not staying there, however he doesn’t see any real money from it (despite the sales literature). The worst part for him is that he bought in 2005 or 2006; similar units are currently listed for sale at half to one third of what he paid.
I’ve stayed there before and It’s a very nice place but for as often as it gets used, it would certainly be cheaper to get a hotel.
I would be very careful. There is still excess supply, so renters may not be readily available, and that will also put downward pressure on rents. Plus with buying so attractive, why would people rent? The recently foreclosed? Is that the best group to count on?
Similar conditions exist in So Fla, and I am still hesitant to say that is a great investment.
Gaming can come back, but homebuilding there won’t, at least not for a long time. The impact that will have on employment and housing demand needs to be factored in.
LV’s metro unemployment rate is worse than Detroit:
http://www.bls.gov/web/metro/laummtrk.htm
I’ll echo the concerns on gaming coming back – I have to think that alot of the HELOC withdrawals profiled here daily fueled splurges at the Bellagio and those just aren’t going to come back. I can see some stabilization and maybe modest recovery from where we are now, but don’t think we will get back to say 2007 peak levels anytime soon. Finally, at least here in the East Coast you are seeing more capacity come on line eg Pennsylvania recently allowed table games and some NY Racino’s aren’t far behind. I can only see more not less competition for Vegas.
Well, I’ve been to one world fair, a picnic, and a rodeo, and that’s the stupidest thing I ever heard come from the IHB.
Well maybe not the stupidest, however there is plenty of downside as mentioned in the astute observations above. I hear many stories of qualified people looking to buy but getting shut out because of the all-cash investors. Is this really happening on a widespread basis for desirable houses, or is this just anecdotal evidence?
I guess I won’t be bidding against you to pick up some of these properties….
I think the stories are largely anecdotal. There is no shortage of supply for sale in Las Vegas. It isn’t really a flipper’s market because resale is challenging.
You’re right! I think most of your readership will not be bidding agaist you 😉
I agree with IrvineRenter and the naysayers. I put in at least 50 offers (ranging from a little below asking to asking) in LV only to be outbid by investors. The LV market will be a case study in America about heavily saturated renter markets. It will be interesting to see what happens to rents, property values, and overall neighborhood appeal when entire blocks are renters.
In the face of uncertainty is lots of money.
IrvineRenter can have them all. I will be staying in a hotel on the strip. The rest of you can rent condos and take taxi’s or experience the joy yourselves of driving a car along the strip.
Its not about buying a vacation home, its about renting to folks who live in LV.
I have to go to Bakersfield once in awhile and always wondered how such a large city can exist in middle of nowhere. They have oil and I see farming too, but still the city is so huge I wonder every time I’m there.
I agree Vegas will bounce back. It’s still fun to spend a weekend there.
Seems like a great deal if you can make the numbers workout.
Larry,
Thank you so much for the valuable work that you’ve done. I’m wondering if you are able to give an update on how the venture is going with your brokerage and/or with your foreclosure fund? I think alot of people question your motives now because they don’t know if your being successful or not. Can you tell us some statistics on how many homes your selling or something?
I think it would be normal for a business to advertise like that, and even though your the “un-Realtor” you still need to advertise. When I can afford it, I’ll definitley be looking for you.
No comment?
Sorry if it was a dumb suggestion.
It was not a dumb suggestion. It requires a more involved answer than I had time to give today. I will give an update on the fund on the weekend thread, and I will look at our sales stats and provide a meaningful synopsis.
I apologize. I didn’t mean to make you feel ignored.
Is the rental market strong enough in Las Vegas to ensure enough positive cashflow to make the investment worth it?
If it’s better to own than rent, why would people rent your property?
Seems a bit self-defeating to me because the cheap prices will either:
a. Dry up the rental pool.
b. Drive rental prices low enough so that cash flow isn’t too much of a benefit.
I would buy out there as a “vacation” home but I don’t know if I would want to be a Desert Land Baron / Overlord.
‘If it’s better to own than rent, why would people rent your property?’
I can’t argue with that…
People will rent because they don’t have a choice. Most of the renters will be former owners who were foreclosed on.
So the strategy is to go find people who have been foreclosed on, have no job, are irresponsible, financially braindead, or just have no common sense. Wouldn’t you rather rent to vacationing boomers who are coming to Florida to enjoy the weather?
I thought your original strategy was to rent to vacationers. Renting to foreclosure people seems much riskier.
Riskier? Not when you consider alot of those folks strategically walked away from a hopeless mortgage and still have consistent income.
Sounds riskier to me having to sort out the reliable ones from the riff raff. Anyone with a stable job could buy their own place for cheap. I would rather rent to vacationing boomers in FL than locals in LV.
Ask for the most recent pay stub?
Nice try. What happens when the renter loses their job a week after move in. Good thing you checked a recent pay stub! Have fun evicting them through the courts when they stop paying.
I am not bullish on Vegas employment. Gaming will not recover until the rest of the country gets back to work.
the eviction process in NV and AZ is shorter correct?
Room in Vegas, Sun/Mon, best price: 300 bucks per weekend.
House in Vegas, 900 a month including taxes and utilities.
Hmm… you don’t need to rent the house to a live in buyer, simply compete with the casinos.
Vacation House in Vegas. 3B/2BA, Maximum occupancy 6. 10% more for added guest up to 10.
3 day weekend rental: Fri, Sat, Sun, 200 bucks + cleaning deposit, 100 bucks.
Easter week: 1300 bucks + cleaning deposit 400 bucks.
Christmas/New Year week: 1500 bucks + cleaning deposit 300 bucks.
BINGO…. Put a one arm bandit in the bathrooms too.
I’m starting to think that I might become the new mafia in Vegas…. rental property mafia, that is. 😉
“IHB Casino/Hotel”
Interstate Hiqhway Bargain!
IHB = Internet Hotel and Brothel
Don’t you already have that with the continuous Internet profiles of people who are about to leave their short term residence because they are f***ed ? 🙂
Did someone hack into your account again?
HAHAHAHAHAHHAHA!
:checks calendar:
No… it’s August not April.
“Did someone hack into your account again?”
Nope. I am totally serious. When we look back into the archives on this post and some of the previous ones I did on Las Vegas, people will see the wisdom of what I stated. I will be putting my money where my mouth is.
You are betting on Vegas over Florida? Seems to me that Florida is a much better prospect. I suspect the boomers will be enjoying their retirement there with all of the wealth that they have transferred to themselves at our expense.
Yeah… but it’s less fun and more of a hassle to check on your Florida properties on a weekend.
“Uh… yeah… me and the guys are going to go check on our rental units… be back on Sunday.”
I don’t know. If I were going into the rental business, I would be targeting boomers (since they have all the money). I don’t picture boomers having vacation homes in Vegas. Renting to the locals is much riskier than renting a vacation house. At least you know the boomers will pay and are not living on Top Ramen to pay the rent working 10 jobs.
Also, Vegas is not a family place. Nobody has ever said “Hey babe, get the kids out of bed while I wash the minivan – we’re all goin to Vegas Baby, Yeah!”
Not going to happen.
AZDave wrote:
You don’t know me very well do you?
Except I won’t wash the minivan… it’s gonna get dirty on the 15 anyways.
You mean
“Load up the Prius, we’ll be there by noon.”
Don’t Canadiens prefer FL to NV? The retiree population also makes for a stable workforce. Taking care of the retirees, that is.
I looked at some even lower priced units in FL – 25k-50k. A lot of apartment-condo conversions. The PI payment might only be $250 on $50k, but you have maintenance fees + taxes. I don’t think they’d rent for much past $500/mo. It wasn’t nearly as can’t-miss as the prices seemed to make me think. Worse yet, people thought they were can’t-miss investments buying them for $200k…
I like some of the markets in Florida as well. I lived in Florida from 1995-2001, and I owned property there. The homebuilder-developer I worked from from 1995-1998 was a retirement community developer. I would be interested in properties along the highway 27 corridor in central Florida.
My point was that I would be cautious about FL also. Broward County, where my parents live, is one of the largest school districts in the country. Either 08 or 09 was the first school year when enrollment declined. So you have oversupply, AND people leaving to move somewhere else. What will absorb that in FL is the part time resident population, which I don’t see in Vegas. The 27 corridor, at least the part I know south of Orlando, is probably not a good bet. Not a lot of business, and I prefer to be closer to the beach.
IR,
When even the crowd of real estate bears on your own blog are against you on the state of Vegas, you know that sentiment is at its worst and the bottom is in for Vegas.
I think you’re right. I am a firm believer in moving against the crowd and doing the opposite of the prevailing sentiment. If anything, the bearish comments have made me even more bullish.
I agree. I gave up on Vegas when I couldn’t get an offer accepted with all the investor competition. Perhaps, I’ll take another stab at it.
Remember, you were a bear on housing overall at the peak, so someone shouldn’t have pointed to you as evidence to buy at the peak.
My suggestion would be to scale up your reserves for empty months or non-payments. Rental homes in Vegas will be much harder to rent than in areas that did not see huge inventories grow during the bubble.
Plus the distance to being a landlord would seem to be a pain to me.
“Remember, you were a bear on housing overall at the peak, so someone shouldn’t have pointed to you as evidence to buy at the peak.”
Keep in mind that I was alone as a bear back at the peak because the kool aid intoxicated believed prices could only go up. Now that everyone is bearish on these beaten down markets and believes prices can only go down, I am turning bullish.
Hold up, IrvineRenter. Nobody is saying prices can only go down. They may have bottomed – but I see no reason that the prices will go up in the forseeable future. You may be able to cashflow it on MS. Excel, but I suspect it’s not the grand slam that you are pumping it to be.
You may be right, and the rents may not turn out as well as comps may suggest. I believe with the huge number of foreclosures, there are going to be large numbers of hard-working people who do have jobs that are going to be forced to rent.
The thing is that even if you can’t rent the house for a few months, at 800 to 900 bucks a month you could use it as a “vacation property” when it’s not rented.
And if you do some work on it while you’re there I’d think the IRS would let deduct your expenses.
If you live in Irvine, where would you rather have this property? LV or Tallahassee?
Besides, Lake Tahoe is too far.
LookingToRelo –
The tone of your observation seems to be such that all the “bearish” sentiments are coming from permabear “chicken little” mentality.
I have brought up the example of FL which experienced a crash similar to LV. I am merely stating that I cannot understand why anyone would be so bullish on LV when FL seems to have much better prospects going for it. If IrvineRenter had come out and said he was bullish on FL, I would be inclined to see the point – but certainly not LV.
Also, the discussion has nothing to do with bottoming in house prices at all. It has only to do with the prospect of future appreciation. So your little quip about “oh the bottom must be in” is just the blowing of hot air.
Look at the other observations speaking of being outbid by “investors” in LV. Maybe all the investor activity in LV will blow another bubble – we’ll see.
If anything, call my comment an oversimplification of what’s happening on the ground in Vegas.
There’s been enough bubble history for a graph to be created that demonstrates what happens to prices as the psychology changes over time.
I don’t think Las Vegas is unique and can see how the chart can apply in this case. Las Vegas is not Detroit.
You and others out here get “it”. That’s why the comments I see are screaming “despair”.
Did anyone else see this:
An August Surprise from Obama?
WHERE’S MY FREE MONEY!?!?!?!?
I’m upside-down on my student loans; the knowledge I gained is worth less than my loan balance. BAIL ME OUT!
If he does this..
Adios Obama, adios Democrats come November.
You’ll see a voter turnout against this that will blow people’s minds.
Will believe it when I see it. If they want to buy votes, it would be much cheaper to send out another round of 600.00 checks to the people and more and more unemployment funds.
Also, does the President have the authority to issue such an order? Seems to me like how a Monarch would operate.
Aside from the $600 check, the only other course of action is to blame a non-Christian nation of brown people for the housing mess, ramp up defense spending, and invade. If we’re fighting falling housing prices over there, we won’t have to fight them here.
I am starting to believe that Obama is going to be a one term president. We are going to see a Republican come in with a protectionist agenda and militarize the Mexican border. Next election will be all about “Security”and “Big Government Spending” with a sideshow about “jobs”. I would not be surprised to see it go to former military (not McCain though – someone younger) take it. The political climate is right for it.
The Obama administration is not considering a change to its policy regarding mortgage finance giants Fannie Mae and Freddie Mac, a Treasury spokesman said Thursday.
“The administration is not considering a change in policy in this area,” said Treasury spokesman Andrew Williams.
http://www.foxbusiness.com/markets/2010/08/05/treasury-change-fannie-freddie-policy-568078743/
Nonsense rumor
After reading a bunch of different articles on Vegas, my belief is unemployment there will be ongoing for years. They built up that place with bubble year spending assumptions. It’s true there are a lot of visitors still (similar numbers to bubble times even), but the amount of money being spent is much, much lower. You hear it all the time from taxi drivers, strippers, bartenders, etc.
If rental housing stock continues increasing (all indications are a yes) and the unemployment picture does not improve or gets worse causing people to move away, the risk of rents going much lower seems to go up dramatically. And don’t forget, time is ticking quickly on the 99 week unemployment benefit train. It’s one thing to squat rent free in a foreclosure to-be, but another when one has to pay rent. These are all substantial downward forces on rental prices. I know traditionally rents are pretty stable, but there is no law that says rents cannot go down significantly. God did not say rents may not go down!
I think what a lot of us are saying is you can’t assume that rents will remain stable, so that risk has to be priced in somewhere or, at the very minimum, highlighted.
IrvineRenter –
You aren’t moonlighting over at CNN Money these days are you?
Vulture Investors – They’re Back
Common sense says that it’s smart to buy a house in an area that will get better, not worse. Vegas is going down hill. Deflation is real in Vegas and will continue as it has in Detroit.
The fact that monthly payments have been taking a nose dive in Vegas for over a decade should convince you to do the exact opposite of what you are concluding. Vegas has already been in full fledge deflation mode until finally the land there is worthless.
Watch what happens when all the investors cram their way into LV and they start competing for renters. Common sense tells me that Vegas is looking at declining rents as everybody and their brother goes off to become a land baron now after reading a story on CNN about “bundles” of money being made. How low can rents go? Perhaps that is the new question.
I agree the Vegas customer is dying off, literally. Entertainment consumption is changing rapidly, at the end of the century Vegas is a warming barren desert with no where to go but down. It will be one of the many great American ghost towns. A great history story, but worthless in a matter of decades.
Lol. Yea right. Gambling and naked women are oldest businesses in the world. If Vegas goes away, there will have to be another town to support these addictions. Put your money where your mouth is and buy real estate in that town.
What – Vegas has naked women too? I thought that being able to look at naked women is why the internet was born.
we are definitely in the eye of the hurricane economically.
asians do like to gamble.
“as expensive as real estate got, that’s how cheap it’s going to get”
americans are getting poorer.
vegas is cheaper than flying abroad.
rents can decrease with deteriorating economic conditions and increased supply of forrent signs
just a few pros n cons to ponder…
What will hasten the demise of Vegas is gambling being legalized in more places. Look at Atlantic City, NJ. Look at Trump’s bankrupt casino empire. If people are counting on the ‘people like to drink and gamble’ refloating Vegas, they have to account for the fact that there will be other places to do those things.
I dunno about Vegas. It’s a single-industry town, and that single industry is uniquely vulnerable to rising energy prices. If world oil production has truly peaked, then, barring billions in high-speed rail investment to run lines from Vegas to two or more elements in the set {San Francisco, Los Angeles, Denver, Salt Lake City, Seattle} I don’t see how the gambling-shows-hookers industry can stabilize.
I don’t feel like investing in anything which is entirely dependent on customers physically travelling an average of 1000 miles, when much of what Vegas sells is available at casinos and street corners closer to people’s homes.
At least Riverside (barf!) and Bakersfield (gak!) are each home to several industries, and are close to a large metropolis.
If I felt that gasoline and jet fuel prices would stay where they are for the next 15 years, I’d be open to the idea of Las Vegas real estate.
Good luck to you Vegas investors. You might be right.
Your argument is sane, but even if gas prices were stable the younger generation and the generations to come will not go to Vegas. The reality is the Vegas customer is shrinking fast. Both in numbers and wallet size.
I dunno about that. If oil prices rise, and airline tickets skyrocket, Vegas is going to look like a good vacation option for more people. Like Disneyland was when Americns were less well off in the sixties – it’s somewhere fun you can drive rather than fly to.
Hmm… legalized prostitution, booze, topless shows, gambling, quickie divorces, gaudy wedding chapels, burgundy velvet, great inexpensive restaurants, free JW neat at the 50 cent one arm bandits, Elvis….
Once upon a time the price at fine restaurants in Vegas was 50% of LA… I’m not kidding you. I once called back the waiter to make sure he hadn’t forgotten to charge us for the cognac! (He hadn’t it… so I tipped him 40% and still the meal was a steal).
Good rooms were dirt cheap.
Ahh Vegas in the early 80s when I first went there!
We saw Rodney Dangerfield at Caesar’s in ’85.
Today’s Vegas is too clean and expensive. At what they charge you can might as well do LA and SF… But fixing Vegas will be easy.
Start by legalizing pot.
Then, LVPD giving public drunks a free ride home. Put a light rail on the strip and only allow Big Ass Cadillac and Buick Convertibles on the Strip -no Toyota Siennas allowed. 😛
Bring back the real mafia to run the show: no crime on the streets allowed.
All they need to do is go back to emphasizing the SIN at night.
Nothing that a recession won’t fix. I have every reason to believe that LV will do just fine.
Now THAT’S the Vegas I’d like to see.
This Vegas that you described, with all the seed and skank and cheap prices still exists at the North end of the Strip. Dirty rooms in a seedy smokey casino are still cheap, heck I think there’s even a $1 craps table at Circus Circus.
I don’t know what happened to food prices though; anything other than fast food is way overpriced. My only thought on that is when someone is wagering over a hundred dollars an hour, it’s easy to drop $5 on a coffee, or $50 on a dinner.
From my experience, I would not want to live 4 hours from rental property that I owned, unless I was willing to pay a management company to take care of everything. My guess is that the management expenses will eat up any potential cash flow.
agreed. you gotta be hands on. management company will function the same way govt does with your money – spend frivilously. It is very hard to monitor this unless you have time to babysit or have a manager with extreme integrity.
Profitability comes from sweat equity. if you want something done right, you have to do it yourself.
Interesting to know. With interest rates as low as it is you could probably buy Las Vegas Homes with 15 year mortgages, 20% down, and still cash flow using properties as rentals.
From Strategic point of view on macro term basis, Las Vegas may not be the choise of gambling for gambers globally.
WYNN, LVS saw the slowdown in US Spending and opened casinos in Macao which are doing much better, this has almost wiped out that foreign capital and travel from wealthy asians who used to come to Vegas for gambling and prostitution enjoyments.
Job growth and casnios will continue to deteoriate in US while Asia takes control. The Vegas game is over for good, dont get caught into RE investing there, always look at macro implications of what happened and what could potentially happpen.
I fell in love with Vegas a long time ago when vacationing there. I’m seriously considering investing in a condo soon, I’ve heard great things about the Trump Condos and i thinking Vegas is on the rise again, i think now is a great time to invest in some real estate there.