We can’t offer any specific investing advice, but we can provide a few general observations about the current real estate market in Las Vegas.
In general, prices are still high and going higher, though they’re not rising as fast and frantic as they did over the past few years. The median price of a single-family Las Vegas house hit a high of $314,950 in March, a 1.9% increase over February and a 6.8% increase over March 2005. That’s high, but keep in mind what some analysts say: The high end of the market, which drives up the median price, is in good shape; the low- to mid-markets are a bit more stagnant.
Inventory is also high; as of May 9, there were 14,324 single-family houses on the market, with 2,993 sold over the last 30 days. This compares to April 9, when 13,472 single-family houses were on the market, with 3,017 sold. Though sales are strong, inventory has been increasing slightly every month in 2006. So has time on market, which is now hovering around 90 days.
An abnormally high number of houses for sale are sitting vacant. This could be explained by the fact that investors, who bought houses on speculation, weren’t able to rent them, so they’re now trying to unload them to get out from under the monthly payments. Investors, it’s believed, helped drive the prices up; will they now drive them down? And if you think vacant houses are a sign that there could be opportunities to buy low from desperate sellers, you might be right. But then what? If you can buy a house low enough to undercut the going rate for rent, you might be able to attract occupants. If not, and if you’re not planning on living in the house yourself, you might wind up in the same position as the renterless investor who sold low or even at a loss.
Condos and townhouses are in the same boat as houses. Inventory is up, but prices are still high. Appreciation is falling. Time on market is rising. Not good signs for investing.
Vacant land is pretty much out. Prices are through the roof and unless you plan to build a house with your own two hands, finding a contractor can be very tough in this market.
There might be a play on a condo-hotel room. Hybrid property is a coming trend in Las Vegas real estate: You own the unit, and the hotel or management company rents it out by the night when you’re not using it. From what we’ve heard, condo-hotel units are priced to pencil out a small profit given certain availability and occupancy rates. Of course, this presupposes that Las Vegas occupancy rates in general will hold up over the foreseeable future, especially taking into consideration the number of Strip hotel and condo-hotel rooms currently under construction (more than 17,000 at the Palazzo, Encore, Cosmopolitan, Planet Hollywood, and CityCenter alone) and planned (thousands more on the drawing boards).
Our view: Las Vegas in late spring 2006 is a tough market for investing in real estate.
