Las Vegas Real Estate
What will the real estate picture in Las Vegas reveal this year? Consider this: For some years now Las Vegas has enjoyed one of the healthiest economies in the nation, and the trend is expected to continue in 2007. In fact, economic indicators suggest that 2007 may surpass all previous years in overall economic performance. A primary reason for this rosy outlook is the vibrant job growth that Las Vegas has been experiencing, which in turn has a positive effect on the local economy, and that bodes well for the Las Vegas real estate market in particular.
Case in point; the number of construction projects in Las Vegas is at an all-time high and workers have been flocking to this area in considerable numbers to take advantage of the opportunities not available to them in most other areas of the country.
In regard to the nation's current real estate situation as we all know the once hot buyers market has cooled considerably to say the least. The Fed's series of interest rate increases and the resultant fleeing of speculators from the market, the dumping of overpriced properties, often at break even prices, and sometimes even at a loss, and a resultant unprecedented growth of inventory has put a damper on the industry. Nationwide, the median price for existing homes are expected to decline an estimated 3.6 percent in 2007, which would be the first decline for an entire year since the Great Depression of the 1930s.
However, just the opposite is occurring in Las Vegas and its surrounding environs. Even as inventory of homes for sale climbed above 20,000 in 2006 and year-over-year sales showed a decline, median home prices in Las Vegas actually inched upward throughout most of 2006. As an example of the area's resistance to an overall depressed nationwide real estate market, the median price of an existing home in Las Vegas increased some 2.7 percent from October 2005 to October 2006. This despite an overall 22.7 percent drop in closings due to lower demand.
One telling indicator of the vibrant Las Vegas economy is the continuously increasing construction of single family homes in such Las Vegas hot spots as Summerlin, Green Valley and North Las Vegas. At the heart of the city itself, the Las Vegas Strip, an even more phenomenal spurt of construction is taking place. Consider this; in April 2005 there were 22 construction projects underway, today in January 2006, there are 41 constructions projects in various stages of development. That kind of activity means a lot of construction workers and eventual employees to staff the new structures. The continuous incoming flow of workers naturally increases the housing demand and that is a key reason for the well-being of the Las Vegas real estate market.
Statistically, for each room built 2.5 jobs are created, and that resulted in a 5.5 percent growth of jobs in Las Vegas since September 2006. Only one month later, the job growth rate in October 2006 increased to a phenomenal 7.4 percent. Compare that figure with the nearly flat 1.3 percent increase in job growth nationwide over the same period. These statistics are solid evidence of a strong and healthy real estate picture and overall economic health that exists today in the City of Las Vegas.
Overall, commercial real estate ventures are thriving in Las Vegas because of the comparative ease of developers to obtain project funding, despite the current trend of Federal Banking Agencies toward closer scrutiny of commercial real estate lending activities relating to the growth of commercial loans from smaller banks, who appear to be selling off their residential and car loans and focusing primarily on commercial real estate.
Fortunately for Las Vegas, Federal Regulators do not consider the city high risk because much of the lending for casino and high-rise condo development originates from financial institutions outside of community banks.
Although construction loans are not difficult to negotiate, one of the difficulties affecting commercial real estate development in Las Vegas at present is the high cost of construction for tenant improvements which currently average $75 a square foot.
In regard to the overall real estate picture in Las Vegas as of January 2006, a buyers market continues to dominate the scene with available inventories of single family homes at record levels and new home builders offering such incentives as 5% of purchase price towards buyer's closing costs, and free upgrades such as granite counter tops, window treatments and appliances. The condominium market is experiencing similar conditions.
Despite current conditions, rapid improvement in the Las Vegas real estate market is expected to occur in 2007. Consider these facts: In a recently completed comprehensive analysis of the Las Vegas real estate market, HUD has concluded that continued population growth in the Las Vegas Valley propelled by increased employment opportunities, continues to make Las Vegas the fastest growing large metropolitan area in the United States. As a result, the demand for housing is expected to increase accordingly, and new single family housing and condominium development continue in this expectation.
Currently, a $13 billion downtown redevelopment project is on the drawing board, underscoring the confidence investors and builders have in the continuing growth and strength of the Las Vegas economy. In fact, the nationwide slowdown in real estate closings this past year did not impact Las Vegas quite as hard. A real estate bust never occurred in the Valley, and is extremely unlikely to occur in this city of 1.8 million, currently experiencing 7,000 new arrivals each month with some 60,000 new jobs expected to be created this year.
As mentioned previously in this article, median prices of single family homes are not just holding steady, but have shown an increase. Still another boost for the Las Vegas real estate market is the adjustment to local building codes in certain areas to allow local builders to create so-called high-density neighborhoods. These are developments on which more houses can be constructed per acre, allowing builders to offer homes at lower costs, thus affording the opportunity for many lower wage blue-collar workers to own a home.