This post was inspired by Arina Hanciulescu (and I am not picking on you, just answering your questions quite frankly!) and Rey Gallegos from my Economic Conditions Report.
Arina posed questions in italics:
"Can you please explain how gaming and tourism industry help the Real Estate Market? I don't see the relation there. Conventions, tourism, gaming, adult entertainment bring to Las Vegas transit population only. Are you saying: "It's the economy stupid?" Well!... Those industry bring up the economy on the general level. But this is not essential factor in turning around the real estate market."
The tourism and convention attendence are absolutely essential to our real estate market. See my answer to what is booming right now under the next question. Leisure and Hospitality is the #1 employing industry in Nevada and accounts for 29% of the job market. Growing convention attendance and tourists bring in more money to our economy which in turns creates construction jobs (tied for the third largest employing industry), more businesses, more tax revenue (to keep the taxes down), etc. In return the people these industries employ, go out and spend their money on the smaller industries (buying homes, pools, landscaping, retail, etc.) Nevada remains attractive as a place to move to, live & work. In turn, our medical and education facilities keep growing in numbers and we have new jobs outside of the #1 Industry: Leisure & Hospitality.
"Las Vegas population is not 100% affected by those industry... There are in majority regular folks with regular jobs and regular business. As the Real Estate is in a spiral down mood all those regular folks (having nothing to do with the gaming/tourism...etc) are still hurting badly in the process."
Real Estate is NOT in a downward spiral. There is TREMENDOUS pressure on the rental market and has been since November of last year. The rental market is very much a part of the Las Vegas real estate market just as resales and new construction. We have seen a phenomenal upward tick in median & average rental rates in the last year. The rental market is experiencing a silent boom and the disparity between renting and a mortgage payment is dwindling in front of our eyes! Talk to land, commercial, business and property management brokers also for the state of real estate.
"If your assessment would be true than why Nevada/Las Vegas is listed on National statistics as top foreclosure rates. RealtyTrac: Nevada posted the nation's highest foreclosure rate, with one foreclosure filing for every 40 households during the first half of 2007. The state reported a total of 25,208 foreclosure filings on 14,687 properties, more than double the number of foreclosure filings reported in the previous six-month period and nearly triple the number reported in the first half of 2006."
Rey did an excellent job rebutting this in that post but I will add. The emergence of no down loans with almost no income qualifying guidelines helped this along the way. This is merely a hiccup to our growth in real estate. Not only is this affecting "normal" people but it is affecting investors who bought and thought they had a "quick flip" and weren't prepared to bleed from their wallet for another several years or prepared to rent out the property and experience negative cash flow. There are stories out there where people are renting properties and they are SCRAMBLING to find a new rental because the property they are renting is going back to the bank. Since I help find rentals, I hear a story like this at least once a week. This week it was twice.
"And Las Vegas has the gaming/tourism going for a growing economy? Is that the answer? Is that enough?"
Yes it is. To see the rental market moving like it is shows me that the State of Real Estate is SOUND. More people that come here to visit, more jobs are created, people are still moving here, people that move here still need housing. Even though they aren't buying homes, this doesn't necessarily mean that the market is stuck.
There are smaller markets within the larger resale market that is the entire Las Vegas Valley that are moving. We are selling at 2001/2002/2003 levels depending on the market you are looking at. We just have an abundance of inventory ~ which is the only thing that is making this market a stagnant market! We have introduced a whole bunch of new inventory to our markets since 2004: Condo Conversions, Patio Homes and High Rises just to name some examples.
The Las Vegas Real Estate Market is a VERY exciting place to be right now. We have a very unique economic base that must be watched carefully and never ignored.
All the Best,
All the Best,
Renee has over 20 years of negotiating, sales and marketing experience to bring to your Las Vegas, NV Real Estate transaction. Full time and dedicated to the Real Estate Profession.
Rhodes Ranch Area Active Listings/Sold/Rental Real Estate Market Reports Generated May 13, 2008
Las Vegas, NV May 2008 High Rise Inventory Update: 3.6 years! (no change)
Las Vegas, NV April 2008 REO Inventory Update: A Seller's Market @ 4 Months Inventory
Las Vegas, NV Short Sale April 2008 Inventory Update: Absorption Dropped Slightly, 3.2 YEARS.
Rhodes Ranch Area Active Listings/Sold/Rental Real Estate Market Reports Generated April 30, 2008
Those Las Vegas Condotels: Self Fulfilling Prophecy?
Economic Conditions for the Las Vegas Valley April 2008
Las Vegas, NV Real Estate: Owner Will Carry (OWC) and Lease Options
Las Vegas, NV Pendings STILL on the Rise, Absorption Rate is Looking Good!
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These foreclosure rates and resale stats compared to previous years are really amazing! They say what shoots up real fast (like housing prices did) must come back down. We'll have to see where the bottom is in all of our markets.
Thanks for the update on the Vegas market!
PS Like the new pic better.
Well said Renee. One can't judge the Las Vegas Real Estate market by one factor alone, foreclosures. You really have to peel back the many layers of our community to see what really drives the market. I know I might get chastised for saying this BUT I think the Valley is poised for another mini-boom. It won't come this year or even in 08 because of the election. As prices fall, and if the mortgage market corrects itself and becomes investor friendly again and rents continue to rise, I think we will see another major influx of investor purchases. Now I will duck!
Great post! I believe in our market! It is strong.
Renee,
I also think its important to add to the comment "Leisure and Hospitality is the #1 employing industry in Nevada and accounts for 29% of the job market." This figure does not include the sectors that support the industry i.e. Drapery Companies that supply the hotels, IT companies that network them, FEDEX that has increased business, payroll check printing companies, etc. However, if the industry declined so would these peripheral jobs.
GREAT blog Renee...you obviously put A LOT of research and work into this!
Katrina: Really, should I go back to the other pic? I am hoping we are near the bottom!
Rey: No need to duck. I was hyper optimistic about our market and then the subprime thang happened! UGH! To tie your two comments together, we have many tipped workers who used those "subprime" loans because they needed stated income to qualify. Tip compliances are extremely low and I have written about this in the past. Someone who can qualify for food stamps "on paper" can really qualify for a 300K house because they bring home a ton of cash! I am optimistic on the residential resale market for 2009! You are 100% correct with the peripheral jobs. I think everyone should work in a casino or casino outlet for a minimum of 2 years to understand what makes our economy work. It is excellent observing experience.
Mary: Not really. I worked in the "Leisure & Hospitality" industry for 6 years and it really opened my eye on our tourism and applied it to Economics 101. All I had to do was google the employment statistics!
FYI Rey: I almost called you so we could write this post together!
Renee, you are my kind of person. You are smart, articulate, and positive. Very good post and it draws the correct conclusion. Real estate in LV is a very good investment. Everybody should buy now to avoid the "rush." I want to be one of those investors. I believe!
Bill Roberts
Renee, I must say that for not spending much time on the post (in your response to Mary) this is really an amazing blog.
You are correct in that there are alot of tip-earners in this market that CAN truly afford a 300k house. One thing the underwriting doesn't take into consideration is the gambling habits of these tip-earners which I am sorry to say is an issue. I also came from the hospitality industry.
Finally, thanks for thinking of me in co-writing the post. You did a great job with it and REALLY hit on some great points about our market and its riving factors.
Bill: Please make sure that I am your agent :)
Rey: Thank you! I totally agree with you that addictions also suck a ton of money out that could be used for "other" things. We can go into the gaming, blow (booger sugar if you want to call it) and all night clubbing too. It amazed me how much money people made and then it was gone by the next morning. Party like rock stars baby! FYI: Please hijack my blog posts at any given time. Consider yourself a guest writer..LOL
Renee, Thank you also. There are alot of temptations in this city, we all just have to learn to live with them. Also, sweet, I have never been a guest writer before. Thank you.
Renee, Very good post. BTW I don't think I've ever heard the term "booger sugar"!!! Now THAT"S funny!! My market too is going to turn around when the investors get back into the game. And it will happen. Rents are still declining in my area but that will soon change. Once rents start going up and values come down low enough to make the numbers work the up cycle will start again. Of course this big bump in the mortgage industry is going to have to level out so there is money available to buy. And that could take a few years. It should be exciting though to see what happens.
Great information, Renee. I learned a heckuva lot. Interestingly our retail vacancy rate is one of the lowest in the country while out rsidential market is still "adjusting.". Residential rents are creaping up, too. Interesting times, and for me ( a former Bostonian) an on-going learning experience.
Jeff
Rey: you are welcome to comment and hijack my posts whenever you want. I think we see this city, economy and market eye to eye :)
Bryant: I am happy to amuse you. I agree about rents rising and values dropping. I worked on the phone today with a fellow agent who has a buyer backing out of a deal and wants to continue to rent. You have to know this market like the back of your hand to deal with objections like that or you aren't selling ANYTHING. If you don't sell anything because of the message you send, they will at least be thinking "that blonde chick told me that" later on.
Jeff: Commercial is hot here too! There are opportunities out there, they just need to be grasped.