[WOHR]

Las Vegas Now | Owners of NY Plaza Hotel Get Go-Ahead For Vegas Strip Casino

[Coop01]

You can always tell the people that are heavily invested in the real estate game.
Simple - If you bought back in 2000 and held onto the property, you might be able to get out with with your skin unless you attended one of those famous real estate seminars that were traveling around the country like Tent Revivals.

If you leveraged the value of the original properties to buy even more without structuring the LLC's and S corps right and you bought more property after mid 2005 and are still holding it - you are screwed. It's probably mortgaged beyond the value. Try to get a new loan.

After the debacle we witnessed this weekend with the JP Morgan and Bear Stearns deal on Sunday evening for a penny on the dollar and a 3/4 point point drop in the Fed fund rate on Tuesday, you gotta be wondering what's next. Carlyle group, Wash. Mutual? Bernanke's ammo belt doesn't have many silver bullets left. They could go below zero I guess. In fact they technically already did by guaranteeing the bank deals.

Sure - all the talking heads wagging in agreement that it's a bottom drove the market up 400 points but the action today gave back 3/4 of that so the smart money could hedge their bets. It's a death of a 1000 cuts.

It will undoubtedly come back but you'll have to service the debt for 10 years until you can get out.
The only saving grace may be foreign investors coming in with bags of cheap dollars. I sold a lot of California desert future " Golf course" land near Palmdale to Japanese investors with bags of money. Did they ever build that International Airport in Palmdale? NO! The only living thing playing golf on that land are Jack Rabbits.

Remember there is a lot of "buildable" desert land out there that is going cheap and future developers can build new for 40% less than you can sell existing homes. And I haven't even talked about the water supply yet.

The folks coming in right now with fresh money and paying the real value for the property are the ones that are going to make out like bandits.
BTW - I hear they have a new "Tent Show" in town on how to profit from the coming real estate crash. As for me - I'm waiting to buy the Belagio on the same terms as JP Morgan got Bear Sterns

[Doogster]

I live in Henderson, NV. Been there 7 years. Planned my move after 30 years of moving all around the country for work. For Bechtel, the big guy. Why Nevada? Many reasons. Funny-Coop01 talks about Lancaster, Ca. I built a cement plant addition near there, lived in Lancaster, and loved to take the MetroLink to LA, and the bus to Santa Anita. But there was no way I'd live in the Cantelope Valley. Rough LA escapees. One thing I learned, however, is that living in a desert is very healthy. Never felt better, even as a former marathon runner. No colds, snow, sleet or freezing rain. Just hot and dry.

On nearing retirement, I noticed in 2000 that the home prices in Vegas had not changed much since my first visit in 1989. There was a recession going on in 1990, and even San Diego was distressed. But Vegas was building the Excalibur despite bad times. So in 2000, I bought a nice house with a Strip view for $140,000. Took 18 months to get it built, but hey-I was still working. It sure appreciated over the next 4 years, but now it's worth maybe $240,000, maybe less. But I owe only $96,000 total. Why live here? The house taxes are low-$1,500 py, house insurance is $400 py. I go to the same casino everyday, and have many friends of all ages. Easy to talk to chickies-they can sit at a bar without being harrassed, since they're playing the machines instead of trying to be picked up-maybe. No traffic problems here in Henderson-we mostly go to the Strip when the relatives visit.

Overall nice place. People from everywhere, California and the Mid-West mostly. Few from the East Coast-thank God. And I'm a former Bostonian. Go to Florida for the NY/BOS experience. Vegas is different-and OK with me.

[Randy Culture]

Until average house price is supported by average income, prices will continue to fall. The OP's insulting tone will get him no sympathy when (if) he gets wiped out in a severe downturn. No one knows how bad it's going to get, just like no one knew how high it was going during the bubble.
My guess is we're getting deflation like in the 1930's. There's been too much debt worldwide.

[olecapt]

This is all poorly understood. If it were true CA would have been out of business years ago.

The sustainable ratio between salaries and home prices depends a lot on the scarcity of land. Wide open places...Dallas for instance...tend to have low home price to salary ratios.

Places with real constraints on the availability of land have much higher ratios. So CA is a great example.

Las Vegas was historically closer to Dallas than CA. But with the newer BLM pricing rules that may no longer be true. So we may see a substantial increase in the ratio actually achieved in Las Vegas.

Time will tell.

[bumpercar]

California = Diverse Economy + High Salaries + Great Weather
Vegas = Tourism-Dependent Economy + Average Salaries + Desert

Land is scarce in California due to heavy demand for homes. Land is scarce in Vegas due to artificial and tenuous supply constraints. They can't build more land in California. The BLM can sell more land in Vegas, and they will, for less than you think.

So, would you rather pay a higher multiple in California where the supply/demand imbalance is essentially guaranteed in perpetuity? Or in Vegas where the supply/demand imbalance is contrived and subject to political and market pressure?

Originally Posted by olecapt

This is all poorly understood. If it were true CA would have been out of business years ago.

The sustainable ratio between salaries and home prices depends a lot on the scarcity of land. Wide open places...Dallas for instance...tend to have low home price to salary ratios.

Places with real constraints on the availability of land have much higher ratios. So CA is a great example.

Las Vegas was historically closer to Dallas than CA. But with the newer BLM pricing rules that may no longer be true. So we may see a substantial increase in the ratio actually achieved in Las Vegas.

Time will tell.

[ClarkGrisowld]

Seems to me like the Vegas real estate market is very challenging. Yes, there are lots of new jobs in the pipeline, but most of those are not the type to support continued run-up on even 500K homes. Sure, you have retirees and investors, but they are also the type to go further out into the desert for better value on new homes.

The economy of Vegas is structurally very different from Chicago, NY, Boston, CA, etc...Most places with high real estate prices have either a shortage of land (meaning a shortage of housing) or a fairly diversified economy with a large and growing middle/upper working class. In most cases those cities have both. Vegas doesn't really have either, and the retirees/investors can be a rather fickle group. My main concern is whether Vegas has the organic high-income job growth to sustain the sort of returns being discussed here. Show me a comparable "blue collar" town with similar real estate prices. This is driven by retirees, and the investors are following that demand shift.

I don't have a good argument of why retirees would stop flocking to Vegas, but many would be far less sensitive to distance from the Strip which implies the existence of a theoretical ceiling on housing prices - they'll just get better value further and further out into the desert. Just think, for a minute, what a train out into the desert might mean for mid/upper-tier home values in Henderson and Summerlin. That's probably not an example worth considering, however it should be noted at some point you reach a peak level of retirees. Maybe not close, now, with the baby boomers retiring but at the same time retirees have a, errr, higher "attrition" rate than other demographics.

[bumpercar]

Those other cities are ripe with high-value "thinking" jobs, like finance, computers, and medicine. Vegas is ripe with repetitive non-thinking jobs, like blackjack dealers, cocktail waitresses, and real-estate agents.

Originally Posted by ClarkGrisowld

Seems to me like the Vegas real estate market is very challenging. Yes, there are lots of new jobs in the pipeline, but most of those are not the type to support continued run-up on even 500K homes. Sure, you have retirees and investors, but they are also the type to go further out into the desert for better value on new homes.

The economy of Vegas is structurally very different from Chicago, NY, Boston, CA, etc...Most places with high real estate prices have either a shortage of land (meaning a shortage of housing) or a fairly diversified economy with a large and growing middle/upper class. In most cases those cities have both. Vegas doesn't really have either, and the retirees/investors can be a rather fickle group. My main concern is whether Vegas has the organic high-income job growth to sustain the sort of returns being discussed here.

Just think, for a minute, what a train out into the desert might mean for mid/upper-tier home values in Henderson and Summerlin.

[sheriff]

Originally Posted by Randy Culture

Until average house price is supported by average income, prices will continue to fall. The OP's insulting tone will get him no sympathy when (if) he gets wiped out in a severe downturn. No one knows how bad it's going to get, just like no one knew how high it was going during the bubble.
My guess is we're getting deflation like in the 1930's. There's been too much debt worldwide.

KTNV ABC,Channel 13,Las Vegas,Nevada,News,Weather,Sports,Entertainment,KTN V.com,Action News .:. New Home Sales Fell In February In The Valley (http://www.ktnv.com/Global/story.asp?S=8043267 - broken link)

[Coop01]

Originally Posted by bumpercar

California = Diverse Economy + High Salaries + Great Weather
Vegas = Tourism-Dependent Economy + Average Salaries + Desert

Land is scarce in California due to heavy demand for homes. Land is scarce in Vegas due to artificial and tenuous supply constraints. They can't build more land in California. The BLM can sell more land in Vegas, and they will, for less than you think.

So, would you rather pay a higher multiple in California where the supply/demand imbalance is essentially guaranteed in perpetuity? Or in Vegas where the supply/demand imbalance is contrived and subject to political and market pressure?

I'd agree with you for the most part as far as diverse economy in CA.
Although the passage of the "Desert Protection Act" in the Clinton presidency did remove a significant amount of "buildable" land, there still exists a vast amount of private land in the Mojave desert. This land at present is not desirable IMO.
The aquifer in the Mojave will sustain a great deal more development but that also is limited.

I think Las Vegas economy is reaching sustainability with less dependence on Casinos but retirees are a necessary supplement to this mix in that they bring money into the system that was captured from other areas.
With retirees comes a greater demand for services and infrastructure to accommodate their unique needs. Hospitals, medical transportation, doctors and associated support for those industries will be required in greater number. This is where the future of Las Vegas lies IMO.

These service sector jobs are low paying so increased home pricing and rental housing is not supportive of that scenario. Lower paying jobs also bring a cry for more social services and bigger government to the needs of people whose jobs don't pay a "living" wage.
The next big crisis will be water. Los Angeles would still be a desert if it weren't for the aqueduct bringing water from the Owens Valley. Where is Las Vegas going to get a larger supply?
These are not insurmountable challenges but visionary planners are required to stabilize the future of Las Vegas. We definitely don't need more " hit and run" investors. It's time for controlled, sustainable growth not more cookie-cutter houses.