The Great Vegas Land Shortage
August 14, 2009
During my drive to the M Resort earlier this week, I actually made it a point to take several photographs of nothing along the way.
Las Vegas Valley
Las Vegas Undeveloped Land
Las Vegas Valley
Las Vegas Undeveloped Land
Las Vegas Undeveloped Land
While it may sound silly, I am actually quite serious. These photographs of nothing are very important to me.
When I fly around the Vegas Valley, or when I take a drive more than 5 miles from the city’s core, I try to take photos of the large pockets of vacant land that I see along the way.
Why?
To remind myself that no matter what the Las Vegas real estate industry says … no matter how much they jump up and down and scream themselves purple about how our real estate market has bottomed and must go up … I can always look at my photographic folder aptly named “/users/rex/desktop/nothing” as irrefutable proof that there is not now, never has been, and never will be a Las Vegas “land crunch”.
To be honest, I almost fell for this ruse in 2006. I was considering the purchase of a large house here in the valley. I was given an education by a local Real Estate agent about the Bureau of Land Management acting as a Federal Reserve-like regulator for land supply, and I was told that if I didn’t buy, and buy quickly, that I would be sorry and would forever regret my decision.
Despite the very compelling arguments made by the “agent”, I could not take her advice on face value. I grew up in a very ardent DIY culture, and for better or worse, it is an ethic that I will probably take to my grave. Part of this particular philosophy eschews the notion of “experts” and “professionals” as possessing any special abilities or knowledge that a motivated person could not obtain on their own.
When you get down to brass tacks, there is really no such thing as a “Realtor” or “Realtor Associate”. While grandiose titles may help the self-esteem of the recipient, and may convey an inflated sense of worth to those seeking their services … the reality is that everyone in real estate is nothing more than a salesperson.
You will never hear a car salesman tell you that it is a bad time to buy a car, you will never hear a Best Buy clerk tell you that an extended warranty is unnecessary, and you will never hear a real estate salesman tell you that it’s a bad time to buy a home.
Unfortunately, in the mid-2000’s, I was only one of three people in Las Vegas who was aware of this fact. People called me a cynical ass who was unaware of market economics. Most of these people are now upside down on their homes. I’m not gloating, just stating a fact.
Before I committed to purchasing my little slice of Las Vegas paradise, I did what few other Las Vegans did at the time.
I simply got in my car and drove. And drove. And drove.
What I saw then was what I see to this day. Mile after mile, and acre after acre of empty and undeveloped sand.
Las Vegas Undeveloped Land
Las Vegas Undeveloped Land
Las Vegas Undeveloped Land
Las Vegas Undeveloped Land
Las Vegas Undeveloped Land
This week, I looked up the value of the home that I almost purchased and was presented with a very startling reality. It had been foreclosed upon, and was recently snatched up by a Florida bank for 80% less than what it sold for in 2006. Eighty percent.
While this may have been an extreme example, news was released this week that as of right now, the median price of a Las Vegas home is $141,000. This is down a whopping 40% from the same time last year. Median prices of a condo have dropped 54 percent to $66,000.
I don’t care who you are … that’s massive.
Now that prices have fallen to these levels, the “Buy now!” banter is once again starting to reach a fever pitch.
I am still on a few real estate mailing lists, and the same people who were screaming to buy in 2007 are once again screaming to buy in 2009.
I would trust these people about as far as I could throw them, but I am once again starting to do my own cynical ass analysis. I will put it against the analysis of self-proclaimed professionals any day of the week.
Drives like the one I took two days ago are important to CA analysis, because they serve as a bit of a reality check. Much like an honest personal assessment of the situation which averted a catastrophe five years ago, it is starting to concern me that so many people are once again convinced that it is TIME TO BUY®.
Bottoms can only be formed in the absence of optimism, and in the face of true capitulation. The fact that some optimism remains, is prima-facie evidence that we have yet to bottom.
I fully realize that they aren’t “making any more land”, but in Las Vegas … they don’t need to. With a declining population, dwindling workforce, and no compelling evidence on the horizon that this pattern will reverse, Las Vegas has all the land it will need for the next 2,000 years, and then some.
Not all of the photos on this page were taken in the boondox. Many of them were taken within 5 miles of the Mandalay Bay.
As a lifelong city-dweller, “home ownership” never seemed particularly attractive to me. I’m not alone. About 20% of Manhattanites own their residences, and only about 38% of DC residents do the same … mostly in areas further from the city center. The inability to move at-will always seemed stifling and decidedly boring. If a better unit three blocks closer to the action became available, I always wanted to be able to pick up and move to it. Without this mentality, I would not have been able to live in a large number of cities and do a large number of things.
On the flip-side, I am getting ancient. Just yesterday I walked past a mound of dirt, and it looked up at me and said “damn dude, you’re old”. As Las Vegas continues its descent into becoming West Detroit, mortgage rates are now 1/2 to 1/3rd of lease rates in many cases.
You could not pay me to live in the suburbs, but the notorious honky-flight of the last two decades has left many places within a two mile radius of 18b (my favorite part of Vegas) quite depressed by historical standards.
It may finally be time to re-visit the issue of renting property from the government (sometimes called “home ownership”) again on at least a casual basis.
I know for an absolute fact that Las Vegas housing prices will never rebound to the levels seen two years ago.
The Vegas housing boom of the 2000’s was a one shot deal, never again to be repeated. I guarantee it. The myth of the “land crunch” was shattered, and I am going to enjoy sitting back and enjoy watching the foreign speculators who did not learn the first time get royally spanked again. If an out-of-town Vegas speculator swallowed poison and needed a nickel for the antidote, I would throw my wallet down a well. I hope they all choke on their own anus.
For those who actually call the city home, however, it may not be quite as stupid to buy a “live-in” as it was a few years ago. Especially near its depressed core. The fringes are still grossly overpriced, but central Vegas is becoming the municipal equivalent of a penny stock. It’s like I told Kris Kristofferson a year before I was born … “freedom’s just another word for nothing left to lose”.
It may be time to very cautiously begin to re-assess the current state of the city from a housing standpoint.
One thing is sure, however. If I ever decide that the time is right, I am going to have a hell of a time finding an agent.
The moment they start undulating their pieholes about the great Vegas land shortage, I will whip out my laptop and reveal to them the contents of “/users/rex/desktop/nothing”.
As for the large developments in town banking on a “turnaround” … Turnberry, City Center, Allure, Trump, etc … I just don’t see it right now, or at any point in the future.
Las Vegas Condos
This is not an island in the middle of the Hudson, this is the Mojave Desert.
There is a very good chance that at some point in the near future, I may be the proud owner of a City Center penthouse.
I already have $68.12 saved toward a unit, and if this trend continues, I’m already halfway toward owning one outright.
All hail the Vegas “land crunch”.
Written by Carlos on August 14, 2009 at 4:03 pm
I agree, Las Vegas is not New York, Boston, Philly, L.A., San Fran, … it is surrounded by land in all directions. If there is indeed a land crunch, it’s artificially manipulated. I remember seeing some mcmansions listed for 1 mill and above, and these properties sat on less than a quarter of an acre, in the middle of the desert. Outrageously overpriced, and people were buying them up a few years back, I suppose expecting to flip it for more. I couldn’t believe how overly inflated our home prices had become. Prices are now finally returning to normalcy and now the average buyer can afford to buy their home. Some 1-2 bedroom condos are listed for less than 50k, not bad.
Written by philipj on August 14, 2009 at 4:13 pm
Re realtors, that means the licensed person joined and paid into the state Association of Realtors, which often is Why they call themselves Realtors, and gives them access to the multi list boards. Those who go out on their own are Real Estate Brokers.
I suggest that when you sit down with a broker, ask him for an Agency form. That form defines him as YOUR agent, or as a Sellers Agent. He is bound by that legal document. If he works for the seller all info gathered will be shared with the seller, not in ther buyers interest..
Also, I say a recovery will not happen until about 2016, maybe sooner, but not much sooner. When you actually see manufacturing happen, and people getting good jobs, a recovery may be comming. Promises of jobs don’t count.
Written by tully on August 14, 2009 at 6:02 pm
After reading this, came across a fairly lengthy Time feature entitled “Less Vegas: The Casino Town Bets on a Comeback.” It’s a four “page” piece, and most of it’s about the RE situation.
The reporter interviewed an agent who is doing well specializing in short sales. She herself bought a foreclosed home, planning to allow foreclosure on the home she currently owned, where she was way underwater. (She did so.) How can this be a good solution? Don’t know, but it worked for her. The whole tone of the article is—-just strange. “Screw others before they screw you/everyone’s doing it, why not me?” sort of thing. I’m no paragon of virtue, but not sure I could do that and sleep at night, you know? I’ve got no problem “screwing” casinos by taking up their offers of cheap rooms/food, but messing with my fellow working stiffs just tryin’ to make in this world would feel lousy to me. Perhaps I am just splitting hairs though.
As she visits and shows homes, she is accompanied by her husband. After she entered a home occupied by a squatter who fired a warning shot, hubby started tagging along. At one foreclosed home in a neighborhood full of them, they actually “broke into” a home she wanted to show. The reporter climbed through an already forced open window, then let the agent and her hubby in at the door. There’s a video of that adventure in the article.
The situation sounds really ugly right now, and it ain’t over. I could easily see some of those new, and now empty, acres of built on the fly/on the cheap tract homes becoming little more than ratty squatters’ villages. Mad Max in the Mohave. In the long run, while some areas closer to the Strip are rougher right now, they might be the better buy if one is planning to stick it out in LV. Some areas of the newest suburban ring may not fare well.
I’m not sure if posting links is OK here so I won’t , but go to the Time web page—-the article is there.
Written by Ron from MI on August 14, 2009 at 7:06 pm
The hype around the real estate boom in Vegas in the last 10 years was lucrative, yet unrealistic.
I’ve never got into real estate or the real estate business myself; too expensive, too risky.
Unless I was a millionaire or a billionaire who COULD afford it, go right at it.
But I don’t, and I didn’t.
And that sales hype about realtors trying to get you to buy a house, property, condo, and so on because “the BLM was limiting people where they could build” and because prices would go through the roof, to people who didn’t have the goods?
I wholeheartedly agree: I think they were total douche bags and dingbats who could pull a price or reason out of their a@*. They all acted and sounded like imbeciles, in my opinion.
And the common folks who went for it and went under: just as.
I don’t want to sound mean. I just wish that people who want something that is that large should have thought it over before agreeing to a commitment
Vegas isn’t a NY or a Chicago; it’s no real cosmopolitan city, it just feels like it., especially at the four corners at LVB and Flamingo. Putting a high-rise condo is cool. But probably in a few years or more, what you see on the Strip, such as the casinos, may be gone in future. And that includes condos as well (for better or worse.)
And it isn’t an LA (although most people from SoCal on vacation with tons of money and juice do come to town to visit the pretentious clubs and high-roller suites.) It can’t always be a haven for the risk-taking Hollywood crowd; it has to be diverse. And aiming just toward celebs to sell them condos or tracts of land don’t make this place attractive. Even the LA goes broke too.
It isn’t a Texas, not a Miami, an Orlando, nor even a Phoenix for that matter(although it’s almost close.)
And it certainly isn’t a Detroit (although Vegas and Detroit are becoming more and more alike, day by day, which is freighting.) It has unions, but like the auto industry, job security in the gaming industry is very volatile., especially in LV. And it doesn’t need antoher suburbia. My guess is that some of those houses that can’t be filled or sold may end up being razed, along with the subdivison. That’s my fear.
It’s just a small town in the middle of the Mojave with a bunch of glitzy buildings from its downtown core all the way down to its airport, with an average and currently existing large suburbia surrounding it .
It isn’t anything else other than that. And you can’t have outlaying areas with homes that are valued at or over a a million dollar and up to over a million. It makes no sense. In western Wayne County (just west of Detroit’s city limits up to 20 miles, we had houses when they were built that didn’tt even come close to initial sales prices of home sold in Vegas, and that was the 1980’s. Putting a house in a developing in a wester Detorit suburb was cheaper than what Vegas was doing five years ago
I’d wish people who buy and the hucksters who sell should have known that…including knowing that the BLM sale tactic was a fluke.
But only if they had used their common sense. Sad.
One question though:
Quote: “As Las Vegas continues its descent into becoming West Detroit, mortgage rates are now 1/2 to 1/3rd of lease rates in many cases.”
I think Rex means either. Northwest and West Detroit, which was very affluent and already built in the 1950’s, 1960’s and well into the 1970’s, is now a huge downtrodden slum; just like the Naked City next to the Strat in Vegas. If he’s talking about western Wayne County, that’s another story.
Written by catherine on August 15, 2009 at 7:47 am
I was almost talked into purchasing a condo in late 2005, almost thank goodness. It would have been the worst purchase of my life if I did. It was a 2 bedroom 2 bath listed for over $250k in the southwest. The agent at the time said they expect it to appreciate to $350k w/in a short period of time and that it would be a great investment for me to make. I think it’s worth less than 100k at this point.
Written by alienward on August 15, 2009 at 9:56 am
“It’s like I told Kris Kristofferson a year before I was born … “freedom’s just another word for nothing left to lose”.”
Dude, as much as I love reading your posts about Vegas, the stuff you come up with out of the blue is just awesome.
Written by Gary Stein on August 15, 2009 at 10:01 am
I almost became one of those out of town investors but decided against it out b/c I listened to my wife. If it weren’t for her “bad feeling” I may be one of those unlucky investors w/ an upsidedown mortgage. I know some people who made a killing during the mid 2000s flipping properties and I wanted a share of it, but my wife is not a risk taker, which I’m thankful for.
Written by FoolsGold on August 15, 2009 at 1:39 pm
I hear there is a shortage of those fifty million dollar an acre parcels on the Strip. Don’t think there is a shortage of desert scrubland on the outskirts of nowheresville miles away from the Strip. Ofcourse with the growth of Indian casinos elsewhere in the country and the relative lack of any incentive to trek to Vegas for reasons unrelated to nostalgia, it just may be that soon some of those casino developers will have upside down mortgages.
Written by JM on August 16, 2009 at 2:05 pm
There was a question on Jeopardy recently indicating that a very high percentage of Nevada land is owned by the federal government, think the figure was 85%, not sure how much that impacts Vegas. They implied it was the old nuclear test ranges.
Written by cactusrose on August 17, 2009 at 8:06 am
I feel bad for some of the people that lost their home due to unforeseen circumstances. I know some deserved it, but I also think the greed of the realtors/agents and lenders/brokers had a hand in it as well. Only one group is not to blame, everyone is, everyone got greedy.
JM – 85%? So that’s how they are manipulating the supply of land in Nevada. Makes sense now.