July Las Vegas Rental Market Update

[Eric Fernwood]

It’s July and time for another Las Vegas update. Before I continue, note that the charts only include properties that match the following profile, unless otherwise noted.

• Type: Single-family
• Configuration: 1,000 SF to 3,000 SF, 2+ bedrooms, 2+ baths, 2+ car garage, minimum lot size is 3,000 SF.
• Price range: $320,000 to $475,000
• Location: All zip codes marked in green below have one or more of our client’s investment properties.

What we are seeing:

Overall inventory is falling in Las Vegas. The chart below is from the MLS and includes all property types and price ranges.

The Charts

The charts below are only for the property profile we target.

Rentals - Median $/SF by Month

June rents were unchanged from May. YoY is flat.

Rentals - Availability by Month

The number of homes for rent continued to drop rapidly, indicating a decreasing supply.

Rentals - Median Time to Rent

The median time to rent is 20 days, unchanged from May. This is a very reasonable time to rent.

Rentals - Months of Supply

Only about 0.7 months of supply for our target rental property profile. Demand is greater than supply. This will push up the rent.

We saw a similar tight supply in sales as well. Now only about 0.6 months of supply. This will push up the prices.

Sales - Months of Supply

Sales - Median $/SF by Month

Despite increasing interest rates, $/SF is climbing month after month in 2023. June $/SqFt is 7% higher than January.

What is driving long-term demand for rental properties in Las Vegas?

Las Vegas Fundamentals

Unlike financial markets (which are largely driven by emotions), real estate prices and rents are driven by supply and demand. What is the supply and demand situation in Las Vegas?

Supply

Las Vegas is unique in that it is a tiny island of privately owned land in an ocean of federal land. See the 2020 aerial view below.

There is very little undeveloped private land remaining, and any available land in desirable areas costs more than $1 million per acre. Due to the high cost of land, new homes in our targeted locations start at $550,000. The homes that appeal to our target tenant segment are priced between $320,000 and $475,000. Therefore, no matter how many new homes are built, the housing stock we target remains almost constant. This is different from metropolitan areas with unlimited expansion potential, where the construction of new homes limits the growth of rent and home prices of existing properties.

Demand

The driver for housing demand is population growth. The average Las Vegas annual population growth is between 2% and 3%. What attracts most people to Las Vegas (and other metros) is jobs.

In a study I did in January, I looked at two major job sites (Monster and Glass Door) for the number of open jobs in Las Vegas. According to these sites, there are between 26,000 and 31,000 open jobs in Las Vegas.

The number of available jobs will increase in the future. Depending on which study you read, there is between $18B and $26B of new construction under development. As these come online, they will create even more jobs attracting more people to Las Vegas.

Of the people who will move to Las Vegas, a significant portion matches the tenant segment we've targeted since 2005. So, the demand for conforming properties priced between $320,000 and $475,000 will increase over time.

Summary

Due to the unique combination of a fixed supply and increasing demand, I believe Las Vegas fundamentals will continue to drive up prices and rents for the foreseeable future.

Let me know if you want more sales or rental data, and I will post additional charts.