2019 Q2 Las Vegas Investor Update

We are in the third quarter of 2019 so it is time for an update on the Las Vegas market from an investors point of view.

Market Update

Below are charts from MLS for the period from 2016 to the present. The data presented is loosely focused on our target property profile: single family homes with 3 bedrooms, priced between $250,000 and $400,000, 2000SF to 2500SF, but for the entire metro area.

Months of Supply

The inventory level rose from approximately 2 months supply in 2018 to a little over 3 months today. A balanced market (number of seller equals the number of buyers) is 6 months. So, it is still a seller's market. However, we are seeing more good deals more frequently due to the increased supply and the improved interest rate.

Median $/SF

Prices for properties that conform to our target market continue to rise. This statement may be in conflict with some national news, which average sales of all property types and price ranges together. The following chart is actual data from the MLS.

Median Sales Price

Economic Fundamentals

The following charts are from SalesTraq.

The number of jobs has surged well past the pre-2008 recession peak.

Investments in Las Vegas

There is currently $24B in projects under construction in Las Vegas. Remember that this is a city of about 2.2M population. These projects will create a huge number of new, well paying jobs. These people will need housing which will continue to drive up demand. What almost ensures price and rent increases is the shortage of available land.

Land Shortage

Las Vegas has very limited room for expansion, which will almost force rents and property prices to increase. Not many people realize that Las Vegas is an island surrounded by federal land. Approximately 84% of all land in Nevada and 87% of Clark County (in which Las Vegas is located) is owned by the federal government. See the map below for what has happened between 1984 and 2016. Note that 2017 and 2018 were huge growth years for Las Vegas so even less land is available now.

Also, since there is limited room for expansion, Las Vegas does not have urban sprawl; the only growth path is redevelopment. This is a huge advantage for investors. In most cities, urban sprawl leaves formerly desirable areas "behind" and they tend to decline resulting in increased crime and falling rents and prices. Not the case for Las Vegas.

Las Vegas still has reasonable home prices.

Summary

Based on current and recent market trends we do not see any signs of an impending significant downturn.

The huge amount of real estate development under way in Las Vegas ($24B) will generate thousands of incremental jobs. These good jobs will attract more people to move to Las Vegas, which will drive up rents and property prices for the foreseeable future.

The land shortage will almost guarantee prices and rents increases.

We have read about a possible dip in the market. This may be true nationally but we do not see any signs of this occurring in Las Vegas. However, even if there is a downturn due to reasons that we cannot see today, we target a tenant pool that is likely to stay employed, even during a downturn. We targeted the same tenant pool in 2008 and our clients did not see their income affected during the 2008 crash (2 min read) . Long term investment is about the right market and the right tenant pool.