Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
Thursday, January 26, 2006
'Nervous Developers Losing Taste' For LV Condos
Time Magazine reports on the fading condo fantasy in Las Vegas. "Now that several high rollers in the Las Vegas condo-hotel game..are either folding or selling their holdings, a growing number of players are losing their taste for big bets on high-rise, residential real estate development."
"Over the past two years, as high-rise fever spread across town. Buyers, mostly interested in flipping them for quick profits, eagerly anted up five-figure down payments, while developers planned more than 70 luxury towers holding a total of about 43,000 units on or near the Strip and downtown."
"But the intense competition for the city's limited supply of contractors sent construction costs skyrocketing 30% last year, just as lending policies tightened, interest rates climbed and sales started to slow. Currently, just 18 projects are underway, and nervous developers have called off three high-profile projects over the past seven months. A number of others..either are being revised or postponed."
"Back east, the luxury condo markets that have had similarly explosive growth in Miami and New York, where high-end apartments can command from $2,000 to $4,000 a square foot, haven’t slumped yet. Still, experts say the abrupt reversal of fortune in the desert, where the mainstream residential real estate and hotel markets are still quite healthy, shows just how quickly the odds can change in even the most affluent markets if runaway speculation and overzealous development take hold."
"'It’s another case of irrational exuberance,' says John Restrepo, head of a Las Vegas real estate and economic consulting firm. 'There is a market for high-rise condo hotels here; but it’s not as deep as people thought it was. The days of the two guys from the East Coast or Canada coming into town and promoting a condo development with a website and a dream are over.'"
Thanks to the readers who sent this in.
ReplyDeleteskeptic,
ReplyDeleteI read a piece that justified a condo purchase saying that at $300/night for 300 nights a week, a $500,000 condo would make money. Why on earth would anyone pay $300 for a night in a little condo in LV?
'I think there is a market for these condos, but not 20 projects. More like 4'
ReplyDeleteAnd with 18 towers out of 70 already started, how will that play out? Consider that leaves 50 properties idle.
skep-tic said: I just don't understand why anyone who isn't from Vegas would want to own a condo there. just stay in a hotel. does any non-resident of Vegas spend more than a weekend there at a time?
ReplyDeleteSkep-tic, in Vegas this is called "doubling-down."
Not only can you lose your shirt at the tables, you can also get taken to the cleaners on your "investment" condo!
In LV,
ReplyDeleteYou gotta know when to hold'em, know when to fold'em...
I live in Las Vegas ... and the market here is completely out of control.
ReplyDeleteThe median price of a new home has gone up ... but whose buying?
I live in an older part of town, with large (2500 + square foot) homes on large lots. When we moved in three years ago (we rent) our house was worth about $185,000. Our rent is $1200 a month.
Today to buy our rental house would take nearly $400,000! Which means that our rent is about half as much (or even less) than a mortgage would be. Scary stuff.
Not only that, but there are four houses on my street that have been for sale since I was pregnant with my now 13-month-old baby. There is an open house and one or the other every week. There is also a condo conversion at the end of my street ... complete with clowns every weekend. Literally, clowns standing on the corner directing traffic. Course, I don't see anyone turning in.
So, the median price may have gone up, but whose buying the resale houses?
There was an article in the RJ a couple of days ago that said one of the big mega-high rise condo buildings had eight people who have either moved in or are decorating.
That's eight condos with life in them. In a 21-story complex. How creepy is that? Like a horror movie.
The answer to who wants a condo is ... investors. No one, or almost no one, is actually moving into them.
The market here is still high, but it's teetering. There were 4000 less children enrolled in the Clark County school district in 2005/06 school year (we had an increase, 1/3 less than anticiapted. We are the fifth largest district in the country.)
We have the Casino industry here, of course. But, casino employees can't afford a $300,000 house. And soon the construction and real estate jobs will dry up.
Why live in Las Vegas with it's high crime, 110+ degree summers and horrible schools, when for the same price you could live nearly anywhere else?
When that question finally hits the people who live here, things will come to a head in Vegas.