According to Forbes online, Las Vegas is the #1 city in America for Baby Boomers. This is especially relevant considering the fact that 2011 is the year when the first wave of baby boomers turn 65 years of age. It is a demographic fact that Americans age 65 and older now officially make up 13% of the total population. These seasoned consumers can be expected to influence economic trends across the country (by virtue of their spending power) for decades to come. One of the important ways this economic clout will come into play concerns the choices made for residency in the retirement years. The Las Vegas real estate market presents a highly attractive opportunity for retirees looking for an active lifestyle in a diverse metropolitan environment. Southern Nevada has some of the best weather you can find and the second lowest tax burden in the country after Alaska (where the golfing is seasonal to say the least). Our outdoor recreational opportunities are some of the very best in the southwest and our indoor shopping, dining and gaming venues are world famous as you well know. Las Vegas retirement homes are particularly attractive due to the fact that prices have dropped by as much as 60% over the last three years. Although pricing has adjusted downward dramatically, you can be sure that the quality of the communities and their extensive amenities are still very much in place. For example, in a recent ranking of the Top 10 most luxurious retirement communities in the country, Sun City Anthem in Henderson was rated #1 in the United States. With spectacular golf courses and clubhouses featuring the finest in upscale amenities, Sun City Anthem bested competitors in California, Arizona and Florida for the top spot. As a matter of fact, Southern Nevada features a total of four Del Webb Sun City communities spread across the valley. No matter what lifestyle you may be looking for in your retirement years, Las Vegas has a 55+ community for you. As you can see, we aren’t the number one baby boomer city in America for no reason!
Any sustainable recovery in the Las Vegas real estate market is going to have to begin with a demonstrable improvement in the local economy and a lowering of our unemployment rate. As much as Southern Nevada has talked about diversifying its economic base over the years, the fact remains that the majority of economic activity valley wide still depends on the Las Vegas Strip. Fortunately, there are some encouraging signs that tourist activity on the Strip has taken a significant turn for the better throughout the course of the year. If this progress can be sustained going forward, we should begin to see a gradual improvement in the overall economy, which would be welcome news indeed. Here is a rundown of recent data that suggests cautious optimism is in order.
According to the Las Vegas Convention and Visitors Authority, the Strip is running at a pace that should produce about 39 million visitors for 2011. This number is significant and encouraging for two reasons. First of all, through July of this year, Vegas visitation numbers are running about four and a half per cent higher than last years totals. Secondly, if we can keep up this pace through the rest of the year, the Las Vegas Strip should just about match the previous record total of 39.2 million visitors set back in 2007. While it is certainly true that people spend less than they used to when they visit our city, just the fact that overall attendance totals are returning to pre-recession levels is encouraging in and of itself. However, people do also seem to be spending more money in 2011 than the previous few years. Gaming revenues in Clark County have been rising steadily since May and casinos that service the local market have participated in the increase as well. Even McCarran International Airport is getting in on the action as Southwest Airlines, WestJet and Allegiant Air all made recent announcements regarding new flight routes as well as expanded service from existing cities.
The Las Vegas real estate market is number one in America for positive cash flow returns for real estate investors. In no city in the nation is it more advantageous to buy as opposed to renting, which is a direct reflection of the tremendous drop in prices across southern Nevada over the past four years. Demand for rental housing is surging here in Las Vegas and across the country. In Las Vegas, rental demand is substantially a result of people being forced to leave their homes due to foreclosure or the successful completion of a short sale. Although you can stay in your home upwards of two years in many cases without paying your mortgage, eventually you have to go and after living in a single family home most people prefer to rent the same as opposed to living in an apartment complex. Las Vegas foreclosures continue to lead the nation and as a consequence rental demand for single family homes is expected to remain strong for the foreseeable future. Additional factors contributing to strong rental demand both locally and nationally include high levels of personal economic anxiety and more stringent lending standards to obtain a mortgage. Although we do see some flipping, the majority of the investor activity in our market is geared towards the long-term with buyers enjoying a positive monthly rental return combined with the intention to hold properties for at least five to ten years. Given the gyrations in the stock market of late, more and more people seem to be interested in adding residential real estate to their investment portfolios and Las Vegas offers the best risk/return ratios you can find anywhere. Another target for investment is the high-end segment of our market. Las Vegas luxury homes are selling for substantially below replacement cost and this is proving to be very enticing. Opportunities are plentiful and the discounts are staggering in some cases. For example, right now there is a stunning luxury home in The Estates at Southern Highlands that is currently priced at $3.9 million, down from $11.5 million just three years ago. In fact, as of the close of business today there are 23 luxury homes in foreclosure in Las Vegas between 750K and four million dollars.
With President Obama scheduled to speak before a joint session of Congress on Thursday evening about jobs and the economy, many minds are concentrated on the housing market and the central role it plays in the continuing economic downturn. The depressed real estate market and stubbornly high unemployment numbers are deeply intertwined. One of the main reasons this recession is so difficult to escape from is that housing cannot help lift us up. It has historically been the case that housing has led the country out of many past recessions, yet this time is clearly a different matter. The bursting of a massive financial bubble creates a different kind of recessionary dynamic and four years into this mess we are just now beginning to realize how truly intransigent the situation is. Job growth of zero for the month of August was just the latest reminder that we are making very poor progress in getting the nation back on the economic track.
New plans are apparently in the works to address the massive inventory of foreclosed homes held by the U.S. government, currently about 250,000 units (roughly one third of the REO total nationwide). One proposal gaining prominence is for Fannie and Freddie to turn their existing inventory into rental properties. On the surface it seems like a reasonable proposal and would theoretically create new jobs in the construction sector as foreclosures were refurbished and prepared for new tenants. As a practical matter the entire scheme seems both dubious and potentially dangerous. The conversion of 200,000+ homes into livable rentals would require the creation of a well organized renovation, landlord and property management function (on a huge scale) that would seem to be beyond the logistical capability of the federal bureaucracy. Ostensibly this massive nationwide managerial task could be contracted out, but to who exactly? Would a public/private partnership on this scale and scope be realistically doable? Before this problem even comes into play, the renovation process would have to be funded and the Republicans in the House are dead set against any new federal spending initiatives. Las Vegas foreclosures continue to lead the nation so the current debate is of more than passing interest to the Michelle Sterling Team as you might imagine.
The truth is that Fannie and Freddie are disposing of foreclosed homes to private investors at a record pace. The problem is, even a record pace doesn’t seem fast enough when matched against the enormity of the problem. That being said, I continue to be very wary of any grand government plan that would somehow speed up the corrective process that residential real estate cannot avoid. The market mechanism for re-allocating the ownership of REO’s is working as well as can be expected under the circumstances. For example, in the Las Vegas real estate market cash investors account for roughly half of all transactions for over two years now and counting. The demand is there and the supply is available and the transactions are occurring at a very steady pace. How much more can you push the process without distorting the picture and doing more harm than good? Something to think about …
It seems quite clear that the Las Vegas economy in general and the Las Vegas real estate market in particular are at a crossroads. The tumultuous political and financial events of the past few weeks have cast a shadow over what seemed to be a slow but steady climb from the depths of the worst recession since the 1930′s. The question on all minds at this point is whether or not the economy is slipping back into a second recession. The rate of continued consumer spending will be the single biggest determining factor of our fate going forward and that spending (or lack of) will depend on consumer confidence. You may have seen the data from last week indicating that consumer confidence readings have recently plunged. This is hardly surprising after the pathetic political performance from both sides that led to a last minute debt ceiling deal to avert default. Not surprisingly, a political fiasco of the highest order fed directly into a global financial market sell-off of major proportions that left everyone wondering where the world economy was heading next. Here in Las Vegas the debate concerning the various economic outcomes looking forward is a matter of particular concern. Our future recovery depends on two rather ephemeral notions; disposable income and faith in the future. If people feel good about their future economic prospects and view extra income as “disposable” for spending purposes, then the Las Vegas business model benefits. Visitor numbers to the Las Vegas Strip have been posting modest but steady gains since the second half of 2010 and June of this year bested June of last year by seven per cent. In another encouraging sign, the Southern Nevada Index of Leading Economic Indicators has also exhibited a steady upward trend since late 2010 with gaming revenues driving the momentum. Even the financial performance of the leading “locals” gaming company is beginning to show signs of renewed strength as higher customer counts across the valley feed into improved revenues from southern Nevada residents. The concern is that all of the gains made over the past year as Las Vegas attempts to steady itself and return to some measure of growth may be throttled into the ground by renewed turmoil in the financial markets and a significant nationwide slowdown in economic activity. No one yet knows if we are slipping backwards again, but you can be sure that we are holding our collective breath here in Las Vegas.
We all keep wondering if it is ever going to get better. We all keep hoping that the next change in bank policy or the next government sponsored program will be the key to breaking the short sale log jam. In the Las Vegas real estate market you need to open 10 short sale escrows in order to successfully close three to four. This is pretty rough sledding to say the least and one wonders why it should have to be this way. The main problem (in my view) is that the various programs invented by the Treasury Department to spur activity for short sale transactions crucially depend on voluntary participation by the banks and other interested parties. No one is telling this incredibly powerful political lobby that they have to do anything. One year ago the administration introduced HAFA (Home Affordable Foreclosure Alternatives) to much fanfare and optimism. One year later, it would be generous to describe the results of the HAFA program as lackluster. Basically, the banks have either ignored HAFA completely or applied it’s prescriptions in a thoroughly haphazard manner that severely diluted it’s value. In addition, overly onerous documentation requirements and qualification guidelines made a bad situation even worse. While it is true that in some cases a short sale negotiation can now be successfully completed within 60 days or so, this still continues to be the exception rather than the rule for Las Vegas short sales. It really shouldn’t be this way …
In my last post I talked about the many reasons why it is financially attractive to choose Las Vegas as a retirement destination. I discussed why it makes financial sense from many vantage points to enjoy the golden years in our desert oasis. But what about Las Vegas if you are still in your prime earning years and have a strong entrepreneurial streak? What if you happen to have some great ideas and a knack for the business process? Or, what if you currently own and/or operate a small or medium size business and need to make the most of that opportunity? Here again, Las Vegas is an excellent choice. The State of Nevada has the fourth best tax climate for business in the nation according to the recently released 2011 rankings tabulated by the non-profit and nonpartisan Tax Foundation. Nevada has no corporate or individual income tax whatsoever and this is the primary factor that keeps us at the top of the rankings year after year. Who are the three states that beat us? The cold weather trio of South Dakota, Alaska and Wyoming ranked first, second and third. While it’s always prudent to save as much money as you can, it also has to be acknowledged that Las Vegas businesses and Las Vegas real estate enjoy certain advantages that go beyond taxation rates as compared to the great white north. If you take our number four ranking in the State Business Tax Climate Index and cross reference it with a weather-based State Climate Index … I think we come out even better!
When considering the best location for establishing a retirement residence, the two most important factors are often times price based and amenity based. There is no question that nearness to family and attractive weather also play an important role much of the time, but cost of living issues and “life quality” opportunities seem to be the most prominent factors in most cases. How much house can you buy for the money and how much of your retirement income do you get to keep in your pocket after accounting for your tax burden? These are the pressing questions, especially in this economy, that most often guide people’s thinking in making their best possible retirement choice.
How does Las Vegas real estate fit into this picture? Let’s just talk about it the way it really is. Las Vegas homes have dropped in price by approximately 60% over the past 3 to 4 years. In fact, prices are now so low in Southern Nevada that U.S. News & World Report recently ranked Las Vegas #2 in the entire country for buying a retirement home on a price basis. As compelling as this is, I would like to point out another tremendously important factor that favors Las Vegas as a prime retirement destination … our overall tax burden. The only state that takes less in taxes than Nevada is Alaska, and the only other states that even come close to our minimal tax rates are Wyoming and New Hampshire. To be honest, it has been our experience that most people try their best to escape cold and snow in their retirement years. Las Vegas, Nevada gives you the opportunity to maximize your retirement income while completely avoiding the snow shovel and the bone chilling temperatures.
How do we stack up on the question of lifestyle amenities and overall pleasurable living? Everyone knows that story already – 320 sunny days a year, great golf and outdoor sporting activities, stimulating cultural venues, fantastic restaurants, terrific shopping and all the nightlife you can stand. When you put it all together, it is hard to imagine a retirement destination with a better mix of all the things that matter most than Las Vegas, Nevada!
As you know from my previous post, I recently had the pleasure of attending the Greater Las Vegas Association of Realtors Annual Alumni Luncheon. The luncheon was held to honor longtime Las Vegas Realtors with more than twenty years of service. Michelle Sterling Las Vegas real estate team member Laura Douglas was one of the 140 twenty-year inductees. Because Laura was not able to attend, she asked me to accept the award on her behalf, which of course I was honored to do. There were also members who had 30, 40 and even 50 years of service!
In palpable contrast, the day before I attended Agent Reboot, an intensive cutting-edge social media, online marketing and Internet training workshop presented by Inman News and designed specifically for real estate agents. Talk about shifting gears!
During the GLVAR luncheon the inductees were asked to describe a significant difference between practicing real estate in Las Vegas when they began their careers and practicing real estate today. A common thread of the feedback was of course the lack of technology available back then. Cell phones were huge, heavy devices. Fax machines were expensive, not so reliable, and in time, the print would disappear from the pages. The MLS was still contained in a “book” or was being run on the old DOS systems. Creating advertising with pictures was time consuming and costly. There was certainly no such thing as GPS; you had to actually know your way around town.
In stark comparison, at the Agent Reboot marketing conference, James Dwiggins of Realty World showed us how to make our businesses entirely paperless, wireless and mobile. We now have the technology available to write a contract, email a contract, have a contract signed and delivered to all appropriate parties without ever generating even one piece of paper; and we can do it from virtually anywhere in the world.
Spending one day with long-time seasoned agents with literally hundreds of years of collective experience, and spending the previous day with technical wizards, was a striking contrast to say the least. The speed with which our industry has changed is both impressive and exciting. But the thing that I find even more exciting is the way that most of us have adapted to these changes. Laura, was the very reason I was at the luncheon. As long as I’ve know Laura, she has always embraced new systems, programs, and gadgets. She always jumps right in and learns what she needs to know. And she always provides excellent service to her clients.
Technology will never replace client interaction and service; it will never replace the critically important relationship between agent and client, but oh my, does it make our lives easier! More importantly, I believe most of these changes have greatly enhanced our ability to provide excellent customer service. We can spend more time with our clients, and less time wrestling with fax machines. It is astonishing and exciting to think of where we might be in another twenty years – when Laura gets her 40 year award!
The Michelle Sterling Las Vegas Real Estate Team would like to congratulate Team Member Laura Douglas for recently being recognized by the Greater Las Vegas Association of Realtors for twenty years of service and professionalism as a Realtor. Laura is an invaluable member of The Michelle Sterling Team. In addition to providing excellent customer service to her clients, Laura also serves as our skillful and diligent transaction coordinator.
Laura never ceases to amaze us with her endless energy and enthusiasm. She has been with our team for five years and is always the first one to learn a new system or software program. Laura’s appetite for learning and growing is an inspiration to us all. She shows up everyday, ready to work, ready to learn and ready to provide great service. Laura works faithfully to develop trust and loyalty with her clients as well as with her fellow Realtors, lenders and escrow officers. Just one example of Laura’s tenacity: She recently had a setback that would have put most people out of commission for an extended period of time, if not altogether. All Laura is focused on is getting back to the office and getting back out in the field with her clients. Nothing can keep her down for long!
Laura has an unwavering, determinant passion for Las Vegas Real Estate and for the Real Estate profession. She embraces that passion every day to the benefit of her clients, our team and to the Real Estate profession. Laura’s twenty years of experience and perspective are sincerely valued by The Michelle Sterling Team. Congratulations on a great twenty years Laura! Here’s to many more!