The US economy revolves around housing. You can't unwind that without tanking everything.
Dollars are created via lending. The largest pool of loans in the US is lending for housing. It's worth about 9 trillion dollars.
When housing prices go down, borrowers walk away from houses and mortgages, and banks with single-digit equity (basically all of them) become insolvent. When banks become insolvent, the economy crashes.
When that happens, the Federal Reserve steps in and prints trillions of dollars to prop up asset prices, and houses (and equities) go back up.
Nostromo is also kind of describing the savings and loan crisis back in the 80s and 90s. The difference is that it wasn't money-center banks that were in trouble, and the government closed a bunch of institutions rather than printing money and bailing people out. (They protected the depositors, but not the S&Ls.)
while this is somewhat true, i really dislike this perspective. dollars are created from--and first and foremost, represents--labor. whenever i work, i create something of value, and to trade that value for something else of value, i use money to abstract my labor into a uniform medium that is universally recognized and easily tradeable.
it is not some central bank granting me value via a loan, it's my labor granting value to the money.
no, i'm not. wealth is the accumulation of the value created by labor. for the wealthy, that means the accumulation of the fruits of other people's labor.
By nearly every standard in the world, people in the United States are very wealthy. People in the U.S. also extend themselves into huge amounts of debt, most of which is avoidable. I'm not saying it's the primary problem, I'm pointing out that wealth isn't created solely on the backs of labor.
i'm referring to the federal reserve creating currency (which is a type of debt)--in theory, the fed was created to print precisely enough money to account for the value generated by our cumulative labor, so that we have that well-accepted paper medium to exchange with each other rather than having to barter for everything.
you're talking about consumer debt, which still represents labor, but it's borrowed from others (or from the future). of course when you borrow to buy depreciating assets, that lowers your personal wealth (you're basically throwing away value).
its interest that creates value from capital rather than labor, ostensibly as a reward for risk-taking, but also to account for the time value of money (and its cousin, inflation). this is why the wealthy care so much about interest rates.
I tend to agree, but I also feel like houses as a financial growth (vs family housing stability) investment is a new thing over the last 25-30 years, exacerbated no doubt by economic policies.
Before that, the only financial rationale I recall for buying a house was as a forced savings vehicle and as freedom from rent variations.
But assuming you're not being sarcastic, you should know that the price of a share of stock, in isolation, says nothing about whether or not it is cheap.
"Affordability" doesn't have the same meaning for housing and for stocks, so the phenomenon are not directly comparable, except in an a highly oversimplified worldview.
Stock purchases are elective, and can be readily scaled down and up based on a person's means. Stocks are highly liquid. They are as affordable as you have discretionary income to purchase them.
Housing is not elective for most people and it can't be scaled down or up anything like the degree to which stock ownership can be scaled. Moving is expensive and hard, as is selling and buying houses, and housing affordability is a function of its cost as a percentage of measures of local median incomes.
This ignores the leverage applied to a typical primary residence purchase via fixed rate debt. With 20% down, your return is 5x inflation, and housing indeed is a perfectly reasonable investment when you amortize transaction costs over an extended period of time.
your absolutely right. In the long term house prices must be roughly pegged to inflation and if society is actually making progress on providing houses it would be even less than inflation. anything else simply isn't sustainable.
that doesn't mean it can't be a safe place to put your money which is not a bad investment actually. For the last 10 years inflation has been beating what a bank can return.
Of course, there's a huge difference between living in your house or renting it out. If you live in it, you're taking a pretty big liability. If you rent it out in a rent to own ratio optimized location, it can be a very good investment and return 6% after all expenses (roughly 4% after income taxes), plus the principle is inflation pegged in the very very long term.
I'm not an expert on real estate trends, but Las Vegas real estate is not something that should be used as an indicator of anything.
IMO, what's happening in Vegas is that a lot of people who swooped in and bought houses when the bubble burst and trying to become mini-millionaires off of their investments.
Houses that went for $120,000 four years ago are listed for $400,000+ for no other reason than people think they can cash in, and see all the other listings for the same unrealistic prices, and they're trying to "get theirs while the getting is good."
The problem is that they've priced themselves out of the market, since very few people who move to Vegas are tied to the city. They just move elsewhere. So there's lots of houses sitting around with $500,000 price tags on them that aren't being bought because they're simply not worth that much.
I base this largely on three people I know who are currently trying to sell their homes. The person who best exemplifies this is a guy who bought his house for $200,000 in 2014. He's trying to sell it for $459,000 now. Why? No reason. He just thinks that he can get that much for it.
This. It's the Craigslist pricing conundrum. Everyone prices stupidly high because they're basing their pricing on what's on the market and everything else on the market is priced stupidly high which is why it's on the market and not sold in the first place.
> Houses that went for $120,000 four years ago are listed for $400,000+ for no other reason than people think they can cash in
This is just not true. People don't usually sell their homes to cash in. Selling a house is a stressful, complicated process and it's also very expensive. You can't keep your home listed for long because people will see it hasn't sold. It also involves uprooting and relocating your family, moving all of your belongings and you still have to live somewhere.
> People don't usually sell their homes to cash in.
The real gambling was 10 years ago. Having had a few relatives try (and fail, in Vegas) to do just this, I'll have to disagree. Watched about $45k in downpayments+fees in each case evaporate as well as the credit scores as they defaulted.
Op may be thinking of the 'flipper' type of home buyer, where these would be investment only transactions, kept marginally in the black between sales by prior profits Airbnb etc.
As I mentioned, I personally know three people who typify what is happening. One is a commercial airline pilot. Another is military. The third is an electrician.
The electrician might be the one who would be most typically a "flipper" except that he has no time for that kind of nonsense because he's also a foster parent for Clark County.
Also, Airbnb is illegal in southern Nevada,† with the exception of the Las Vegas city limits, which is a very small area, and not part of the "resort corridor" that everyone knows about.
>Houses that went for $120,000 four years ago are listed for $400,000+ for no other reason than people think they can cash in, and see all the other listings for the same unrealistic prices, and they're trying to "get theirs while the getting is good."
It is always a careful balance of asking price and sale price, and is reflective of many different variables: housing supply, population demand, wage growth, job growth, space, traffic, etc. Seller greed is part of the equation, but not the determining factor.
>very few people who move to Vegas are tied to the city
this is true, Nevada does have very high population turnover, but, it is not totally clear that this has a huge bearing on sale prices, this should reflect much more in rent, as those that buy homes are generally committing to longer stays. In the <2 year timeframe, home buying transaction costs and taxes can negate any appreciation, though. If appreciation is high enough, though, then even the transaction costs can be ignored. It is also important to remove people who are simply moving within las vegas into nicer homes, as they may receive benefits that reduce those transaction costs for the sale of their primary residence.
>I'm not an expert on real estate trends, but Las Vegas real estate is not something that should be used as an indicator of anything.
It was a very hard hit area in the last crisis, so it is reasonable to watch its recovery for at least some indications of the state of the recovery from the previous crash, and that recovery should be compared the fundamentals of the Las Vegas economy, relative to the last crash.
This is exactly what it's an indicator of. It just starts in wacky places like Vegas.
When dopey money is able to pursue 3-5x short term returns on real estate, that's the sign of a peak. The hammer inevitably comes down and cleans them out.
My little city is alot like Vegas in some ways. Fueled by tax policy and investor dollars, something like 3,000 luxury rental/condo units have been dumped on a city of 100k. Supposedly, a combination of millennials who don't like houses and downsizing retirees will be renting these things.
They are all half vacant, and the builders, who usually have less than 5-10% invested into the "Tacky Acres Apartment Complex 37 LLC", walk away with profits from construction and tax offsets and leave the the investors with a bag of poo.
> My little city is alot like Vegas in some ways... half vacant
In what way is your "wacky" city anything like Las Vegas, which has a huge percentage of renters (vs homeowners), and one of the lowest rental vacancy rates in the United States?
You've just made up some fictional connection between your town as Las Vegas for karma-gathering, despite there really being no substantive similarities at all.
Sounds like a really good scenario for your city since those units will be providing shelter from the elements for many decades to come. I can’t imagine why you wouldn’t be happy about this unless you stand to profit from a housing shortage.
To be honest, I've been a landlord of an underwater property I couldn't rent, and decided to be nice to a low-income person in need. Within short order her alcoholic boyfriend moved in and triggered her latent alcoholism and the parties started happening and ultimately the place was left worse off than when they had arrived. Luckily they did not create the aforementioned meth lab or cause any structural damage. But these days I'm much more sympathetic to property owners letting their vacant property lay fallow, rather than incur the liability (financial and/or legal) of helping someone out. As they say, no good deed goes unpunished.
Property management is a profession with accompanying knowledge. Watch for trouble and evict bad tenants quickly. Laws that make things easy for landlords encourage better practice and markets that function better for everyone.
Infrastructure requires maintenance, and the tax base of a given piece of infrastructure is generally funded by the amount of property tax recovered in the area; this means that inappropriate developments aren't just misaligned investments; they're also a continuing stream of expenses for years to come which is ultimately borne by the rest of the community.
Now this isn't necessarily what will happen, but the relationship between communities and development is more involved than 'development = more resources for the community'.
I never understood the LV housing market. There is literally land in all directions as far as the eye can see. If people want to live there, a house can certainly be built.
Visibly undeveloped land isn't a good proxy for the market's land supply. Much of the 'empty' land on the edges of the Vegas Valley is BLM land [1]. Periodically, the government auctions off parcels [2], but the BLM's incentives are a bit more complex than those of private landowners.
Actually, no. Very little of the land you see from the tourist zone can be developed. LV is hemmed in very tightly by military bases, national parks/monuments/protected areas, and state parks.
Look at an app like FlightRadar24 and see the vast areas that jets have to avoid because so many military installations surround Las Vegas.
Plus, it's the desert. Nobody wants to buy a house without access to water.
I've done a lot of traveling in the Vegas area (and, sadly, into Vegas itself). In addition to BLM land (Vegas runs right up to Red Rock Canyon these days) and all the military and other federal/state land,you just can't use a lot of land in a way that's unfamiliar to people in a lot of areas. You look outside Las Vegas in a number of directions and there's literally nothing there because it's undeveloped desert with no water source and Vegas is already using too much water itself.
Vegas uses very little water. Almost all of the water is cleaned, then recycled back into Lake Mead, where it originated.
The houses are intentionally close together to reduce the number of miles of water lines, and therefore the number of leaks, which every water system has in abundance.
The water you see in the fountains, etc... is not suitable for drinking or other uses because it is groundwater with crazy high mineral content, and ends up back in the ground where it came from. That's why when a drunken frat boy jumps in the Bellagio fountains, the metrocops use a boat to get him out, rather than just swim for him. You don't want to touch most of the fountain water in Vegas.
The vast majority of the water from the Colorado River gets pumped to Los Angeles. Nevada gets a tiny fraction (about 7%, IIRC).
In 2013, I could see that there were houses for sale in Vegas that cost less than a car payment. By 2015 I'd worked up the courage to buy one. I paid $143K. The previous owner had paid $85K.
One of the reasons I was able to get it for $142K was because I made a TON of offers. I basically walked around a housing complex and picked out a handful of identical homes, then made lowball offers on all of them.
Basically there was a TON of supply.
The home was so cheap, it created some bizarre challenges:
1) It was hard to find a lender. Banks don't want to deal with tiny loans.
2) It was hard to find a realtor. Nobody wants to do a deal where they're going to make peanuts on the commission.
I managed to get it all sorted out.
After just 25 months, I sold it. I liked the home, but I just wasn't using it. I'd pictured that my family and I would go to Vegas every few weeks, but we wound up going about once or twice a year. (This was a second home.)
When I put it up for sale, I had two offers the first day it was listed.
In my situation, I think some things that helped a lot were:
1) inventory in Vegas became tighter and tighter, as people are priced out of California. If you're moving from Rancho Cucamonga to Las Vegas, $143K seems like a bargain.
2) Builders in Vegas seem uninterested in smaller homes. The one that I sold was just 1200 square feet. Most homes in the neighborhood were at least as twice as big.
In summary: a classic case of "inexpensive home in nice neighborhood", plus a big helping of luck.
Alex Honnold the famous free climber spoke highly of it in a recent interview when talking about where he bought his house. Apparently it's a good area for outdoorsy stuff, lots of wild things within reach, cooler at high elevations, while still having a city center.
I lived in Las Vegas for two years, and loved it. I don't drink or gamble, and I was born and raised in Brooklyn for context. I loved biking, hiking, climbing, kayaking, and skiing there. It's sunny almost all year long, and this had a great affect on my attitude. The restaurants, malls, and other off-The-Strip amenities are what you are used to in most East coast suburban areas. There is music and art being made there, and flying in and out of McCarran airport is as easy as it gets. I saw the movie 'Free Solo' three weeks ago, and it shows Alex settling in to a house he bought with his girlfriend in Las Vegas. Really good movie BTW.
I believe it, most of the USA deserts are comically underrated.
Las Vegas also has Mount Charleston [1] nearby for when the summer gets too hot.
I have a small acreage near Joshua Tree National Park and it's a lot of fun, plenty of outdoorsy activities and low costs so one doesn't have to waste much time on working. My assumption is that there are similar circumstances to be had in Nevada. We also have a mountain escape nearby in Big Bear for when it's hot.
Yes, it's amazing how less you spend, and how much your health and attitude improves when the environment is conducive to being outside on your bike, skates, or shoes! A mountain range far enough away that it doesn't feel like a barrier, but close enough to look to for awe. I am thinking about LV, or back to Indonesia where I lived for over a year in the rice fields of East Java. Now, I am trying to see how I can build a business in a remote area without being a remote worker. I find trying to do what I do back here in NY/NJ doesn't work for me. I like the separation of worlds.
Not my thing (to live there permanently) but I know people who like the desert Southwest. Outside the fairly uninteresting cities--Vegas is a lot more than the Strip but it's mostly generic sprawl IMO--there are a lot of interesting National Parks, mountains, etc. Also a lot of people like to golf and that's big there. And if you want to travel a lot, there's a major airport.
Its a great hub city to travel from. Cheap housing, enough stuff to do while you are in town (the jokes of it having no culture arent true anymore, even if its not big city good), and flights are cheap from McCarren.
That said, I still moved after I got over my travel-all-the-time phase and felt like I had done everything to do there.
Theres supposedly a lot of opportunity there for people who only have a high school diploma (or less) due to the casinos and manual labor.
I love Vegas. Tons of stuff to do no matter what your interests are, great weather, low rent, low taxes, lax laws on vices (gambling, drinking, marijuana), cheap flights in and out. Also a great arbitrage opportunity for remote tech work.
I'm really wondering what the Fed's game plan is. Raising rates quickly and launching quantitative tightening in a globally weakening economic environment seems crazy.
The great depression was made worse because as things recovered, rates stayed the same. Eventually there wasn't interest to lend against and the market seized. And even though The New Deal helped, but it was the massive build up to WWII that allowed recovery to happen.
I feel like I haven't seen appreciably high interest rates from the fed since the 90s. It feels like we're in a boom right now like in the dot com era, so I'd like to see rates in the 3-5%+ range so they have room to take the brakes off in a recession.
The real problem to me though is that the fed interest rate no longer reflect reality. Who cares if it's 2% when people are paying 15-30% on their credit cards. If we really wanted to help the middle class, we should tie bank and credit card interest rates to a maximum multiplier, say no greater than 2:1 or something for secured debt, and 4:1 or something for unsecured debt. So a mortgage could only be 5% if the fed rate is 2.5% and a credit card could only be 20% if the fed rate is 5%.
This would simply limit lending to riskier borrowers who would then seek financing through other, less desirable means (title loans, or even loan sharks).
Credit Card interest rates can be 1000%, as long as you pay off your statement balance in full before due date, it doesn't matter (cash advances notwithstanding).
Treating the symptom won't fix the problem. The middle class could help itself by refusing to finance consumption with debt. The middle class could just quit taking on debt at 15%. And before you say that they have to just to survive, no, the definition of middle class is people who actually have enough money to live on. What would help the middle class is getting them to learn some basic financial sense.
That said, I do think that credit card interest rates are unconscionable and should be capped much lower. As it is, credit card debt is financial slavery and people should treat it like crack cocaine--just say no.
Recently was reading that housing is high risk investment. How come it is if you can buy the house when economy crashes and in 5-10 years it is priced even higher?
That's exactly why it is risky. How do you know you're at the bottom of the crash? How do you predict the next crash? If you think you can, you can make a lot of money, but if you're wrong, you stand to lose lots of money.
Seems like a high risk investment if you aren't sitting put for a long time. If you plan on living in the house for a decade or more, the chances of you losing money seem pretty low. But people are less likely to sit put in one job or area these days than in the past, and there are external factors too, like potentially being laid off and needing to sell or move for another job.
So as an actual investment tool in the short term, housing seems like it could be risky, but if you are looking for a place to put down roots, you would almost surely be coming out ahead.
I have family out there. Over the summer, they said that a fairly large % of houses were not appraising for selling price, requiring buyers to make up the difference between what the bank would lend and what the selling price was in cash.
To me, that was a pretty clear indicator of where that housing market was heading.
Appraisers can only go by comparable sales (“comps”). In a rapidly rising market, comps always trail market value. I experienced this with my own Bay Area home purchase and had to shell out $40k to cover the difference between my offer and appraisal. Home prices at the time were going up 2% per month. Redfin et al now value my house at $90k over my offer
Fun idea if you have a lot of money - buy 20 houses in a relatively small area. Sell 3 to your Uncle Larry for 40% more than you bought them for, then sell the next 17, ratcheting each up about 5% for every 4-5 houses sold. Boom, you've now created a housing bubble and get to walk away with all the profits. If you do this over 2-3 years you might be able to get a 40% annual return, unless of course the market crashes before you can get out.
I would not be surprised if this was what was happening just on a spread out and wide scale. All home sellers want the price to go up, so if the only way to make them go up is to sell at a higher price, you can prime the pump.
There was a story a while back about sales of NYC apartments over 5 million slowing.
I think this is actually due to Trump capping the state income tax deduction. States with high income tax rates are seeing less real estate speculation.
Nevada has no income tax. This is actually why this observation is interesting to me. I thought tax changes were causing the slowdown in my area in Northern CA as well, and figured NV would be getting a bit of a boost, but I guess not.. so maybe it is a real slowdown after all.
A data point for your consideraton: One month ago, I briefly flirted with moving to Las Vegas for tax reasons. I was shocked at the expense (and shabbiness) of high-end housing there. Construction costs were similarly high--I was quoted $450-$500/sqft, on par with NYC. My realtor explained to me that rich Californians were "stampeding" into Nevada and causing some serious dislocations in real estate. She thought the market was eventually going to crater.
Anecdotally, a significant enough amount (not a majority, but enough to move prices) of 5M+ home purchasing is from foreigners looking for a pied a terre in New York. Emerging markets have not been doing well, so there is less of that activity.
IMO this is why a free-for-all relaxation of zoning doesn't work in New York, because a few select global cities (London, Paris, New York, etc.) have global appeal, and therefore market demand is not limited to just locals. Oligarchs aren't exactly looking to set up in the Bay.
One of the causes of this is the 1031 tax exchanges (allows a person/company to roll over a gain on real estate into a "like-kind" asset, again: real estate). I have a friend that has rolled over a few houses and duplexes into ever more valuable property (he's done well, but he's levered 3-4x). I've often asked him, "when will you cash out?" His answer, "I can't, I don't want to pay the capital gains tax." "Are you worried about a crash?" "No, because even if rents dip 20% I can make the mortgage payments and repairs and wait for the market to recover." I don't know how much this has driven real estate speculation in my area (Denver, CO), but if there is a semi-serious market turn, enough to cross some sort of pain threshold for speculators, there's got to be some forced selling.
> "No, because even if rents dip 20% I can make the mortgage payments and repairs and wait for the market to recover."
20% is the guaranteed max price he would pay on capital gains tax assuming he's held the property for more than a year, and then he'd have the money in the clear. His "even if..." scenario is not the worst case scenario for not selling.
Anybody have a sense of how other countries have minimized these problems? I've read about Denmark controlling rents by private landlords, and Sweden helping people finance land in exchange for controlling the sales price. But, really, I'm wondering what things are being tried.
As much as people dislike the new tax bill that was passed, it does contain some good moves, namely reducing the amount of mortgage interest that people can deduct from their taxes. Personally, I'd like to go even further and eliminate all government support to Freddie and Fannie. This would remove a lot of government backstops which would cause short term pain, but produce long term gain in the form of a more stable housing market.
1 Billion Dollars for New Raider Stadium, 1 Billion for New Wynn Casion0 and Amazon opening New Shipping Center N. LV in 2019 1000 new jobs, lowest unempolyment in 10 years CA homeowners have lots of equity and high taxes. The same gurus that didn't buy 5 years now know the LV market NOT
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[ 0.21 ms ] story [ 220 ms ] threadhttp://cityobservatory.org/housing-cant-be-a-good-investment...
Dollars are created via lending. The largest pool of loans in the US is lending for housing. It's worth about 9 trillion dollars.
When housing prices go down, borrowers walk away from houses and mortgages, and banks with single-digit equity (basically all of them) become insolvent. When banks become insolvent, the economy crashes.
When that happens, the Federal Reserve steps in and prints trillions of dollars to prop up asset prices, and houses (and equities) go back up.
I don't see this changing anytime soon.
while this is somewhat true, i really dislike this perspective. dollars are created from--and first and foremost, represents--labor. whenever i work, i create something of value, and to trade that value for something else of value, i use money to abstract my labor into a uniform medium that is universally recognized and easily tradeable.
it is not some central bank granting me value via a loan, it's my labor granting value to the money.
i'm referring to the federal reserve creating currency (which is a type of debt)--in theory, the fed was created to print precisely enough money to account for the value generated by our cumulative labor, so that we have that well-accepted paper medium to exchange with each other rather than having to barter for everything.
you're talking about consumer debt, which still represents labor, but it's borrowed from others (or from the future). of course when you borrow to buy depreciating assets, that lowers your personal wealth (you're basically throwing away value).
its interest that creates value from capital rather than labor, ostensibly as a reward for risk-taking, but also to account for the time value of money (and its cousin, inflation). this is why the wealthy care so much about interest rates.
Before that, the only financial rationale I recall for buying a house was as a forced savings vehicle and as freedom from rent variations.
But assuming you're not being sarcastic, you should know that the price of a share of stock, in isolation, says nothing about whether or not it is cheap.
Stock purchases are elective, and can be readily scaled down and up based on a person's means. Stocks are highly liquid. They are as affordable as you have discretionary income to purchase them.
Housing is not elective for most people and it can't be scaled down or up anything like the degree to which stock ownership can be scaled. Moving is expensive and hard, as is selling and buying houses, and housing affordability is a function of its cost as a percentage of measures of local median incomes.
that doesn't mean it can't be a safe place to put your money which is not a bad investment actually. For the last 10 years inflation has been beating what a bank can return.
Of course, there's a huge difference between living in your house or renting it out. If you live in it, you're taking a pretty big liability. If you rent it out in a rent to own ratio optimized location, it can be a very good investment and return 6% after all expenses (roughly 4% after income taxes), plus the principle is inflation pegged in the very very long term.
IMO, what's happening in Vegas is that a lot of people who swooped in and bought houses when the bubble burst and trying to become mini-millionaires off of their investments.
Houses that went for $120,000 four years ago are listed for $400,000+ for no other reason than people think they can cash in, and see all the other listings for the same unrealistic prices, and they're trying to "get theirs while the getting is good."
The problem is that they've priced themselves out of the market, since very few people who move to Vegas are tied to the city. They just move elsewhere. So there's lots of houses sitting around with $500,000 price tags on them that aren't being bought because they're simply not worth that much.
I base this largely on three people I know who are currently trying to sell their homes. The person who best exemplifies this is a guy who bought his house for $200,000 in 2014. He's trying to sell it for $459,000 now. Why? No reason. He just thinks that he can get that much for it.
People have to stop using houses as piggy banks.
This is just not true. People don't usually sell their homes to cash in. Selling a house is a stressful, complicated process and it's also very expensive. You can't keep your home listed for long because people will see it hasn't sold. It also involves uprooting and relocating your family, moving all of your belongings and you still have to live somewhere.
The real gambling was 10 years ago. Having had a few relatives try (and fail, in Vegas) to do just this, I'll have to disagree. Watched about $45k in downpayments+fees in each case evaporate as well as the credit scores as they defaulted.
As I mentioned, I personally know three people who typify what is happening. One is a commercial airline pilot. Another is military. The third is an electrician.
The electrician might be the one who would be most typically a "flipper" except that he has no time for that kind of nonsense because he's also a foster parent for Clark County.
Also, Airbnb is illegal in southern Nevada,† with the exception of the Las Vegas city limits, which is a very small area, and not part of the "resort corridor" that everyone knows about.
† http://www.clarkcountynv.gov/administrative-services/Pages/S...
Listing prices are not the only indicator in residential housing. Sale prices can be a more accurate number, and those are also up. https://www.zillow.com/las-vegas-nv/home-values/
It is always a careful balance of asking price and sale price, and is reflective of many different variables: housing supply, population demand, wage growth, job growth, space, traffic, etc. Seller greed is part of the equation, but not the determining factor.
>very few people who move to Vegas are tied to the city
this is true, Nevada does have very high population turnover, but, it is not totally clear that this has a huge bearing on sale prices, this should reflect much more in rent, as those that buy homes are generally committing to longer stays. In the <2 year timeframe, home buying transaction costs and taxes can negate any appreciation, though. If appreciation is high enough, though, then even the transaction costs can be ignored. It is also important to remove people who are simply moving within las vegas into nicer homes, as they may receive benefits that reduce those transaction costs for the sale of their primary residence.
>I'm not an expert on real estate trends, but Las Vegas real estate is not something that should be used as an indicator of anything.
It was a very hard hit area in the last crisis, so it is reasonable to watch its recovery for at least some indications of the state of the recovery from the previous crash, and that recovery should be compared the fundamentals of the Las Vegas economy, relative to the last crash.
When dopey money is able to pursue 3-5x short term returns on real estate, that's the sign of a peak. The hammer inevitably comes down and cleans them out.
My little city is alot like Vegas in some ways. Fueled by tax policy and investor dollars, something like 3,000 luxury rental/condo units have been dumped on a city of 100k. Supposedly, a combination of millennials who don't like houses and downsizing retirees will be renting these things.
They are all half vacant, and the builders, who usually have less than 5-10% invested into the "Tacky Acres Apartment Complex 37 LLC", walk away with profits from construction and tax offsets and leave the the investors with a bag of poo.
In what way is your "wacky" city anything like Las Vegas, which has a huge percentage of renters (vs homeowners), and one of the lowest rental vacancy rates in the United States?
These properties have up to 20 year tax exemptions and are targeted at 90th percentile income in our area.
So homeowners and owners of normal rental property get to carry the tax burden of mostly older wealthy renters.
http://www.city-data.com/top82.html
You've just made up some fictional connection between your town as Las Vegas for karma-gathering, despite there really being no substantive similarities at all.
Sorry if you disagree. I may well be wrong, but internet points don’t motivate me fwiw.
Now this isn't necessarily what will happen, but the relationship between communities and development is more involved than 'development = more resources for the community'.
[1] https://caltopo.com/map.html#ll=36.12923,-115.0639&z=11&b=om... [2] https://www.blm.gov/sites/blm.gov/files/documents/files/SNPL...
Look at an app like FlightRadar24 and see the vast areas that jets have to avoid because so many military installations surround Las Vegas.
Plus, it's the desert. Nobody wants to buy a house without access to water.
Vegas uses very little water. Almost all of the water is cleaned, then recycled back into Lake Mead, where it originated.
The houses are intentionally close together to reduce the number of miles of water lines, and therefore the number of leaks, which every water system has in abundance.
The water you see in the fountains, etc... is not suitable for drinking or other uses because it is groundwater with crazy high mineral content, and ends up back in the ground where it came from. That's why when a drunken frat boy jumps in the Bellagio fountains, the metrocops use a boat to get him out, rather than just swim for him. You don't want to touch most of the fountain water in Vegas.
The vast majority of the water from the Colorado River gets pumped to Los Angeles. Nevada gets a tiny fraction (about 7%, IIRC).
People won't buy a $100k house that's not connected to the sewer/water/grid - especially in a desert.
https://www.calculatedriskblog.com/2018/09/california-housin...
https://www.calculatedriskblog.com/2018/11/sacramento-housin...
https://www.calculatedriskblog.com/2018/10/seattle-real-esta...
https://www.calculatedriskblog.com/2018/12/denver-real-estat...
One of the reasons I was able to get it for $142K was because I made a TON of offers. I basically walked around a housing complex and picked out a handful of identical homes, then made lowball offers on all of them.
Basically there was a TON of supply.
The home was so cheap, it created some bizarre challenges:
1) It was hard to find a lender. Banks don't want to deal with tiny loans.
2) It was hard to find a realtor. Nobody wants to do a deal where they're going to make peanuts on the commission.
I managed to get it all sorted out.
After just 25 months, I sold it. I liked the home, but I just wasn't using it. I'd pictured that my family and I would go to Vegas every few weeks, but we wound up going about once or twice a year. (This was a second home.)
When I put it up for sale, I had two offers the first day it was listed.
In my situation, I think some things that helped a lot were:
1) inventory in Vegas became tighter and tighter, as people are priced out of California. If you're moving from Rancho Cucamonga to Las Vegas, $143K seems like a bargain.
2) Builders in Vegas seem uninterested in smaller homes. The one that I sold was just 1200 square feet. Most homes in the neighborhood were at least as twice as big.
In summary: a classic case of "inexpensive home in nice neighborhood", plus a big helping of luck.
Las Vegas also has Mount Charleston [1] nearby for when the summer gets too hot.
I have a small acreage near Joshua Tree National Park and it's a lot of fun, plenty of outdoorsy activities and low costs so one doesn't have to waste much time on working. My assumption is that there are similar circumstances to be had in Nevada. We also have a mountain escape nearby in Big Bear for when it's hot.
[1] https://en.wikipedia.org/wiki/Mount_Charleston [1.bis] https://en.wikipedia.org/wiki/Mount_Charleston,_Nevada
That said, I still moved after I got over my travel-all-the-time phase and felt like I had done everything to do there.
Theres supposedly a lot of opportunity there for people who only have a high school diploma (or less) due to the casinos and manual labor.
Unemployment is at record low and USD inflation is next to non-existent.
The real problem to me though is that the fed interest rate no longer reflect reality. Who cares if it's 2% when people are paying 15-30% on their credit cards. If we really wanted to help the middle class, we should tie bank and credit card interest rates to a maximum multiplier, say no greater than 2:1 or something for secured debt, and 4:1 or something for unsecured debt. So a mortgage could only be 5% if the fed rate is 2.5% and a credit card could only be 20% if the fed rate is 5%.
Credit Card interest rates can be 1000%, as long as you pay off your statement balance in full before due date, it doesn't matter (cash advances notwithstanding).
That said, I do think that credit card interest rates are unconscionable and should be capped much lower. As it is, credit card debt is financial slavery and people should treat it like crack cocaine--just say no.
So as an actual investment tool in the short term, housing seems like it could be risky, but if you are looking for a place to put down roots, you would almost surely be coming out ahead.
To me, that was a pretty clear indicator of where that housing market was heading.
I would not be surprised if this was what was happening just on a spread out and wide scale. All home sellers want the price to go up, so if the only way to make them go up is to sell at a higher price, you can prime the pump.
B) they didn't put an appraisal contingency in the offer
Or
C) they think prices are going up and think they can make a quick dollar riding the wave
I think this is actually due to Trump capping the state income tax deduction. States with high income tax rates are seeing less real estate speculation.
IMO this is why a free-for-all relaxation of zoning doesn't work in New York, because a few select global cities (London, Paris, New York, etc.) have global appeal, and therefore market demand is not limited to just locals. Oligarchs aren't exactly looking to set up in the Bay.
20% is the guaranteed max price he would pay on capital gains tax assuming he's held the property for more than a year, and then he'd have the money in the clear. His "even if..." scenario is not the worst case scenario for not selling.