Las Vegas Real Estate Continues to Attract Investors

The Las Vegas real estate market may be ground zero for the nationwide foreclosure disaster, but it is also the prime target for aggressive residential real estate investors from all across the country and all over the world. Despite current economic conditions, large amounts of investment dollars seeking long-term value are flowing like a river into the market for Las Vegas foreclosures. Why would this be so? Clearly the expectation is that as the U.S. economy recovers, Las Vegas will regain it's footing and continue to move forward as a uniquely successful city that draws people (as both visitors and residents) like the magnet it has always been.

Is the foreclosure banking scandal involving all those "robo-signer" issues slowing things down or significantly impacting the transactional process for Las Vegas homes? The answer is absolutely not. The paperwork issues that have landed the banks in so much hot water center around the 23 "judicial foreclosure" states where those paperwork procedures apply. Nevada is one of 27 non-judicial foreclosure states and this latest bank-based firestorm does not really apply to us at all. What then is the driving force that does apply and accounts for the tremendous level of cash-based investor buyer activity? Simply put, at these prices real estate investors can positive-cash-flow foreclosure homes in Las Vegas right from day one. This highly attractive financial incentive is central to understanding why our market is so active.

The Mortgage Interest Deduction Brouhaha

Wow, the president's deficit commission sure knows how to start a public debate with a bang! The proposal to limit the mortgage interest tax deduction received a level of attention commensurate with it's status as one of the costliest deductions in the U.S. tax code. At the heart of the emotionally charged reaction is the notion of home ownership as a cornerstone of the American economic dream. This is a matter of bedrock faith between the U.S. government and the American middle-class family that animates a large portion of U.S. GDP due to the fact that home ownership is so inextricably linked with consumer spending, which constitutes 65% of national gross domestic product. Various leadership organizations in the mortgage and real estate industries immediately predicted catastrophic consequences for the U.S. housing market (and broader economy) if such a proposal ever became law, and they are probably right about this. The foundation that supports consumer spending in all of its forms, from dinner and a movie to the purchase of a new car or home, is consumer confidence. Getting a solid grip on something as ephemeral as confidence in an economy like this is like trying to nail jello to a wall. Viewed from that context, taking a buzz saw to a housing-based tax deduction that most Americans view as a "sacred right" during a housing induced recession of tremendous magnitude ... is probably not the best way to right the ship.

In the Las Vegas real estate market for example, a lack of confidence in our short term economic prospects has lead many to shy away from making a housing purchase even though prices are very enticing. On the other hand, serious real estate investors with positive cash flow goals are being very aggressive about the purchase of Las Vegas foreclosures and seem undeterred by current economic circumstances. This makes clear the complicated relationship between confidence and perspective, which is a function of positional point of view. On balance however, we would have to say that any assault on the mortgage interest deduction would be a serious negative for residential real estate here locally in Las Vegas and more broadly on a national scale as well.

Las Vegas Regains Itself One Step at a Time

For the Michelle Sterling Las Vegas Real Estate Team a big part of our job has been to offer a more balanced and rational longer-term perspective on the highly volatile shorter term events that have impacted our city over the past few years. You may well have read quite a bit in the press of late indicating that Las Vegas, Nevada is down and out for the count. While it is true that we have had our share of economic troubles (along with the rest of the country) the news is not all doom and gloom. Did our local economy take an especially hard hit due to gaming industry dependence on consumer confidence and discretionary spending? Yes, of course. Have Las Vegas foreclosures chalked-up the highest rates in the country? Yes, they have. Does this represent the whole story across all of Southern Nevada? No, it does not. Sophisticated investors (with mature time horizons) from all over the world have been very aggressive about adding Las Vegas homes to their portfolios at current prices despite current conditions. We find that to be both encouraging and instructive for the future.

The Las Vegas Strip is the primary economic engine for our community and therefore the best place to look for clues about what lies ahead. The Las Vegas Convention and Visitors Authority generates a monthly report on visitor numbers and has just released the data for September. Modest yet still encouraging signs continue to point to a moderate recovery for business in the Las Vegas gaming industry. We have just completed seven straight months where visitor volume increased as compared to our 2009 numbers. While it must be acknowledged that the U.S. economy still faces serious challenges and consumer attitudes continue to be steeped in caution, we are seeing modest improvement in gaming-related activity. Although the gains are far from dramatic, this does not make them irrelevant either. Thus far in 2010, 28.1 million people have traveled to Las Vegas, which is 2.4% more than the same period for 2009 ... and more is always better than less.