Las Vegas Real Estate Market Report, September 2015

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As we officially enter the final month of Q3, 2015, the Las Vegas real estate market continues to show signs of improvement!

Indicators across all four major segments, including single family residences, investment and rental properties, commercial real estate, and industrial, reflect the continued growth and rebound of our local market.

Residential Real Estate

The residential real estate market is not only strong but also continuing to improve, as prices have increased 9 to 11%, year-over-year, depending on location and price point.   Over 50% of listed homes are going into contract within 30 days.  This data suggests that if the property is priced correctly, sellers can anticipate offers within an average of 60 days.

Currently, there are 7,595 single family residences (SFR) available, not under contract.  The Las Vegas residential market is also averaging 2,440 sales per month, indicating the market is currently at or below a 90 day supply.

Absorption rates, however, vary within each price band. For example, properties priced at each of the following maintain a current supply of:

  • Under $300k – 2 month supply
  • $301-$500k- 5 month supply
  • $501k- $800k -9 month supply
  • $800k-$1MM- 10 month supply
  • $1MM & Over – 15 month supply

While the price band absorption is subject to location, it offers a strong indication as to the importance of pricing.

Though supply is relatively strong in the high end Luxe market ($1MM & Over), this price band appears to be improving.  As of September 1, 2015, Luxe market inventory was 355 available homes (priced above $1MM), while only 270 homes sold in the last 12 months.

The high end market is very sensitive to location with new construction in the Ridges and Macdonald Highlands commanding higher price per sq ft than other mature areas such as Tournament hills and Red Rock Country Club. The Ridges commanded the highest sale in years at 11MM last month.

Across all price bands, the median price of Las Vegas homes is $275k, which is still 15% lower than 2006, supporting continued gradual increased appreciation.

Notice of Defaults have also increased.  We anticipate this resulting in more trustee sales, which may affect the average cost of homes sold.  Additionally, Heloc’s and adjustable rate mortgages from 2005 and 2006 are still adjusting and, unfortunately, home equity has not rebounded enough to cover refinancing.  The Brazill Team is diligently monitoring this situation, to Las Vegas homeowners.

Investment and Rental Real Estate

Similar to the residential real estate marketing, the Las Vegas rental real estate market continues to show signs of improvement.

Currently, there are currently 2,853 rentals on the market in the Las Vegas Valley.  On average, 2,661 residences are rented each month, leaving an inventory of less than a 2 month supply of homes (1.07).

The time on market varies, according to price range.  As of September 1, 2015, calculations were as follows, based on monthly rent:

  • Up to $1000/mo – Less than .75 month supply
  • $1100-$1200/mo – 1.02 month supply
  • $1201-$1300/mo – .9 month supply
  • $1301-$1400/mo – 1.09 month supply
  • $1401- $1500/mo – 1.16 month supply

The market has also seen an increase in monthly rental rates.

Commercial Real Estate

Land prices throughout the Valley are still climbing!  Though single family dirt remains relatively flat, averaging $375k to $400k per acre in Class A locations, multi-family land is still heavily in demand, with prices ranging from $460k to $600k per acre.  Additionally, hard zoned, multi-family has been picked clean in the last 3 years and site selection has been a challenge.

Retail land is trading, when there are AAA credit leases in place, and single tenant development is increasing in good locations.   Industrial land is also trading, with tenant driven development.

Office Development – Medical office development on the rise.

Office Market – The office market is still struggling with oversupply and a 18.5% vacancy. New construction near hospitals, in all areas of the valley, is allowing the medical office segment to pick up.

Multi-family – The multi-family segment is still on fire with demand increasing.  As the Millennials market is opting to rent, rather than buy, as they want all of the amenities with less maintenance, builders are conceding.  Merchant builders are also cashing in as prices on Class A properties are closing near $200k per door.

Cap rates are compressing to low 5’s and in some cases sub 5. There are thousands of units slated to come online in 2016 so we will be watching vacancy next year to see if we are approaching hyper supply.

Retail – The retail segment is bouncing back!  The vacancy down to 9.7% and the asking rental rate has increased to 1.28 PSF NNN. The ICSC conference was finally packed this year with a lot of optimistic retailers signing several leases.

Industrial Real Estate

As with the other major segments of the Las Vegas real estate market, industrial real estate is also showing signs of improvement.  Overall, industrial vacancy is down to 6.6%, year-over-year.  Warehouse distribution is driving the increased demand, and pushing average rental rates to $0.57 PSF NNN.

 Conclusion

The Las Vegas real estate market is at the top end of recovery, phasing into expansion in most segments, except office. Multi-family is phasing from expansion to hyper supply with all of the new projects in the pipeline.

For more information about the current state of the Las Vegas real estate market, or to discuss buying or selling your real estate, please contact Stacy or Antone Brazill via phone, 702-278-3886, or visit The Brazill Team online at www.thebrazillteam.com.

This Las Vegas Real Estate Market Report was compiled by Stacy and Antone Brazill, The Brazill Team.  This report was developed using data from various industry reports as well as the Brazill’s vast knowledge of the local marketplace.  Stacy and Antone Brazill have worked in the Las Vegas real estate market for decades and their agency is deeply experienced in all facets of traditional and investment real estate including Multi-family, Land, Office, Retail, Industrial, Residential and Development. 

For questions regarding this report, or to obtain additional information about current Las Vegas real estate opportunities, please contact The Brazill Team at 702-278-3886 or visit their website, www.thebrazillteam.com.

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Fed Promises ‘Patient’ Approach to Interest Rate Hikes

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As a result of the strengthening U.S. economy and job market, The Federal Reserve is signaling that it’s edging closer to raising interest rates from record lows and promising to be “patient” in determining when to raise rates.

In mid-late December, following a two-day meeting, The Fed said that this “patient” approach is consistent with what it called its “previous” guidance that it expected to keep the rate near zero for a “considerable time.”

The Fed gave no specific guidance on when the first rate hike might occur.

Most private economists believe that the first rate hike will occur in June as long as the inflation outlook doesn’t remain persistently below its target rate of 2 percent. In an updated economic forecast, the Fed lowered its inflation forecast for next year to 1 percent to 1.6 percent.

The Fed’s action was approved on a 7-3 vote. The fact that three Fed officials dissented from the majority view was evidence of the internal battles inside the Fed at the moment as the central bank tries to transition from an extended period of ultra-low interest rates to a period when it begins to raise rates. The Fed has not raised rates in more than eight years.

The dissents included Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser, two of the Fed’s leading hawks, officials who believe the Fed needs to emphasize the fight against inflation more than the battle to boost employment. But Narayana Kocherlakota, president of the Fed’s Minneapolis regional bank, also dissented. He is a leading dove, an official who has pushed for more efforts to boost employment.

The Fed’s decision to move to a “patient” approach had been expected given the significant gains this year in the labor market. The economy created 321,000 jobs in November, keeping on track for the healthiest year for job growth since 1999, with the unemployment rate now down to 5.8 percent. That is close to the 5.2 percent to 5.5 percent unemployment rate that the central bank considers maximum employment.

The Fed is following the pattern it set in 2004 when it moved away from the phrase “considerable period” in January of that year and substituted “patient.”: It followed that in June with the first rate hike.

The Fed’s key short-term rate has been at a record low near zero since December 2008. When the Fed does begin raising rates, the expectation is that the rate increases will be a gradual process implemented with small quarter-point moves that will leave consumer and business interest rates at historically low levels for a considerable period.

At the previous meeting in October, the Fed brought to an end its third round of bond purchases. Those bond purchases have pushed the Fed’s holdings to close to 44.5 trillion, more than four times the level of the Fed’s balance when the financial crisis hit in the fall of 2008.

While it is not adding to those bond holdings, the Fed is maintaining the current record-high level which is continuing to exert downward pressure on long-term rates.

Supporters of the bond purchases defend them as a successful attempt by the Fed to use all tools at its disposal to battle the worst economic downturn the country has seen since the Great Depression of the 1930s.

But critics of the move contend that the Fed will find it difficult to sell off its massive holdings without jolting financial markets. They also worry that the sharp increase in the money supply that was a result of the bond purchases will at some point trigger unwanted inflation and potentially inflate dangerous asset bubbles.

Source: http://lasvegassun.com/news/2014/dec/17/fed-promises-patient-approach-rate-hikes/?_ga=1.25066362.1510413987.1394217585