Listing prices are insane now in Las Vegas vs comps

22 Replies

The listing prices now are insane versus the closed comparable for multi units, specifically 4plexs in Las Vegas. I understand the hype with Realtor.com listing Las Vegas as #1 top 100 cities forecast for 2018. I understand the Raiders coming to Las Vegas. I even understand the comparables SOLD within the last 3 months. However, new listings for 4plexs are priced 10%-20% above comparables or $25k-50k above previous sold. After talking to a number of listing agents, the new norm is list above comps and hope to get all cash buyers. Of course, the contract is signed subject to viewing. 

If financed with 25% down, then the appraisal will be short, and sellers are expecting buyer to come in with the difference. 

Is this the new normal for Las Vegas?

Terry

@Terry Lao

I notice that the trend is new listing price have to be listed higher than last sold comp price.

By how much higher?
Depends on how aggressive the seller is.
If the seller want to sell it fast, list it $5000 more than last sold comp, the seller will get multiple full price offers the first two weeks easily.

If the seller is not in a hurry selling it, they may list it much higher, but takes longer time to sell it.

I saw an agent listed more than 40 properties for the same Investor in the same area two years ago. The agent didn’t list all 40 properties at the same time. He listed 2 to 3 properties at a time. Once they are contingent or sold, he listed another few properties about $3000 to $5000 higher, etc, etc.
I saw all his listings sold at almost full price. This way, he could use his own last sold property to comp the next new listing. Very smart strategy.

When all the sellers are using this strategy, the price will be driven up in a much faster rate.

And I notice that a lot of sellers/agents in the current market are doing the same, new listing price is always higher than last comp by at least $5000.

Imagine a property is sold at $200k in Jan 2018, another similar property in the same area is sold at $205k in Feb 2018, another similar property is sold at $210k in March 2018, etc, etc, ... another similar property will be selling estimate $255k in Dec 2018.

I see that the housing trend today is, price will be more and more expensive everyday. The sooner the buyer get it the cheaper, the later the buyer get it pay more.

@Mary L.  on some new construction i am building Portland that is exactly what i am doing.. if we sell more than two in a month i raise prices.. so we are up 10k since first of the year for same house and still selling. no apprasial issues.

Just one more sign that the market is becoming even more greedy and pushing closer to the tipping point. All signs of a unsustainable market climb that will possibly lead to a drastic market adjustment.

Artificial market growth is not sustainable.   

In stocks I think they call that laddering. I guess it also works for REI in up markets. It would seem harder to manipulate RE prices with appraisals and the pace. I think supply plays bigger role overall still. Good luck!

@Mary L.

Realtor.com listed Las Vegas as the #1 top 100 for growth (4.905) and appreciation (6.90%) for 2018. Based upon the Jan (11.3%) and Feb (14.6%) median price increases year over year, I would forecast that to be double digits (10%+). 

The low inventory is fueling this median price increase, but it is having negative effect on sales, as sales have been decreasing month over month. 

Answer.....have more inventory to balance this market, which is not anytime soon. However, Realtor.com did predict inventory to rise in mid year. 

Terry

@Jay Hinrichs , I like what you are doing a lot.  I'm planning to do the "same laddering" when I sell my properties in the future (at least a few years later).  Still have a lot of confidence on the housing market.  :)

@Terry Lao , GLVAR Feb 2018 report, only 3,653 single family house and 679 condo/townhouse available listed without offers.  Current inventory is still extremely low compare to last housing peak at June 2006.  See attached picture.  In 2006 June, there were 20,026 single family houses and 4,630 conod/townhouses listed for sale.  It may still take a while to reach those numbers again.  How soon?  Nobody knows.  It all depends on the buyer/seller confidence on the housing market.  

The more confidence the sellers have on the housing market, the less sellers willing to sell their properties, and inventory will keep shrinking, and price will keep continue moving up.  Supply and Demand.  

The less confidence the sellers have, then they will list more houses for sale, and the inventory will rise soon.  How soon?  How late?  One factor depends on the majority of the Seller confidence level mindset.  My confidence level is very strong.  I'm not planing to sell any the next few years.  I am holding my properties very tight at the moment and keep the inventory low.  

Another factor is, is there a lot of new construction?

From my understanding, new construction have a huge shortage of labor to build new houses.  They won't be able build a lot of affordable houses to flood the market yet.  At least not in a short period of time.  

Housing supply is extremely low.  Demand is extremely high.  It tell us one direction.  Up.  Up.  Up.

@Mary L.

Looks like we both use the GLVAR for our info. Las Vegas inventory is low and not much you can do about it. Unless inventory rises, the appreciation will continue to rise. Factor in jobs, economy, consumer confidence, visitors to Las Vegas, $1.9B Raiders stadium, and new casino construction on Vegas strip. 

I estimate Las Vegas median home price 290-300k by Dec'18. However, that still does not equal pre-recession high of $341k in Jul'06. The big 4 growth areas, Bay area, Seattle, Dallas Forth Worth,  and Southern Cal, already passed their pre-recession highs. This equates to value in Las Vegas over other mentioned cities.

I just might sell when median reaches 300k, or the year 2020 when Raiders finish their stadium.

Terry

It looks like they built 8400 new houses last year. Say maybe 20% were less than $300k, so less than 1700? Seems like an almost non-factor. If less than 3 months sales are going to account for all the new sales you need to convince someone else to sell and move. if the average seller paid $200,000 a couple years ago and locked in a 3% mortgage. What would it take to get them to move, pay 6-10% in costs, and buy something today with a 4% mortgage?

Same could be said for investors. I have plenty of properties that have doubled over the last bunch of years. I don’t want to sell. They cash flow, they average about 8-10 years old (since built) so low maintenance, the weather is pretty house friendly, there’s no lawns to mow, leaves to rake. But if I sold I’d have to buy something else to avoid the depreciation recapture and capital gains tax massacre. If they double again from here I’d PROBABLY be willing to sell some. 

Maybe people don’t realize how small the valley is? People who are moving here for a job, retirement, to escape California, usually pick 1/2 to 1/4th of the valley area that they want to live in. If they try to filter by number of stories, Garages or square feet, suddenly it’s a tiny selection pool. Love or hate hoa’s? Cut that number in half again. 

Yes, the easy buy anything on the mls at list and start banging checks is over. And I’m sure there are other great markets, even better ones, but that doesn’t make vegas a bad one. 

I’d be interested in other vegas investors opinions of how high their values would have to go before they’d sell. 

-Bill

@Bill Brandt

You make good points on holding onto investment properties, especially if currently have good cashflows.

Here are some counterpoints. 

1. Long term capital gain is 15% for most, depending on your tax bracket. If gain is 200k, then tax is 30k.

2. The real estate cycle low point for Las Vegas was loss of over 50% from peak Jul'06, which median was $135k. High was 341k. Why not sell at high, pay the tax, and buy the low again. 

3. Stockton, CA, is similar to Las Vegas when the recession hit. The bay area sneezed when the recession hit, but Stockton got the flu. Las Vegas will take the hit when southern california goes through another recession.

4. Buy and sell real estate like stocks, buy low, sell high. Pigs get fat, hogs gets slaughtered.

Terry

I think there should be some caution used when comparing 2018 with the market crash in 2007/8.  It's like saying that the last time my engine blew up because I didn't put oil in it was at 30,000 miles.  Since I only have 25,000 miles on this new engine, it's clear sailing.  

Mind you, I'm not saying a crash is coming or we should all bury our cash or anything like that.  I'm just saying that comparing everything to pre-crash and then using that as a primary justification for your investment thesis is a strategy burdened with logical flaws.  

Just like when people say, "Yes, but credit scores are much higher, so we won't see a repeat of the mortgage meltdown." 

While that fact is true, markets (stock, RE, etc) seldom decline for the same reason that they did the last time.  The cause of the next recession will likely be for reasons that have absolutely nothing to do with subprime loans.  

But that doesn't mean that a recession won't happen.  There are a plethora of reasons a recession could come about but if you're only staring at a chart of credit worthiness of borrowers, you're sure to miss it.  

Point being, past indicators should be one of many, many data points in your decision. 

Anything is possible. Prices have dropped more than 5% already once in the history of the city. I just put the odds at the prices being higher in a year at 90+%, same to 5% lower at 9% and more than 10% lower at less than 1%. The opportunity costs of selling, paying costs and losing all that income so I can hope for a crash just doesn’t suit me. 

During the boom years EVERYONE I met all day everyday owned at least one spec house they were going to flip. Now everyone I talk to day to day thinks cashflowing rentals are waaaay too risky. 

I’m not saying you or anyone else should buy. If it drops I’ll buy 2x as much. But I don’t think I’ll get that “lucky” and really don’t want to. 

@Bill R.

Point well taken. I am not saying the next recession will be the same cause of the 2007/08 recession. I am saying there will be a next recession, but don't know when and why. However, since the 2007/08 was the most recent, then it is logical that one would analyze the most recent, and learn from the past.

From an stock market investors point of view, you have basically (3) options, buy, hold, and sell. I believe the same should be for real estate investments, buy, hold, and sell. Each has it strategy and merits. Overall, the goal should be to make money. 

I bought in 2014-2016, and doubled, tripled, and close to quadrupled, my original investment. I do have an exit strategy............which is when SFR median home price reaches 300k. Not if, but when it does, then can look at economy, jobs, tourism, and status of the Raiders $1.9B stadium.

Terry

@terry Lao

Hey terry, I’m far from an expert and simply trying to learn. I love talking real estate but I get so few chances to do it I become long winded. If you (or anyone else out there in the forums.) come to Vegas for fun, work or real estate I’d love to blow a couple hours on a long lunch/dinner talking strategies and properties. 

-Bill

I will not consider selling before the median price hit new record peak. Newer peak is always higher than the previous peak.

If last peak (year 2005) median price was $341k, I will not consider selling before median price hit $341k. I expect new peak will be at least 20% higher than last peak, that being said, I expect the new peak median price to be at least $409k.

@Mary L.

If you have good net cash flows, bought all cash, or great interest rate, you can hold indefinitely and ride out the next recession. I have an exit plan, in case of downturn. My exit point minimum is when median SFR reaches 300k. Currently it is 275k as of Feb'18.

Mary, you mentioned you will hold until 20% higher than last peak (341k), which is 409k. While that is a ambitious goal, it is possible. Since you have condos, you would have to look at the GLVAR median condo which is now 150k. 

I have 4plexs, and median is mostly proportional gain for all types. When median SFR reaches 300k, which I think will happen by Dec'18, I will look at the economy, jobs, unemployment number, interest rates, home sales, stock market, and economic outlook. If all still positive, I might hold a bit longer. However, I do not want a repeat of 2008, which Las Vegas lost over 50% value. Those who forget the past are doomed to repeat.

Yes, my exit strategy is trying to time the market. I look at it like playing blackjack at the casinos. I'm up $500. I will play a bit more, but if I go below $400, I will stop. If I hit $600 then will re-valuate. 

Terry

@Phillip Dwyer

I don't want to pay off any mortgage since I'm leveraging to purchase these 4 plexes and all are 50% LTV or lower. I don't want to cash out refi due to the great rate I have now.

I actually want to purchase another one or two 4plex, but it is a sellers market and red hot with multiple offers and close to list or above. 

Putting a date to sell all is difficult. The key is the median SFR which as of Feb'18 is $275k. My target is 300K, which should reach by Dec'18. I will re-valuate at Dec'18, and if economy, jobs, unemployment, stock market, and Case Shiller top 20 city index, all looks good............maybe hold for another year.

The peak seems to be 2020, as date coincides with completion of Raiders stadium. Good as guess as any.

Terry

I agree most properties are listed higher than comps...but they are doing it because they are selling for higher than comps.

Cash buyers are pushing values...appreciation rates will be even higher for 2018 than they were in 2017 (which were already high).

The demand is through the roof and inventory is few and far betweem...I guess we will see how high it goes until affordability becomes an issue.

While I agree there are many factors that make this bull market different from the last bubble, affordability has to come into play at some point. Wadges are not increasing at the same rate as home values and eventually buyers will be priced out of the market. I don't see a slow down anytime soon.

Make hay while the sun shines and have a plan in place for the downturn that will eventually come.

Robert Adams, Real Estate Agent in MA (#9530304 ), NV (#62827), and RI (#18138)
702-349-9175

I gambled before like many people.

I learn a lot from gambling.

In a hot dice table, we would never stop betting and never leave the table before “the Seven” come out. Never guess/predict when “the Seven” come out, but prepare for it, just keep roll, and roll, and roll the dice. Just keep collect more, and more, and more chips while the table is still red hot. Once “the Seven” out, party is over. Grab the chips and go.

In a hot baccarat table, we would never stop betting and never leave the table when we catch a streak of long Bank/long player/long jump. We never want to stop betting before the long Bank end.

Just keep collect more, and more, and more chips while the table is still red hot. Once “the Long Bank end, party is over. Grab the chips and go.

Believe it or not. I am lucky so far that, overall in the last 14 years, I am ahead in the casino. I didn’t lose money in the casino overall. I won some money, plus all the comps, free food, free rooms. Because I have been using the “hit and run” gambling strategy. When I have the luck and catch a streak, I bet all the way until I lose one hand. I grab the chips and left the table once I lose one hand. I do not set a winning goal. The winning amount can be $1 to unlimited ($150k max so far, average winning $5k each session) depends on the luck. But I set a loss limit (usually $2k). Once I lose that “set amount”, it was not my day, I leave the table too.
I don’t bring a lot of money to gamble.
If you have the luck, little money can win big money.
If you are bad luck on that day, no matter how much money you bring out, you will lose it all.
When I have the luck, I would use the winning house money to bet more and more.

So far, I am in the housing streak, I will not predict when the downturn come, just let it ride higher and higher and higher, until the housing report data is weak. Then I will grab the chips and leave the table. Just let my winning money keep growing until the headwind changes.

The housing market is red hot today, still have a lot of money to be made, I’m still having fun in the party. Leaving the party now is too early.

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