What trends are you seeing in your local market?

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Eric Fernwood · Answer

Hello Noah,

Broad statements make good soundbites, but they are rarely applicable to specific markets. Furthermore, they do not apply to all segments within a single market. For instance, the demographic that buys million-dollar houses differs from the demographic that buys $400,000 homes. It is possible for prices to decrease in the million-dollar home market segment while increasing in the $400,000 market segment.

We've targeted a single narrow tenant segment in Las Vegas for the last 15+ years. Below are statistics for properties that conform to this tenant segment.

Sales - Median $/SF by Month

Prices have stabilized and started rising again.

Sales - List to Contract Days by Month

Days on market have been dropping rapidly since January, indicating increasing demand.

Sales - Availability by Month

The number of homes on the market has declined rapidly since December, indicating decreasing supply.

Sales - Months of Supply

There is only 1 month of supply, indicating a strong seller’s market.

Based on the statistics, demand is increasing and supply is decreasing. Prices are starting to rise and will continue to rise for the next few months.

A frequent question I receive is, “Why is Las Vegas performing so well when so many cities are not?”

Supply & Demand

Unlike the stock market, which is largely driven by emotions in the short term, real estate prices are based on supply and demand. Las Vegas is unique in that its housing stock is almost fixed while demand continues to increase. This almost guarantees that prices and rents will rise in the future.

The Supply Is Almost Fixed

Las Vegas is a small island of private property surrounded by a vast expanse of federal land. There is very little undeveloped privately owned land available in Las Vegas, and what is available is quite expensive. As a result, new homes in the areas we target start at $550,000, while properties that match our target tenant pool segment are priced between $320,000 and $475,000. Therefore, even if more new homes are built, it will not increase the housing stock for the market that we are targeting.

Demand

Increasing population drives the demand for housing. The population of Las Vegas grows by an average of 2-3% each year. What is attracting people to Las Vegas? Jobs. In a study I conducted in January, there were between 26,000 and 31,000 open jobs in Las Vegas. These open jobs will attract more people to Las Vegas, thereby increasing the demand for housing.

Currently, there are between $16 billion and $26 billion worth of new projects under construction, depending on which study you read. As these large-scale projects come online, they will create thousands of additional jobs.

What trends are you seeing in your local market?

2 Replies

Supply & Demand