
Las Vegas Housing Weakness Signals the Slowdown Is Spreading - spking
https://www.wsj.com/articles/las-vegas-housing-weakness-signals-the-slowdown-is-spreading-11544702400
======
reaperducer
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.

People have to stop using houses as piggy banks.

~~~
matwood
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.

~~~
reaperducer
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.

~~~
ghaff
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.

~~~
reaperducer
_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).

------
Nelkins
Housing can’t be a good investment and affordable

[http://cityobservatory.org/housing-cant-be-a-good-
investment...](http://cityobservatory.org/housing-cant-be-a-good-investment-
and-affordable/)

~~~
nostromo
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.

I don't see this changing anytime soon.

~~~
pathseeker
You are describing what happened once as a generality.

~~~
nostromo
The Federal Reserve would no doubt respond in the same way if we find
ourselves in a similar situation.

~~~
toomuchtodo
Labor will give up on seeking housing long before the Fed stops propping up
traditional asset prices.

------
smuss77
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.

~~~
defen
> "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.

------
ssharp
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.

~~~
kaybe
Why would anyone pay significantly more than appraising price?

~~~
srfilipek
Little to no availability of homes. It's happening in the Boston area now. Too
many people, not enough space.

------
lasvegaswinner
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

------
nostromo
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.

~~~
zackmorris
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%.

~~~
linuxftw
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).

------
currriuosly
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?

~~~
freeone3000
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.

~~~
thousandautumns
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.

------
MrTonyD
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.

~~~
jdhn
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.

------
neonate
[http://archive.is/WvYmq](http://archive.is/WvYmq)

------
dawnerd
Who wants to live in Vegas anyways?

~~~
newnewpdro
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.

~~~
eggy
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.

~~~
newnewpdro
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.

[1]
[https://en.wikipedia.org/wiki/Mount_Charleston](https://en.wikipedia.org/wiki/Mount_Charleston)
[1.bis]
[https://en.wikipedia.org/wiki/Mount_Charleston,_Nevada](https://en.wikipedia.org/wiki/Mount_Charleston,_Nevada)

~~~
eggy
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.

------
wmil
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.

~~~
bilbo0s
Does Nevada have high income tax? Is that why this is happening maybe?

~~~
seiferteric
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.

~~~
ctlby
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.

