Is Las Vegas Overvalued? We Dare Say
Posted: May 24, 2018 by Tamara Foote
May 24, 2018
Re: Forbes May 14th, 2018 – Most Overvalued Housing Market
Dear Ms. Sharf:
Please pause to consider some important alternate facts. Firstly, the Las Vegas unemployment is way down, not up. Secondly, our housing market is healthy again having rebounded strongly from the lows in 2009-10. Contrary to Fitch’s assertion, we see the current local market fundamentals as far different from those of the recent boom-bust. Today’s positive economics are based on conventional and sustainable value factors, namely:
- Demand - Las Vegas’ employment, family formation and population growth from income taxed, high home value/realty tax and long commute states are continuing to drive home sales.
- Supply - greatly constrained, for both new and existing homes, especially for homes priced under $300,000, will establish a floor value.
- New Investments - the smart money has doubled down on Las Vegas with more than $8B in new investment with delivery starting in 2019 along with new permanent employment and spin-off economic boosts yet to be accounted for in home values. ? Note: the futures contracts traded on the Case-Shiller Index, Fitch’s data source, forecast that Las Vegas should see a another 11% price growth through 2022.
- New Normal - the Las Vegas housing market is more likely to see normalization or at least a slowing of price appreciation due to the limitations on supply and affordability, as constrained by slow income growth and rising interest rates.
- Below Peak - most importantly, Las Vegas is one of just a few large metro areas in the U.S. with home values below its most recent peak – Las Vegas is 26% below, as measured by the Case-Shiller Index.
The reality – strong demand, constrained supply, economic impact of billions of new investment and Case-Shiller’s own view all support the fairness of current home prices and the likely probability that there is upside potential over the foreseeable horizon. While we respect various views and recognize only the future will tell who was most accurate – had a Las Vegas home buyer heeded the similar gloomy assessment in your 2017 Forbes article and not purchased a home, at the then median price of $240,300 which is now worth $266,800, they would have lost out on $26,500 in equity or an 11% gain in just a year.
Finally and furthermore – the Vegas Golden Knights are about to compete in the NHL Stanley Cup Final, in their inaugural season; against historical precedent, 500 to 1 odds and the best experts’ predictions.
Though not on our list of alternate facts, this phenomenon has got to justify at least a couple percentage points in home value appreciation!
DON’T BET AGAINST VEGAS!!
Robert Hamrick Chairman and CEO
Coldwell Banker Premier Realty
Las Vegas, Nevada
Data Contact: John McClelland Vice President,
Research Coldwell Banker Premier Realty
Las Vegas, Nevada
Please see the referenced Forbes articles for the last three years below: