Las Vegas is on Fire

As more high-rise hotel and condominium towers rise on the Strip, subdivisions and strip malls continue their march across the Southern Nevada desert. The city's population is expected to blow past 2 million on its way to 3 million. No wonder, Las Vegas was the hottest housing market in the country last quarter:

Las Vegas home values showed the biggest gains. The median price of an existing single-family home in and around Sin City shot up 52.4 percent.

"This is the biggest annual home-price increase in any metro area on record," said NAR chief economist David Lereah, explaining that the supply of houses on the market has been extremely tight.

One reason for the lack of supply (data show only a 1.7 month inventory of homes in Vegas) is the fact that most of the land surrounding the city is owned by the federal government -- 87 percent to be exact:

Most of that land is controlled by the BLM [Bureau of Land Management], which possesses nearly 3 million of Clark County's 5 million acres, a throwback to a time when no right-minded investor, short of a miner or railroad man, was willing to buy land in a desert wasteland.

Once again, we see government standing in the way of housing affordability:

BLM critics say more land would be available for construction if the agency would just open the spigot; then, the law of supply and demand would ease the recent explosion in land and housing prices. For proof they look to Phoenix, another booming city, which in the mid-1990s had higher median home prices than the Las Vegas Valley. Not today. The median price of a new Phoenix-area home was $182,000 in June. Here it was $241,750.

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The average acre of land in the Las Vegas Valley costs about $290,000. In the Phoenix area that figure ranges from $30,000 to $50,000, or what it cost here a decade ago.

So where to go from here? Government authorities should draft a conservation plan to protect sensitive desert habitat like they're doing in Riverside County, CA and then get out of the way.

The pricing increases may be driven in part by a constrained land market, but a red hot Las Vegas economy that continues to outpace the country in construction activity and job growth can share the credit:

Nevada created 8,200 jobs in May, the Department of Employment, Training and Rehabilitation said June 19. In the past year, 47,600 new jobs have been added to the state's work force, which is growing at a 4.4 percent annual rate, compared with 1 percent nationally.

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The 2003 [construction] index, released in May, shows Las Vegas had a list-topping 48.11 rating, nearly 10 points ahead of second-ranked Riverside-San Bernardino, Calif. (38.81). Las Vegas' score was 17.6 percent higher than a year ago (40.9), and 17.5 percent higher than two years ago (40.11).

High barriers to entry for acquiring prime land and blistering employment growth bode well for apartment investors in the area. We're extending The Walsh Team presence to Las Vegas through our associate, Mike Gallegos. Please contact us if you want a piece of the action.