- The Las Vegas housing market has undergone significant changes due to a number of factors, including water shortage, increasing population, and economic growth
- Las Vegas is heavily reliant on the entertainment industry but is starting to diversify into other industries
- The current market conditions are changing rapidly in Vegas; there are a lot of price reductions and few houses coming on the market. Thus, many asset management companies are pulling out of real estate right now.
- Despite the uncertainty, Pam and Justin still believe in investing in real estate
This Poplar Propcast episode dives deep into the Las Vegas Housing Market! Justin is joined by Pamela Junge, a seasoned expert in the real estate industry and the Chief Adventure Officer of The Junge Group. Together, they explored the factors that shaped the current state of the local market and discussed the impact of the 2008 crisis on the housing landscape. From water availability and rental trends to the influence of transient populations and commercial access, they provided a comprehensive overview of the current conditions in the Las Vegas housing market.
All the information discussed in this blog came from season 1, episode 2 of the Poplar Propcast, available in Google Podcasts. So if you want to dive deep into the discussion, have a listen.
Housing density in Las vegas
Justin brought up rural preservation lots, revealing that his current home is located in one of these areas. He explained, “The neighborhood I’m in now is considered [a] rural preservation lot. So they have to be at least a certain size, and that changes the density a lot.” Justin observed that this type of housing is rare in Las Vegas, with most new developments featuring houses that are very close together.
Curious about this shift in density, Justin asked Pam for her thoughts on the matter. Pam explained, “One of the motivations for the shift is just that we’re pretty landlocked with all the BLM [Bureau of Land Management] land around us. They don’t let it go quickly. And a lot of that is to control population. However, the problem there is that we’ve ended up with a housing shortage.”
Pam went on to describe how developers have become creative in their solutions, such as incorporating rooftop decks as green spaces, due to a lack of available land for traditional green areas. She noted, “For the longest time, the county required some type of common area or green space within the subdivision. Now we’re even seeing that get set aside for rooftop decks.”
Las Vegas real estate and its water shortage
The evolution of yards
To explore the evolution of yards in Las Vegas, Justin and Pam discussed the trend of sustainable landscaping in response to the water shortage. “In the early days, you just pull the water out of the ground and get the space, green it up…from 2000 to 2020…our water use went down by like 20%. And a large part of that is pulling out green space and doing xeriscaping,” explains Justin.
However, he observed that the trend has now progressed to the point where some developments don’t even have xeriscaping but instead feature rooftop decks.
Nevada’s water conservation laws and restrictions
Pam praised Nevada’s effective water conservation efforts, stating that “Nevada Water Authority has done a pretty good job.” In Nevada, homeowners are rewarded for replacing grass with xeriscaping, receiving a dollar per square foot for every patch of grass removed.
However, Pam warned that homeowners must be aware of the covenant that runs with the property if it has been xeriscaped through the Southern Nevada Water Authority program. “If homeowners convert and build a pool, they will be fined by the authority, and the covenant will be lifted. Las Vegas will soon limit the maximum pool size in the state to 10% above the average pool size to prevent the construction of overly large pools.”
Las Vegas efficient water treatment
Justin was equally happy for Nevada’s efforts in water preservation and treatment. “They not only do xeriscaping but also subsidize pool covers to decrease evaporation,” he said.
He also highlighted their water treatment efforts, stating that “any water that goes down the drain gets treated and put back into the lake.” He emphasized that water used for pools or watering plants does not go through this treatment process, and anything that goes into storm drains does not go back into the lake.
Las Vegas economy
Las Vegas’ strong union
Justin noted that the hospitality sector in Vegas is more stable compared to other cities due to the strong union protections. “Our unions put together a pension. And so you have this ability to retire and just stay here. That’s not really available for people that work in hospitality in San Diego, LA, San Francisco, New York. The unions here are really strong,” he said.
Pam added that the union not only takes care of its members in retirement but also currently. “The union is a force to be reckoned with in this town,” she said.
The future of the Las Vegas economy
During their conversation on the employment impact of casinos, Justin and Pam discussed the potential impact of automation on the industry. Pam pointed out the trend towards automation has already begun, mentioning the use of machines for the automatic pouring of drinks in some bars. She noted that while it may not be as friendly, it offers benefits from a corporate and financial standpoint, such as reduced overpour and absence of sick leave.
Justin added that some bars already use machines for perfect pours and that the role of people in the industry may change. He commented, “We’re using people for the last mile; that’ll be interesting to see how it changes the economy.”
Risks in the Las Vegas market
Pam voiced her apprehension about the heavy reliance of Las Vegas on the entertainment industry, citing the need for diversification to avoid the harsh impact of potential downturns. She remarked, “For the last 20 to 30 years, [we’ve been] looking at diversifying the Las Vegas economy because if it hits the fan, we’re gonna get hit hard. For a really long time, we were the one trick pony.”
While Pam appreciated the city’s efforts to diversify by constructing the sports mecca and welcoming sports teams, she questioned whether it truly translated to a diversified economy or merely sustained the existing tourist-driven industry.
She remarked, “Let’s take Allegiant Stadium, for instance. There’s 10 games a year and maybe 20 concerts. So that ginormous stadium is not operating on a day-to-day basis where people are working regular nine-to-five jobs. You have a handful of employees to make it operate. Then you have part-time employees that come in for events. That’s great. However, it’s not creating a lot of full-time jobs.”
Diversifying the Las Vegas Economy
Regarding diversifying the Las Vegas economy, Tony Hsieh’s efforts in building downtown Las Vegas into a tech-friendly neighborhood were noted by Justin, who said that Tony was “trying to create an environment to encourage tech culture.” Pam praised Tony’s efforts and cited the Innovation Center as evidence of the city’s progress in technology.
Justin also mentioned Vegas’ growing reputation in the food scene, “We have one of the best food scenes, I think, in the country. And it’s just kind of quiet and off-strip cuz people come here and like the flashy things. But as soon as you get off-strip, you hit places like Echo and Rig in Tivoli Village, Sparrow and Wolf in Spring Mountain, and they have phenomenal things going on there. Brilliant chefs making brilliant food.”
In addition, Pam shared that “the pandemic has accelerated the shift of brick and mortar stores to e-commerce” and that they are helping these businesses with new business plans to convert real estate for their expansion needs.
Las Vegas’ increasing population
During a discussion about Las Vegas’ population, Justin asked Pam if the city experienced an influx of people from other states during the pandemic. Pam replied, “Absolutely! Our numbers were fantastic, honestly. I think we were ranked in the top 10 of places where people were flocking to. Las Vegas was very enticing, especially for our neighbors in California.”
Las Vegas market update
Following the topic of population, Pam shared that she had lost two California buyers in the past month because Vegas isn’t so magical for them anymore. “Our property values skyrocketed, probably even more so than a lot of other regions across the nation. And so Californians are now becoming disenchanted with us,” says Pam.
Justin noted that this was also compounded by the increase in interest rates, claiming those two factors drastically change how people can budget or plan for buying a house.
Pam discussed another factor that might have skyrocketed the Las Vegas market, and that’s millennials’ buying intent. “Our number one buyer right now is millennials. But the problem is, they’re not putting anything back on the market. They’re moving from an apartment or mom and dad’s home, so they’re not stepping up from a starter house. So all they do is consume.”
Later, Justin and Pam discussed how residents choose homes in Vegas. Pam discussed that most people in Vegas would compromise proximity to have their own space instead of living on top of their neighbors.
Uncertainty in the housing market in Las Vegas
Pam and Justin discussed the housing shortage in Las Vegas, with Pam noting that “It all comes down to supply and demand. If we have a housing shortage, the market’s not going to crash overnight, but it’s changing really fast right now.” She also mentioned that “we started seeing a few price reductions and a few more houses coming on the market. Last week we actually had more price reductions than we had new houses put on the market.”
Justin shared his personal experience with a decrease in housing prices, saying, “A couple of weeks ago, I got an email from Open Door that said, ‘your open door offer has expired. Click here to see your new offer.’ It was down almost $80,000 in six months. So the iBuyers are really pulling back, at least for that one, as I noticed.”
Pam warned about the uncertainty in the Las Vegas housing market, saying that “Asset management companies have all pulled out. Hedge fund companies have pulled out. They’re not doing anything; they’re not touching real estate right now, any kind of real estate.”
Is real estate still a good investment in Las Vegas?
Pam and Justin still believe in real estate as a good investment, despite the current uncertainty. According to Pam, “I’m still really old-fashioned when it comes to home ownership. I believe in home ownership. I’ve got the highest degree in commercial real estate you can get. And I dig helping people buy houses still.” She pointed out that historically, real estate has never failed over the long term, citing how quickly Las Vegas recovered from losing 60 to 70% of its value.
Justin agreed, adding, “These interest rates are great. Anytime you can get single-digit interest rates on a 30-year loan, you’re gonna beat inflation every time. And your property’s gonna appreciate like the devil every single time.”
In terms of buying a house, Justin broke down the thought process, encouraging listeners to still buy. “For most people, the decision to either rent or buy is ‘How much can I afford per month? Do I have a down payment? And how long am I gonna be here?’ If you’re gonna be here for more than five years, you have the down payment, and you can make the monthly, you should buy, one hundred percent.”
He also noted that buying a home “shouldn’t be this big economic joy ride to see if you’re gonna win in the game of capitalism.”
The Las Vegas housing market has undergone significant changes in recent years due to various factors, including water shortages, land availability, and economic fluctuations. The city’s reliance on the entertainment industry and the potential impact of automation on employment opportunities in the hospitality sector are also important considerations for the housing market’s future.
However, despite these challenges, Pam and Justin still believe that Las Vegas still presents an opportunity for real estate investors. The discussion between Justin and Pamela Junge on the Poplar Propcast provides a comprehensive overview of the current conditions and future prospects of the Las Vegas housing market.