Las Vegas Covid Phase __
I have discovered Covid discussions are right up there with politics and religion. I try dodging questions about Covid for that reason. However, many of our investors have been asking “What’s it really like in Las Vegas?”
Well if you live on the West side of town or the affluent Henderson areas, the majority are running around in masks. I live on the East side, where most blue collar workers live. Masks are typically not worn unless inside a business (required by law). Blue collar workers simply don’t share the same enthusiasm for wearing masks. I also find “Covid Believers” are more politically aligned to the Democratic party but I have no data to prove this. Most people who own businesses are more conservative Republicans who are not in love with the Democratic governor and are “Covid Non Believers”. People getting free money from the government have no problems with the lockdown. It’s a “snow day” for all the kids who don’t want to go back to work.
There is a lot of media describing an increase in the number of folks who have tested positive with Covid. This is true but the number of people dying in Nevada is pretty much holding steady. This interactive chart shows we are averaging about 2-5 deaths a day. We do not have refrigerated tractor trailers pulling up to hospitals to carry off the dead. In fact, some hospitals (Mountain View News) are laying off staff because there isn’t enough business.
The Vegas economy is disintegrating with continued lockdowns, cancelled events and closed bars. The only people staying at our short term rentals are folks who live less than a days drive and are going stir crazy. 25% of the workforce is rumored to be furloughed. I spoke with a senior employee at MGM who said they will be laying of 10s of thousands of people at the end of August. My guess is there will be about 200,000 without a job or free money starting September 1st. Most flights to Vegas have been cancelled and most countries won’t allow citizens to return once they visit here. There will be a lot of people without work in the near future. It will get much worse before it gets better.
Real Estate Market
We predicted a correction back in October 2018 and we are sticking to our expectations of a considerable drop in prices. We expect prices to drop about 35%. The government is just prolonging the inevitable. Once mortgage forebearances end, people stop getting free money and people have permanently lost their jobs, the foreclosure avalanche will start.
When will he hit bottom? We are guessing middle to late of next year. The real unknowns is how long the government will run out of money to print. As we approach the bottom, I be increasing the frequency of these broadcasts. Investors who followed our advice in the last recession snapped up properties and made significant profits. We will do it again. Don’t worry, we will let you know when it’s time to buy.
Postponed Rent Party Ends September 1st
Fortunately, the Postponed Rent Party ends September 1st. Tenants who elected not to pay rent are hopelessly behind now. We have only about 8 naughty tenants who will be dragged out by their heels. The majority of our tenants are strong and those who are limping along have been offered to leave without penalty. We have been able to place excellent tenants in our vacant units by offering rents a bit below market and raising our entry standards. This strategy has been working well. Rents in general will be decreasing across the board by about 5% by the end of the year. Tenants in our portfolio who have lease expirations will be given an opportunity to sign new one year leases without an increase.
We predict the courts will be backed up. If you are one of those 8 unlucky owners, it may take until the middle of October to have naughty tenants locked out.