Las Vegas Real Estate Market Update
Prices increased temporarily in June giving a lot of real estate agents hope in a recovering market. My belief is that it is a false hope. I predict prices to continue decreasing with a noticeable declining trend in the fall of 2023. What throws everyone off is the low inventory. Primary buyers are choking on these new interest rates and investors don’t want to buy assets that barely make a profit.
According to Forbes Advisor, Home Prices Are Likely To Keep Declining – “Current trends suggest home prices will continue to decline from the highest median listing price of $499,900 in May 2022 as buyers become more selective since mortgage rates hover near 20-year highs and inflation continues to squeeze consumers’ budgets.”
I have witnessed a lot of California investors with 1031 money forced to buy something. Sadly, they are crying in their soup because none of these recent purchases make more than a 3% return. Some of these investors are not going to make it through the downturn. Rents are steadily decreasing and I see foreclosures on the horizon. Just like 2008.
We will not be taking on new clients who don’t have deep pockets. In the last rodeo we had to ride some of those investments into foreclosures and short sales. It wasn’t pretty. In summary, I still believe there is no benefit to investors to purchasing real estate right now in Las Vegas. Rents are decreasing and properties are still overvalued.
The Rental Season Ended
Every year the school season in Las Vegas creeps up a little more. About a decade ago, school season started around Labor Day. This year I had to slow down through the school zones the second week of August. This means that the rental season has also shifted. All the families have settled in and the number of inquires for vacant properties has dropped in half already.
We will be getting very aggressive with price reductions on vacant rentals. We will also modify our policies to have our leases end no later than 7/31/2023. Lease renewals will also have the same treatment. Don’t panic if you see a lease renewal a tiny bit shorter in 2024.
Pad Split
There is a new platform in town called “Pad Split“. We have been managing one of these for about 8 months now and it appears to work pretty well. A property that would normally gross $1400 a month is now grossing about $3000 a month. This platform caters to the young adults who have seasonal work who rent out individual rooms. Leases are month to month which conforms to local laws and the application process is streamlined. Tenants are screened first on income and then reputation. They can then pick from a variety of houses available. The company also encourages owners to convert common areas to bedrooms. This serves 2 purposes: 1) Reduces conflict among tenants 2) creates another income source.
So far, the one we have been managing has worked out pretty well. The investor pays utilities and has the kitchen and bathrooms cleaned once a month. Managing one of these Pad Splits is not for amateurs. These require a lot of skills similar to managing multi family properties. All it takes is one naughty tenant to make the property fail completely. For example, I had to use a lot of my “tenant whispering” skills to get a naughty tenant to move along about 3 months ago. If that tenant’s behavior had remained unchecked, all of the other tenants would have left. “Don’t try this at home.”
Quick snapshot of our staff.
We have more folks to help manage our properties now. Vennetta and Victoria will be managing some of our portfolio. Our goal is to provide even better customer service than before. Recent customer reviews on Yelp and Google have been excellent!
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