Data recently released by the National Association of Home Builders correlates with the field experience of our Las Vegas real estate team as we address the preferences of our clients. For the first time since 1982, the average size of a newly completed home actually fell, as in smaller. This is clearly a response on the part of builders to imperatives for post-meltdown buyers to be more practical, rather than insisting on more and more of everything. We didn’t find this “smaller is better” trend surprising since so many Las Vegas clients over the past year have expressed the desire to down-size their living space. Let’s face it, almost everyone seems to be living in a new financial and psychological reality, and it’s only natural that this would find expression in the homes people choose to buy. Closely related to the issue of size, we are also seeing more concerns expressed and attention focused on the energy efficiency of various properties on a comparative basis. As much as the “green scene” would like to attribute this to enhanced environmental awareness, the anecdotal evidence suggests that the main concern is more basic and old-fashioned, the size of the monthly energy bill.
Archive for January, 2010
Las Vegas real estate presents the most undervalued residential real estate opportunity in the entire country according to CNNMoney.com. In today’s online article focusing primarily on the most overvalued markets in the country (hard to believe there are any of those), CNNMoney declared Las Vegas, Nevada 41.4% below fair market value, thereby leading the nation in this distinction. Here’s a curious coincidence speaking of 41%, it just so happens that 41% of all buyers in the Las Vegas market paid CASH for their homes in the month of December. In fact, between September and December of 2009, cash transactions accounted for a whopping 40-45% of overall buyer activity each month. Could there be a connection here? Could it possibly involve smart money seeking out a highly compelling long-term opportunity?
Hmm … most unique city in America … most undervalued market … massive amounts of cash buyers … go figure ??
When people talk about the biggest players in the Las Vegas real estate game on the Strip, you inevitably hear names like Steve Wynn and Kirk Kerkorian. Here’s a name you hardly ever hear about unless you read the financial press at a sophisticated level … Carl Icahn.
Let’s start with a little recent Vegas history about this self-made billionaire. Icahn used to own the Stratosphere Hotel and Casino at the north end of the Strip and bundled it together with the Arizona Charlie’s properties (which he also owned) that cater to locals from various locations around the valley. A few short years ago (at the height of the market) Icahn sold the whole gaming package to a real estate hedge fund run by the geniuses at Goldman Sachs. Needless to say, the Goldman guys ended up getting killed while Icahn walked away with a massive return on his initial investment in the properties.
Fast forward to today … and who is back on the Strip as a major player once more? Read this from DealBook in today’s New York Times …
The billionaire investor Carl C. Icahn has made the winning bid to buy the bankrupt and unfinished Fontainebleau Las Vegas resort. According to court papers filed in Miami, the bankruptcy examiner in charge of running a court-supervised auction of the Fontainebleau said the only qualified bid received for the Fontainebleau was from Icahn Nevada Gaming Acquisition L.L.C., Reuters reports
What was the winning bid for a mostly finished 3,800 room 63-story Strip resort that already has about $2 billion sunk into it?
Would you believe $156 million ?!?
You could describe this price as “fire sale” but even that would be an understatement. The truth is, no one had the nerve and the cash to step forward in this economic environment to make a serious competing auction bid against Icahn for Fontainebleau Las Vegas. How did this guy get to be a billionaire over the course of his amazing career? The question hardly needs asking …
As an Internet-based business, the Michelle Sterling Las Vegas real estate team takes a keen interest in all things Google. The Google search engine provides the marketing foundation for our daily business process and we have followed the growth of the company over the past decade with keen interest on many levels. It is along this line of thought that we would like to comment on the current situation concerning Google and the hacker-related espionage recently perpetrated against the company.
One would imagine that the Google motto of “do no evil” has been stood on its head in some very intense meetings lately, as the company seems quite determined to “have no evil done to you”. Google has already announced their intention to revisit the decision to censor results on its Chinese search engine, and today brings a new announcement postponing the release of new mobile phones (that use Google’s Android software) by a Chinese cellphone company. The situation seems destined to get much more complicated before it gets resolved, with Reuters reporting that Google employees in China are under investigation by the company. Was this at least partially an inside job? Anything seems possible at this point.
Particularly disturbing are reports that intensive efforts were made to compromise the security/privacy of Gmail in order to gain access to accounts belonging to Chinese human rights activists. As the US government deepens its involvement in the matter, this could potentially become a significant diplomatic issue between the two countries as well.
The residential real estate industry is one of the most competitive online sectors in terms of Internet commerce and the Las Vegas real estate market is one of the most competitive metropolitan areas for website visibility. It is for this very reason that all eyes are on Google as they prepare to roll-out the newest version of the search engine that changed the world. Unlike many previous “algo” updates that tended to make changes around the margins, every indication this time is that the forthcoming “caffeine update” represents fundamental change. As you might imagine, speculation among website developers is rampant about what this all means. Unfortunately, there is no way to be sure about anything until the new Google calculations go “live” for all to see. Stay tuned !!
If you spend every day of your professional life immersed in the Las Vegas real estate market as we do, you can’t help but watch with interest the latest goings on in Washington. If you happen to be a fan of theater of the absurd, it was hard to beat opening day testimony on Wednesday as the Financial Crisis Inquiry Commission got under way on Capital Hill. Four titans of Wall Street sat before Congress and the American public and acted as if they still didn’t understand fully what happened to the financial system, the housing market, and worst of all, how it all affected the American people. Lloyd Blankfein of Goldman Sachs actually compared the financial crisis to a hurricane nobody could have predicted, as if Goldman traders had never shorted their CDO positions in anticipation of a collapse in the residential real estate market. Too much for words …
The very next day, a visibly angry President Obama walked in front of the White House cameras (with his economic team standing stoically behind him) and announced his proposal for a new tax on the nation’s largest financial institutions. Clearly determined to get every penny of the TARP money back and more disgusted than ever with Wall Street greed, the President laid out the logic behind his new tax in some of the harshest language thus far employed in relation to this matter. Was it just me, or did Secretary Geitner look a little pained and uncomfortable over the announcement while OMB Director Orszag appeared almost delighted? Maybe Peter was just thinking to himself about his rather exciting personal life, who knows?
It seems inevitable that Las Vegas foreclosures will continue to be the dominant issue facing our market in 2010. Actually, it seems entirely possible that the foreclosure issue will loom even larger this year than it did last year, although that hardly seems possible. Approximately 3.5 million homes are expected to enter some phase of the foreclosure process nationwide this year, and you can expect Nevada, Arizona and Florida to lead the way. Although layoffs and slow economic conditions continue to be the main contributing factors to additional foreclosures, an increasing number of Las Vegas home owners are “strategically defaulting” on properties they could continue to pay for, but just won’t … and who can blame them ??
On a brighter note … this today from Bank of America …
Bank of America expects to release about 6,000 foreclosed properties into the Nevada housing market in 2010, or about 500 a month, an executive with the bank said Wednesday.
Why is this a brighter note? Because the supply vs demand imbalance in the Las Vegas real estate market continues to border on complete insanity. For every desirable foreclosure property for sale in Southern Nevada there are 25-50 hungry buyers trying to kill each other to score the deal. REO inventory in Las Vegas has shrunk to inexplicably paltry levels even though 200 homes a day are going into default. Buyer demand is absolutely HUGE for foreclosure inventory that MUST be stuck in the system somewhere, even though no one can say for sure where it is !?!
At least Bank of America finally said something …
Without question, the last 24 months have been very challenging for the Las Vegas economy and the Las Vegas real estate market. However, we are starting to see encouraging signs that the worst is behind us and the corner is being turned. For example, after 22 straight months of year-over-year declines, the Nevada Gaming Control Board reports that November 2009 casino winnings actually bested November 2008 totals, albeit by a small amount. Let’s hope this is the beginning of a trend in 2010 that sees the steady return of gaming customers to our ready and waiting city. About 30% of state revenues come directly from taxes on casino winnings, so this is a big deal for budgeting gaps and governmental services state-wide. As economic stability slowly returns globally, Las Vegas should begin to see the return of visitors that haven’t “stopped by” much over the past two years. As you might expect, steady recovery in the gaming industry is key to the resumption of job growth in Southern Nevada, and renewed job growth is the key to almost everything economic that matters.