The Micro View – Monday, March 16, 2020
Less than one (and incredibly long) week ago, I offered a few insights into the local Las Vegas real estate market amidst the uncertainty unfolding due to the pandemic and the economic factors threatening to change things as we know it. The dominos lined up and the pieces are starting to fall. We’re feeling the early effects of social gathering cancellations en masse, and quite quickly. Anyone with a Facebook account has probably seen a post on their feed about casino workers facing furloughs or layoffs. What’s most shocking is watching the city (of Las Vegas) shut down, as some of the largest resorts close their doors. In unequivocally necessary actions, every major gathering, from conventions to Strip performances to hotel restaurants, and even schools and religious gatherings are ceasing operations for at least the next two weeks. I’ve never known this town to NOT have a St. Patrick’s Day Parade, but that’s unfortunately the case this year. At a time when we were gearing up to host what was estimated to be 700,000 tourists for one of the most exciting NFL Draft parties to ever be thrown, we’re shutting down all tourism activities.
It begs the question of whether or not we will be able to quickly and gainfully employ those laid off resort employees, based on recent stats of a regional worker shortage.
It’s too early in the game to cite any credible real estate trends or valuation changes. We’re just at the tipping point of a shift in consumer confidence, along with a hundred other factors that determine the outlook for the residential and commercial real estate market. Layoffs are definitely one of those factors. It begs the question of whether or not we will be able to quickly and gainfully employ those laid-off resort employees, based on recent stats of a regional worker shortage. Time will tell. As of Friday of last week, massive amounts of refinance applications had forced banks and brokers to raise their rates. The Federal Reserve’s surprise cut to zero on Sunday, along with its commitment to provide liquidity for the banking system should be able to alleviate some of that, as well as prevent a potential credit crunch.
As of last month, the Greater Las Vegas Association of Realtors’ Multiple Listing Service was showing about two months (or less) of inventory, based upon demand. We couldn’t have asked for a better starting point to enter a time of economic uncertainty.
The residential housing market has been driving down the freeway at about 70 MPH for the last couple of years. About six months ago, we slowed to about 50 MPH but were still moving ahead. As of last month, the Greater Las Vegas Association of Realtors Multiple Listing Service was showing about two months (or less) of inventory, based on demand. We couldn’t have asked for a better starting point to enter a time of economic uncertainty. We have a bit of a buffer, along with several months, to regain footing and re-stabilize, assuming the coronavirus is under containment and the markets are correcting. Owning a home versus renting, especially in the median to average price range, is still more economical and sensical for most Las Vegans.
If not for The Blackstone Group coming into our market around 2009 and purchasing 20,000 distressed SFR’s, as well as multifamily properties, we may have never recovered as fast as we did.
There is an incredible amount of private capital waiting to re-enter our market. My phone is ringing off the hook with buyers looking for opportunities. This is a very comforting and simple math equation. If and when the market starts to subside and take a downturn, I’m hopeful that we can place that money in solid properties and stop the bleeding before it progresses into (heaven forbid) something resembling the crash of 2008. Investor faith in Las Vegas appears to be high and that may be our saving grace. If not for The Blackstone Group coming into our market around 2009 and purchasing 20,000 distressed SFRs, as well as multifamily properties, we may have never recovered as fast as we did. We’re a stronger community than we were back then, with more opportunities for businesses and families alike.
A bump in the road is inevitable, but a quick recovery is possible.
What’s the most fascinating thing to watch unfold are behaviors and the shifts in how we do things. Technology has enabled a new platform to keep some companies afloat while shutting their brick-and-mortar office doors – the forced implementation of people-centric workplaces. With many in the workforce having been sent to work from home, what was once just a novel idea that was tested by few, may become the new norm as people and employers embrace this change. As global conferences have been canceled, live streaming has instantly become a way to salvage at least some of the experience, and a way to save the disruption of lost time. Much of the same has happened on a smaller level with religious services and other gatherings. I bring this up because, if the WAY we do business and conduct our everyday lives changes as a direct result of people-distancing collides with technology, we may be looking at yet another fundamental functional obsolescence of some types of real estate as we know it.
This is not a week-to-week or day-to-day situation. This is almost an hour-to-hour whirlwind of ups and downs. A bump in the road is inevitable, but a quick recovery is possible. Consumer confidence is key and investor confidence is pivotal. Stay tuned!
… in every recession a credible amount of opportunity is created so you want to be able to be of service to the community whenever you hit a recession there is always more opportunity and we at Las Vegas EXP are here to catch these golden nuggetsPAM JUNGE