The recent economic news has been less than flattering – to say the least. This summer danger signs and flashing red lights are appearing at virtually every corner of the economy.

Less than a year ago experts and policy makers at the Federal Reserve believed increasing inflation was a temporary condition. In fact, the Fed popularized the term “transitory inflation.” In their view, rising prices, product and labor shortages, and an overpriced stock market were short-term conditions and easily remedied.

What a difference a year makes. Today the inflation rate is entrenched at 8.6%, the highest level in more than 40 years. In Las Vegas, gas prices are over $5 per gallon. International conflicts and ongoing Covid-19 lock downs in Asia continue to impact supply chains, and the major stock exchanges are now in bear market territory.

So far in 2022 the Federal Reserve has raised interest rates three times, and we anticipate three more increases before the year ends. The central bank is also reducing the size of its balance sheet by more than $40 billion per month. In September, this amount will be $95 billion per month. These actions constrict the money supply and reduce the availability of credit. Taken together, these steps are intended to reduce inflation and cool off the white-hot residential real estate market.

According to Bankrate, 30-year fixed-rate mortgages in Nevada are now 5.53%. Last July they were 3.26%. That’s a 70% increase in less than a year. Translation – last year if you borrowed $400,000, then your loan payment was $1,743. Today it is $2,278. That’s a payment increase of $535 on the same principal.

The real estate market in Southern Nevada is beginning to cool. Las Vegas Realtors reported 3,758 homes were sold in May. That’s down 8.8% from a year ago. Condos and townhomes were down 6.6% for the same period. That said, the median home prices in Las Vegas are $482,000 – an all-time high, and they’re up over 25% from last year. Furthermore, the available supply of homes on the market is just over one month.

What does this mean to landowners in Southern Nevada?

No one can be certain, but here’s what we believe. First, 2022 is not 2007. New lending regulations have ensured far fewer risky loans, and people have significantly more equity in their homes. In Las Vegas, median home prices have increased by 400% over the past decade, and more than 25% since last year.

Second, regardless of the economic conditions, developable land in Las Vegas is supply constrained. The 3,758 homes sold in May represent less than two months’ supply, and there are fewer than 9,000 vacant lots ready to build.

Third, California remains the primary source of new residents to Las Vegas. Over 39 million people live there versus 3.2 million living in Nevada. More importantly, the California Association of Realtors reported the median home price to be $797,000. That’s 65% higher than the median price of a home in Las Vegas.

Fourth, developers need land to build homes and they want to build in Las Vegas. In May, more than 50 parcels of vacant land were sold, and the average price exceeded $780,000 per acre.

Our perspective.

Our perspective is based on 35 years’ experience where we have successfully navigated four economic cycles. During this time, we have brokered and invested in more than $2 billion (25,000 acres) in land. Presently we own more than 2,000 acres.

We believe there is a shortage of cost-effective housing across the United States, and specifically in Las Vegas. Regardless of the economic cycle, people still need affordable housing. Higher interest rates and land shortages are pushing buyers and sellers into higher residential densities and multi-unit developments.

We are monetizing our land portfolio to facilitate this, and we are advising our partners and clients to take similar actions. Concurrently, we are buying land to assemble properties for higher density development in Las Vegas, and we are investing in infrastructure in adjacent, secondary markets.

We welcome the opportunity to provide you with an independent assessment of your property. This document includes a market analysis and an independent opinion of value. Contact Dylan Wolf, Vice President, to indicate your interest – [email protected], or phone us at 725-243-8372.