Nearly a decade after the Great recession, Las Vegas has rebuilt its real estate market, and analysts say we’re in a period of expansion. Here, John Restrepo—principal of local firm RCG Economics—shares his expertise in regional economics and real estate trends.
What shifts are you seeing in the local market?
The trend’s upward. We have a supply-constrained market [a shortage of land relative to demand] here in Southern Nevada, so land prices are getting increasingly more expensive. There’s a large demand for industrial space, particularly warehouse distribution space—or what the e-commerce types call fulfillment centers—and apartment complexes because of the rising cost of housing prices, particularly new home prices.
How does this impact the real estate market?
It could price some renters and homebuyers out of the market. The [developers] may not find the land affordable enough to build, so they may go to other markets. It could potentially have an impact on economic growth and economic development and, ultimately, the cost of development.
What does the rising cost of housing mean for the economy?
At some point there will be a correction in the market, and the demand for real estate will soften a bit, so price increases will moderate. I’m not sure prices will necessarily drop; just the growth of prices will slow down.
What are we averaging right now for home prices?
$325,000 [is the] new [median] home price.
Are apartment rental costs rising as well?
The fact that the vacancy rate continues to drop, although it’s dropping a little slower than it was before, indicates that rents are going to continue to moderately increase.
What does this mean for apartment construction?
If the economy slows, because we’ve built so many apartment complexes and still others are under construction today, we could have an oversupply situation in the next couple of years. We have to monitor the economy and the ratio between job growth and number of apartment units permitted. If that ratio gets out of whack, then we could have an oversupply in the market.
Where are the prime areas for growth in the residential market?
Essentially, the northwest part of the Valley, Summerlin, some of the southwest and Green Valley’s master-planned community in the southeast. That’s where folks prefer to live because of the amenities and services, and the value of those homes. Retailers follow residents, so there’s this domino effect between residential development [and] commercial development.
Does potentially having the Raiders move to Las Vegas change the market?
I don’t think the stadium is going to have a material effect, positive or negative, on overall real estate prices in Southern Nevada. Having a stadium is not going to generate demand for housing nearby. What it’ll probably generate is the demand for lodging establishments. Motels, probably non-gaming hotels and motels, but primarily commercial development, food and beverage establishments and other types of stores that can feed off those tourists being at the stadium.
What’s the likelihood of another recession hit and how will it impact real estate?
We’ve had a pretty long up-cycle here the last few years, so we’re due for some type of slowdown. I don’t think it’ll be necessarily deep like the Great Recession was but we anticipate some type of correction.