Las Vegas High Rise Condominiums Crunch

As reported here back in February (and later reported by Channel 8 News a couple of months later) concerning one lender that had passed out a private memo about not lending money on certain Las Vegas condominium projects, this recent article in the Las Vegas Review Journal shows the difficulties that Las Vegas Condominium purchasers are experiencing concerning the ability to finance their Las Vegas High Rise Condominium purchases as projects come to fruition.

Read the Story by clicking Here.

The key phrase here is value. If you read the blog post about Bank United not lending money on Las Vegas Condominiums, the primary reason stated was because of “High Investor Concentration”. Basically, pre-construction investments by people who never intended on living in the building but merely to flip their condo unit once the project was completed.

Basically Economics 101: High Supply with no demand equals lower prices.

I’ve always had the wait and see type of approach towards Las Vegas high rise condominiums. As a long time Las Vegas resident, I never really saw a true demand or thought that everybody was going to be moving to the Las Vegas strip or downtown (places that Las Vegas locals tend to avoid at all costs). I certainly love the luxury high rise condominium living concept and I’m a huge fan of views, but I really had to wonder if the prices justified it. The Las Vegas high roller will get their luxury suites for free and all of the amenities that go along with it – so I certainly never considered that there would be a demand from them.

Hmmm.. I can’t say I’ve smelled vomit but I have noticed that the upkeep on one particular project hammered with foreclosures has been minimal to say the least. A recent Las Vegas condominium project with multiple bank owned condominium units that we visited reminded me and my client of the dorms back in college.

There is a very fine line in real estate marketing and will only say that a developer and an advertising team (sometimes with no experience in actual real estate sales) have one thing in mind — to sell their product and not the best one for the buyer.

Precisely why I walked from selling New condominium units when I worked for a developer and learned the ins and outs of how an advertising company worked. That’s when I learned that if you spent enough money in advertising with certain media outlets, you can get some pretty good articles about your project published that look like legitimate reviews.

Now, I’m not at all gloom and doom about Las Vegas luxury condominium projects. I have been watching them closely and I’m currently searching for one for a cash buyer in a couple of completed projects in great locations. The problem is that the few sales in these completed projects from owners that cut their losses, do not justify the majority of the asking prices in the particular price range we are looking for.

In other words, when they do come up for sale at an appealing price, they sell. Lenders and Appraisers see the same thing – precisely why there is a perceived “credit crunch”. In the current environment, lenders are going to be extremely cautious about lending money and they certainly should be. Nobody wants to lose money on real estate, but the demand has to be there to justify a selling price and current Las Vegas condominium inventory reports that are completed just do not show a demand at this time.

As we saw in the Las Vegas single family market, Las Vegas homes in highly desired areas such as Summerlin and Rhodes Ranch did not start selling again until prices were slashed.

At the end of the day it’s the Las Vegas real estate buyer that controls prices in a buyers market.. My job as the cash buyers Las Vegas Realtor® who wants to purchase a unit in a couple of particular buildings is to represent their best interest. Right now their best interest is to put offers in at established market values seen on the resale side which means they will be lower then the asking prices. Will it work? We’ll soon see…

Paul Francis, CRS
Luxury Las Vegas Real Estate
702.592.3058