California’s high cost of living is helping Las Vegas Valley’s housing economy and will continue into the foreseeable future, according to RealtyTrac.
“Las Vegas continues to be a natural spillover market for investors who have been priced out of California,” said RealtyTrac vice president Daren Blomquist. “It’s still viewed as a bargain market.”
The effects could include decreasing rents and tougher competition for people buying a home to live in, but a more stable housing economy in the short term. Whether a market is appealing to investors is based on returns, according to the Las Vegas Review-Journal.
San Francisco, for example, the nation’s second-worst return after New York City, has a median home price of $1.05 million while the typical rent on a three bedroom house or apartment in that area is $2,801 a month. This means an annual yield of 3.2%. Returns in California’s coastal areas are about a third of Southern Nevada’s yields.
The numbers in Southern California were not any better. In Orange County, the median price of $559,000 plus fair-market rent of $2,250 meant a yearly return of 4.83%.
Steve Hawks, an investment specialist with Platinum Real Estate Professionals in Las Vegas deems California as a nightmare right now because the stream of California investors have turned into a flood. Higher property and income taxes are contributing to the push.
Blomquist said that those not renting or investing will still experience the rewards of a stable economy in Las Vegas. Blomquist added that investors brought the market into its hardest times, buying up properties that would have sat empty and unused. "The local economy will get a boost as apartment investors and developers build new communities to meet rental demand."
However, to have long-term housing stability and sustainability, there will have to be more traditional buyers rather than investors.
“Even though some of the numbers look good for investors, you have to look at the fact that the market might be getting a little saturated,” he said. “More jobs might be coming back, but wage growth is not very robust.”
Blomquist predicts that investors’ gazes will be directed back towards Las Vegas if they can get homes at a discount and trump some of the other markets and their weaknesses.