In early 2005 Las Vegas real estate agents couldn't answer the phones fast enough. The push toward towering condominium skyscrapers quickly became one of the hottest real estate trends in Las Vegas, with the hottest celebrity names including Pamela Anderson, Ivana Trump, Michael Jordan and George Clooney jumping into the market to invest in, build or brand major projects. Bruce Eichener's Cosmopolitan project logged an unprecedented 900 sales in the first 24 hours of opening. Buyers were clamoring to purchase multiple units and were angry when they were restricted to purchasing just two in many of the high profile developments.
The latest statistics from the Las Vegas MLS and new homes research company SalesTraq show about 820 resale units in the high rise condominium projects on the local market the first week in May. There were 20 closings on high rise condos in the month between March and April. At that rate, it will take approximately 3 1/2 years to sell off all the high rise units currently on the market. When you compare that to the 13 months of supply of preowned Las Vegas homes for sale or the two-month inventory of single family Las Vegas new homes and townhome units under construction in the Valley, the outlook for the high rise market could seem bleak.
"People who bought units on contract in 2005 are aware the market in 2008 is nothing like the market they bought in," said Larry Murphy of Salestraq. "But appraisals are coming in at whatever they agreed to pay on their contract three years ago. People are saying, 'We don't think that appraisal is right, and we don't want to close at that price.' A lot of people have been unwilling or unable to come to the closing table." Some are walking away entirely from over $100,000 in deposits, while others are closing and trying to "flip" their units.
The new mortgage lending restrictions haven't helped matters either. Even buyers with excellent credit, cash in the bank and 20 percent deposits already in escrow aren't having much luck negotiating normal market rates on regular residential high rises unless they are owner occupants. Condo hotel buyers are being hit with a minimum of 25% down payments and high interest rates, while foreign investors are looking at 35% down payments. These restrictions have served to shrink the available pool of high rise buyers. Combined with the glut of current inventory, even prospective buyers with cash in hand are apprehensive about jumping into the Las Vegas high rise condo market.
But multi billion dollar developers are still predicting that high rise condos will be the new suburbia once the credit crunch eases and the housing market starts rebounding. Units at projects such as CityCenter could close for $1,600 to $3,000 per square foot starting next year, when owners begin moving in. Currently prices at Sky Las Vegas, the only completed residential high-rise on the actual Las Vegas Strip, are ranging between $400 to $1,000 per square foot. Rising construction costs for steel, concrete, copper and even land mean bigger replacement values, and those construction costs will figure into future high rise prices.
And these developers are betting that their predictions come true - after multiple millions of dollars in marketing research, of course! MGM has already bought another 60 acres of land on the north end of the Strip for City Center II. Station Casinos has 60+ acres just off the Strip behind the Panorama for three more major casinos plus assorted high rise towers. And M is in the works on the south end of Las Vegas near Southern Highlands. They believe that rising oil prices and changing lifestyle patterns will make suburban living obsolete and that the convenience and amenities of high rise living in multiuse projects will appeal to both the retiring baby boom generation and the digital youth population which is just starting to make its presence felt in the marketplace.
So while the Las Vegas high rise market may be weak at the moment, don't count it out in the long haul - the big money is betting on it. And now, while there are Las Vegas foreclosures in the best buyer's market we have ever had, may just be the time to pick up something to hold for the next five years while anticipated high rise prices climb to New York levels.
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