All in Las Vegas Market
Nobody has bought Musk’s Boring line of bull except the Las Vegas Convention and Visitor Authority (LVCVA) which forked over $52.5 million in 2019 and $4 million per year for two tunnels less than a mile long under the convention center. Las Vegas Mayor Carolyn Goodman was the lone vote against the project. She told Bloomberg, “Everybody turned them down,” she now recalls thinking. “What are we, dumb here?”
But, a guy who is by now an old Vegas wiseman, Donny Osmond, probably has it right about the Grand Prix, "The traffic has been horrendous...But the locals, eventually, are going to embrace this thing completely."
So, the haves are leaving California, leaving behind the have-nots, high taxes, plus high violent and property crime rates.
Big builder Lennar sent out a sales flier via email, advertising 3.99% mortgage interest from Lennar Home mortgage plus price reductions of $40,000 to $50,000 a unit. These reductions included units in subdivisions selling from the $300,000s all the way to over $1,000,000.
Fannie Mae announced today it provided nearly $70 billion in multifamily financing last year. Fannie Mae apartment loan pricing and terms are attractive: the 5-year fixed rate starts at 2.74% to the 30-year fixed starting at 3.81%. The larger point is with the CPI at 7% in December, the real interest rate on these Fannie Mae loans is negative.
For $50 million Musk’s company is contractually obligated to move 4,000 people per hour for 13 hours a day during major trade shows, but recent data showed it’s moving more like 1,300 people per hour.
Instead of getting the sweaty, intoxicated crowd home in under three hours, Clark County Commissioner Michael Naft told the LVRJ, “I think there were lots of departments and agencies that were taking notes and making sure that every situation was an opportunity to learn from.”
Back in the days of quasi-Laissez Faire, a pandemic would have created plenty of opportunities for the Zells of the world, but, as Grant explains, “Hotels, malls and other properties have suffered enormous declines in revenue. But few owners have been forced to sell at steep discounts thanks to government stimulus programs and the Federal Reserve’s easy money policy which kept a lid on foreclosure.”
I popped awake at 1:00am, anxiety my alarm clock. A half-hour later I feared someone was already on their way to be first in line for a prized lot, overlooking the city, one of only four being released by a large publicly held homebuilder for that subdivision.
Real estate investors can feel it too. Last week The Las Vegas Review-Journal reported that developers reached a deal to buy 2 acres in CityCenter on the Strip for $80 million. LVRJ report Eli Segal described the price as “a sky-high valuation that exceeds land deals on Las Vegas Boulevard even during the frenzied mid-2000s real estate bubble.”
What did SGA see that the rest of the town didn’t and doesn’t? As the Fool explains, “There are around 30 casinos on the Las Vegas Strip, about two dozen more nearby (such as on Fremont Street), and dozens more elsewhere. Yet with so many gambling halls available and so few people to fill them, casino operators could delay their recovery by continuing to operate them all. Perhaps the new normal for Vegas should be fewer casinos.”
Despite happy talk here and there, Las Vegas, with its dependence on frequent fliers and conventioneers, is in a bad way. During an earnings call for Las Vegas Sands, owners of The Venetian and Palazzo on the Las Vegas Strip, Sands President Rob Goldstein said, “We’re in a world of hurt here in terms of Vegas.”
The constant argument about Covid shutdowns, social distancing and other inconveniences is the government's ham-handed response is killing “the economy.” This brings to mind Margaret Thatcher’s famous quip, “There is no such thing as society,” which, although long since underground, she is still criticized for. “There are only the individuals, families, groups, associations and organizations that make it up,” writes economist William Watson to finish her thought. Likewise, he explains, “there is no such thing as ‘the economy’. There are only the people, groups, associations, etc. that make it up.”
In the newest case, the company is struggling before a game has been played. Last August Allegiant Airlines inked a deal with the NFL’s used-to-be-Oakland, used-to-be Los Angeles, used-to-be-Oakland (again) and now, Las Vegas Raiders for the naming rights to the new 65,000 seat and partially taxpayer funded stadium which sits along I-15 in Clark County, Nevada.
To refresh our memories, Jurow says, “2006 was just insane. 320 billion dollars taken out in cash just in that year, and boy, the debt helped the economy continue, even though things were showing signs of real problems.”
Most believe it’s clear sailing for housing. Jurow’s view its anything but rosy for housing. He believes the housing rebound is a mirage orchestrated by lenders and mortgage servicers keeping foreclosed homes and subprime loans in serious default off the market. In other words, there are millions of homes just waiting to hit the market. Sometime.
Apartment developers’ tea leaves tell them Millennials will always be renters, willing to pay handsomely for cool creature comforts: climbing walls, coffee bars, and concierge service. Average rents in Las Vegas rose from $900 in Q3 2016 to $1,059 in Q4 2018. On Sunday, the local paper featured a new mid-rise project with successful Millennial written all over it.
What could go wrong? Insurance? Or, lack of it? Insurers are leaving the football market fearing Chronic Traumatic Encephalopathy (CTE) is the new asbestos.
“We’re in a mental recession,” chief economist at Freddie Mac Sam Khater told the Journal (presumably with a straight face). “It’s a constant stream of negative headlines for a couple of months…it wears on you.”
For those believing this is the pause that refreshes, James Stack thinks otherwise. “Housing could be heading for its worst year since the last housing crash," Stack, 67, said told Bloomberg in a phone interview. “Expect home sales to continue on a downward trend in the next 12-plus months. And there’s a significant downside risk to housing prices if a recession takes hold.”
