May 8, 2020
LAS VEGAS, NEVADA
April Huynh, Realtor and Property manager
The C0VID-19 pandemic is a once-in-a-lifetime event that has turned the world upside down and inside out in a matter of just 3 months. The ripple effect caused by the virus has reverberated throughout the entire economy and has affected virtually every segment of business.
Without a doubt, Nevada is one of the hardest hit by the coronavirus outbreak in which “two out of every five jobs are in leisure, hospitality, or retail, the state will likely lose 5.3 private of private-sector jobs,” states the The Economic Policy Institute (EPI) in its March 2020 report. In this unsettling environment, does it still make sense to purchase investment properties in Las Vegas right now?
Prior to the outbreak, Las Vegas real estate was red-hot! Why, just last June Channel 13 News ran a segment in which they reported that “Las Vegas rents, growing faster than any big market in the country, are up 8.9 percent from last May, with the next fastest growing rents to be found in San Jose.” As for real estate prices, many expected that Las Vegas home prices have the potential to reach a new record in 2020, due to strong demand for housing and a persistently tight listing supply.
Across the city were multi-billion dollar projects in various phases of construction to showcase the city’s future entertainment possibilities. These included the World Resort, the first casino and hotel to be constructed on the Las Vegas strip since City Center over a decade ago, the nearly-completed Allegiant Stadium to be occupied by the Las Vegas Raiders , and the MSG Sphere, a technologically advanced venue described as “the concert venue of the future” by those reporting on the development.
With all this going on, clearly the Vegas real estate market was hitting all the right notes...but that was all before March 20, 2020, the date Las Vegas was ordered to shut down... So now what?
For the balance of this blog, I’ll cite three reasons why Las Vegas is still a strong market for you to invest in.
The Fundamentals are Still Sound
There is still a shortage of homes in the Las Vegas valley and people will always need a place to call home and, therefore, the rental market is still active and percolating. Combine this with the tight inventory of listings for sale, therefore rental properties will lose little value, if at all within the next year or two.
In its April 30, 2020 report, zumper.com, a site dedicated to help people find homes for rent, reveals that despite all this negative impact caused by the virus lockdown, 2 bedroom rentals prices have gone up 1.7% over the previous month’s rent and 3.5% on a year-over-year basis while 1 bedrooms have gone done 2.1% month over month and 2% year-over-year. This insight tells us investors will do better investing in 2+ bedroom homes, which I encourage anyway.
Real Estate Can Be a Sound Investment During a Recession
During times of uncertainty in the stock market, many investors turn to real estate to diversify their portfolio, hedge against the volatility, and generate an additional income stream.
In an April 2020 US News & World Report article, writers Rebecca Lake and Paulina Likos argue that there are good reasons to buy real estate in tough economic times. They make the case that property investments can produce stable income, may be less sensitive to market volatility, and that they may outperform stocks and bonds. In fact, they cite Jim Egan, head of commercial real estate banking and senior vice president at Bryn Mawr Trust, as stating that “a recession can be the best time to buy real estate.”
While it is true that the road to recovery will be lengthier for Las Vegas due to its strong reliance on industries that have been hit hard by the virus, nonetheless, many believe Vegas will re-emerge stronger than before. It always has and it will again. If anything, the Great Recession has taught us that Las Vegas is a market that is resilient and innovative. Its leaders will continue to adapt, re-invent, and morph so that Vegas remains America’s playground and the capital of entertainment. While we await the recovery, investors will still have a robust rental market in which they can earn an income during these shaky times.
To conclude, many are asking whether this is the right time to invest in real estate. The answer, as is often the case, is: it depends. First, there are risks in all investments. Can you stomach the risks in real estate investments over risks in other markets? At this time, many are fearful to purchase properties in this climate of uncertainty. However, the often repeated adage in stock purchases can also apply here: “Be greedy when others are fearful, be fearful when others are greedy.” Acting under that philosophy, purchasing a property now would be considered a great move.
Now let’s consider some final relevant factors. State Governor Steve Sisolak is looking to methodically loosening the Shelter-in-Place order as he’s outlined a plan to open up the economy in phases starting this month and that is good news. Also, be sure that you choose the right market product for your investment. Going forward, I see Single Family Residences priced above the entry level to be a safer and more secure product, since many are already unable to pay their rent at apartment or homes at the entry level because they are the first to suffer from the economic downturn. Finally, make sure you have adequate funds to ride out the storm as you await the recovery.
If, after careful consideration, you see that accumulating some investment properties now make sense for you, you may look back years later and see that what you added to your portfolio has given you a beautiful return!