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BLM Land Auction - Is it a indicator of future home prices in Las Vegas valley!

System - Tuesday, May 5, 2015

With over 15 years in the Southern Nevada real estate market, one of the main questions I receive from our current and future investors in the Las Vegas property management market is “What do you think of the Las Vegas home prices in the near future?”  While I always tell my clientele I don’t have a crystal ball, I rely on multiple factors to help with my evaluation. And today I received a good indicator while reading the Las Vegas Review Journal. The principal of supply and demand continues to play a key role in the future home prices of Las Vegas. When I started in this industry there was vacant land throughout Las Vegas, and on the fringes of the Valley. Fast forward to the present, we have developed numerous master-planned communities, like Summerlin, Southern Highlands, and Mountains Edge. This has given the consumer thousands of acres of land to build homes on, therefore creating more supply. Many of these land purchases were done through the Bureau of Land Management (BLM) of Nevada, which is auctioning off government land.

If you look back at the auction prices in 2000, you’ll see builders and developers purchasing land from $60,000/acre to highs of $140,000/ acre.  With the most recent auction, it’s all prices in the $180,000/acre range for bulk pricing.  There were no large subdivisions purchased. The largest buyer in the last few years has been American West homes. I don’t have the statistics on, but they would have to be in the top two builders in the Southern Nevada market over the past 20+ years. The recent land auctions have not provided any large portions of land for future master-planned communities. With that being said, this economics 101 and supply and demand were to play into the Las Vegas on prices, I personally would make the assumption that home prices well increase in the upcoming years simply based on the fact that there is not a significant amount of new building. This results in home buyers buying the resale homes. This is one of the factors of these land auctions that I personally use.

Another factor is the builders are paying good money for raw land when they purchase. Developing this land there are many additional cost in running utilities, developing streets, and overall infrastructure. Ultimately, the buyers of these new homes pay the price. So next time you’re looking to invest in the Las Vegas property management market, go see what the new home prices are selling for, and 10-15% for upgrades, landscaping, and pools.  Divide the total price by the square footage of your home and see what your price per square foot is. Then I like to look at similar resale homes (age/size/structure/amenities) and see how much those homes are selling for.  This helps me gauge the fair market value of that specific area. Many times you will see the home prices selling for 20% more than the “used” homes that were built five years earlier.

By all means this is only one factor that I like to use, and should never be the decision for buying or not buying your investment homes.  These are just a few of the factors I like to add to my overall evaluation. I strongly recommend using a seasoned real estate agent that understands the Las Vegas rental market, and has a track record to prove it.

Las Vegas Review Journal - Published May 6, 2015