Mark Del Guercio, happens to live in Las Vegas and knows the city inside out. Through most of last year, Mark kept bugging me to look at investing in Vegas, given the slide in prices down there. I kept telling him that I was uneasy, and the fundamentals were telling me it would get much worse before it started to recover. While Mark didn’t want to hear that since he lives there (and everyone wants to see their own town turn around sooner than later), economic data that has just come out this week shows that my hesitation, and my trust in the fundamentals to tell the truth, both turned out as I would have hoped. An article out this week outlines that in 2008, Las Vegas median home prices fell by 37%, and that they’re now down a total of 45% from their high in Febuary 2007. The article quotes local experts as saying that the bottom hasn’t hit yet, and that 2009 is going to be more of the same. Another article in the Review Journal today says that unemployment in Las Vegas is now 9.1%, and projected to grow higher through 2009, as more layoffs take place. According to the article, “the economy will stabilize in late 2009, with job loss diminishing perhaps later this year. But he said he doesn’t expect the state to post year-over-year job growth before late 2010 or early 2011“. Employment strength and home prices are linked, as rising unemployment causes a weakening of housing demand, and prices follow suit. Throughout last year, I had expected Vegas would be one of the first markets to see a turnaround once the overall economic malaise started to ease, but since we’ve watched the economy in the U.S get much worse, spreading to other countries around the world, I know expect the U.S. recovery is not going to be a short-term phenomenon, and as a result, many (most, but not all) housing markets across the U.S. are in for another tough year. I remain confident that Las Vegas WILL be a great market to go into when the recover comes.. but I don’t expect that to be any time sooner than early 2010, possibly later. Of course, that doesn’t stop the speculators and promoters who don’t know anything about real estate to claim that this is the year for markets like Las Vegas and Phoenix — because telling people that allows them to push crappy investments on unsuspecting investors who don’t know how to do their own research. We’re seeing promotions all over the place for “foreclosure tours” and “buying trips”, trying to coax Canadians and even Americans to go into these markets and buy up the houses because “they’re so cheap“. Well, the most powerful question I can ask to that statement is, “cheap compared to what?” Just because a house today is selling for 50% of what it sold for 3 years ago does NOT make it cheap. Just because someone was dumb enough to pay double for it 3 years ago means nothing about what it is worth in today’s market. Don’t be fooled by these promoters trying to make a quick buck! And for Canadians (or any non-U.S. investors), it’s even WORSE — not only do you take the market risk, but you’re also at risk because of the currency. If the U.S. dollar drops like I expect it will this year and next , your investment in a U.S. market works against you, not for you. Always remember one of my Properity Principles, the “Do and Get Rule” — “Only take advice from those who are DOING and GETTING what it is you want to DO and GET”. If you’re going to take real estate investing advice from someone, make sure they’ve been doing it for several years and have a strong track record in doing it! Recently, I’ve seen “experts” selling courses on how to invest in commercial real estate, and their claim to fame in their bio is that “they’ve bought over $4 million dollars of commercial real estate”. Are they kidding? Who cares? I own individual properties that are worth more than that on their own! I’ve seen a promoter putting on foreclosure tours in Las Vegas, promoting it as a great investment market right now. Of course, this is someone who didn’t even OWN their own home during the entire boom of this decade in real estate! With the chaos and crisis in the economy, there are so many questionable deals out there right now, and questionable people pushing them like heroine. I keep saying it, and allow me to again .. Now Is Not The Time To Be Foolish. Do your due diligence! Find out who’s selling you the deal, and check them out! Sadly, even in this world of people realizing how much they’re getting ripped off by the financial industry, there’s a whole new load of promoters willing to act like they care about the investor, ready to push them into a deal that pays them a commission, but the deal is ultimately bad for the investor. Don’t be fooled. The fundamentals never lie. And now, I’m glad I listened to the fundamentals, rather than being tempted to jump into the market because things are “cheap”. And of course, Mark’s happy too, because he’s avoided a lot of the downturn as a result. We’ll eventually launch an investment fund focused on the Vegas market, but not any time soon! Stay tuned to my blog, because I’m about to launch some very exciting things to counteract this Crisis of Credibility in the financial market place!]]>
3 Responses
Thanks Greg,
once again, lessons that people need to start doing their own due diligence and ground work rather than believing a lot of the charlatans out there who say they will take care of their retirement funds! They sure will help their retirement fund, it just won’t be the right party’s retirement fund that gets lined unfortunately.
YIKES! I honestly have never heard of you Greg Habstritt but was directed to your review by an investor I work with. I am just a local Las Vegas realtor and don’t claim to be a real estate “guru”. I definitely am compelled to write back when I see someone writing a market analysis on a market he clearly does not have in depth information on. Is the newspaper considered your reliable source for real estate information? Interesting as I was there at the market preview the newspaper and now you are quoting the 2009 report from . They failed to say that 2 out of the 4 “experts” there on the podium actually disagreed with each other on the market direction in 2009. It is clear to me here that no one knows what is going to happen tomorrow. It is also clear to me your article displays a one dimensional approach to real estate. In 2005 when the papers said how great real estate was is that when you decided to jump on the bandwagon? I know that I am consistently buying properties here in Las Vegas for investors in the 2-4 hundred thousand range and flipping them for net profits of 30-60k within 91 days. I can also show you newer condos surrounded by million dollar houses going for 35k that rent for $700. What’s wrong with that? Is that dumb? Yes Greg, I am here at ground zero in the trenches and I have worked with real estate promoters like Robert Allen and Russ Whitney since the year 2000. I must say it causes me concern when people actually read and believe a completely inaccurate article from a so called real estate “Guru” they look to for guidance. Rest assured, most the people buying today are not all the same investors of yesterday. Many of those are broke from bad guidance and decisions. I am now seeing doctors, attorneys, people with educations, and even owners of successful casinos out here buying up the residential. Scary to think you know more than all these guys from your chair which I have to assume must be 1000s of miles away! I certainly hope moving forward you are able to base your information off of more than just media coverage and hearsay! Kevin/Las Vegas Realtor
Hi Kevin:
Thanks for your post. Since you’re in the Las Vegas market, I can understand why you don’t like to hear negative opinions about your local market, particularly since you’re a real estate agent working with investors.
Let clarify a couple of points for you. The information I rely on has nothing to do with the media. I have an extensive network of contacts within Las Vegas, and have been there several times this past year. Ironically, you’re about as incorrect as you could in assuming I’m the kind of guy that believes the media.
My conclusions come not only from research completed (in my book, “How To Predict The Real Estate Market”, I outline 15 specific economic indicators), but from several sources within Las Vegas – investors, mortgage companies, developers that have been in the market for 30 years and more, etc.
I never said no one can make money in Las Vegas right now. I also know of a few investors making money by flipping properties. For someone in the market that lives there and knows what they’re doing, it’s possible. My point which you seemed to miss was that it was foolish for outside investors who don’t understand the market to invest there, thinking it’s a good time because it’s ‘cheap’.
You obviously took great exception to my article and lost sight of the fact that the entire POINT of the article is to do your research, understand your market, and be careful who you take advice from.
You may not like it, but the economic indicators are BAD for Las Vegas right now. I said that it’s not going to be forever, but for now, there are a lot of promoters and speculators trying to pitch real estate in these market as though they’re cheap, and my point is that they’re going to get cheaper.
Your comment about how doctors, attorneys and other professionals now being investors in the market indicates that the “smart” money is now moving is somewhat comical. Someone’s profession has nothing to do with their investing literacy, and I know some doctors and lawyers that are among the worst investors who have made the biggest mistakes. And most doctors will tell you, their peers are not sophisticated investors at all. Being ‘educated’ or a professional has no bearing on whether you’re a successful investor, and after teaching many thousands of people about investing, I am saying that having earned the right to do so. I don’t know if you’ve trained thousands of investors or not, but I suspect you haven’t – otherwise you’d know this to be true.
There are some genius doctors and other professionals who know how to invest very well. I also know of housewives, janitors and drycleaner delivery guys who have achieved financial freedom from investing. Your profession or training has no bearing on your ability to be successful in real estate, and perhaps more experience will reveal this fact to you.
I hate to disappoint you, but I’d suggest to you that I probably have more research and data on Las Vegas than you do. I’m happy to share of that with you if you’re really interested. However, I get the sense you’re more interested in being ‘right’ about it than knowing the realities. I can introduce to some of the smartest people I know in the real estate world who are in Las Vegas, and say that it’s the worst market they’ve seen in over 30 years.
Is it impossible to make any money in Las Vegas? No, and I didn’t say it was. What I said was that it’s foolish to invest in a market you don’t know anything about, and that investing in a market with seriously negative indicators is very high risk.
And if you do understand economic fundamentals and how they relate to real estate, I’d suggest you look at some of the recent unemployment and net migration numbers for Las Vegas. Anyone who knows how to read them recognizes they are VERY bad news for Las Vegas in the short and medium term.
I don’t believe this is how it will be for many years, and in fact I also teach that Vegas will be one of the TOP markets to be in, once there’s a recovery. But unless you know a secret that the rest of the world doesn’t know, I don’t think you can call a bottom to the current market, and until it starts to recover the risk is extreme – particularly for out of town investors. And Las Vegas is NOT going to recover in the short-term, until at least into next year.
And no, I didn’t jump on the bandwagon in 2005 when the market was going up. I was one of the sole voices in the market telling people that buying for appreciation was a bad idea, and I’ve been invested a lot longer than that.
So I can appreciate your defense of your market, and I congratulate for all the money you say you’re making. However, recognize that VERY few investors are making money in Las Vegas, and hopefully you can at least acknowledge that, because it’s the fact.
Once the next wave of foreclosures hit the market (resulting from, among other things, the looming termination of the moratorium on foreclosures which is removed tomorrow), we’ll see how solid the market is for flipping in Las Vegas. Again, I’m not saying you cannot make money there, as I’m sure you are. The point is, it’s a risky market if you’re an average investor out there.
We can agree to disagree, and we’ll compare notes again in a year from now. What I can absolutely assure you is that the median price in Vegas will be lower a year from now than it is today, and that a lot of people are jumping in and buying because things are ‘so cheap’ – and they’re going to regret it with some hindsight.
You should be happy that I am negative on Las Vegas right now, because it will keep other investors out of your market, and leave you and your investors more profit to enjoy.
So good luck with that and let’s see in a year from now what I’ve said continues to hold true or not. We can argue about the future, but I prefer to let it happen and then talk about reality, not hope or fear.