Las Vegas has a long road ahead
Las Vegas was one of the hardest hit areas after the housing bubble burst, and many residents of the area are still underwater on their mortgage payments. The turmoil of real estate in Las Vegas has caused a ripple effect in the rest of the area's economy, and experts believe the road to recovery for commercial real estate is long, but will improve with time.
Some residents in neighborhoods such as Southern Highlands stopped paying their mortgages years ago, creating a false economy. However, the demand for homes in the area has increased. At the beginning of the summer, new home sales were climbing and were 46 percent higher this July than the same month last year. As the housing market improves, it will directly translate to a higher demand for office space in the Las Vegas metro area.
In the past quarter-century, Nevada was the fastest growing state in the United States. During the 2000s, more than 6,000 people relocated each month, which caused housing construction to boom until 2006. After the price appreciation slowed, construction fell to levels similar to 1993.
"We’ve never seen the depth of housing decline we’ve seen in Las Vegas," Mark Fleming, chief economist for CoreLogic told Bloomberg News. "A large majority of Vegas’ housing stock was built during the housing boom and is much more sensitive to negative equity risk as opposed to California, where a much larger segment of the housing stock was built in prior decades."
A law enacted last year in the state requires banks to present the original deeds of trust before starting a foreclosure. Assembly Bill 284 took effect in October, and since then the rate of foreclosures have gone down 71 percent, according to Bloomberg. Some contractors and developers believe there are 40,000 to 50,000 homes that still need to be foreclosed upon, creating a shadow inventory not reflected yet in market trends. Many other real estate experts believe there is no such thing.
The Las Vegas economy is growing with more tourist conventions, which is a top revenue outlet for the city. The commercial real estate industry is expected to increase as the housing market does. Business owners need to be sure that investing in an area will continue to grow at a slow pace. Construction is expected to stay minimal, but staffing levels are expected to rise 1.2 percent, according to brokerage firm Marcus & Millichap.