“About 1,000 houses are listed for sale in Las Vegas for $1 million or higher, more than 600 of them built since 2004. But unless they've been constructed in the last year or two, the properties are considered out-of-date, making them all that more difficult to sell, real estate agents say.”
In a town where Hank Overalls becomes Mr. Henry Tuxedo and Lucy Dressbarn becomes Lady Prada von Guccistein overnight, in a place where the word of the moment is always “New!” whereas “Classic” and “Established” are maledictions, it is only natural that the homes be as extravagant and aesthetically bankrupt as their occupants. The trouble is—in case you don’t know—Las Vegas is situated in a flat, hostile desert, and there isn’t much in the way of a view or an established neighborhood. With acres of land available for development and only an impotent Bureau of Land Management to moderate it all, one developer after another (and sometimes the same one, over and over) has created the next “hot” neighborhood, and residents have followed:
“One developer, Christopher Homes, recently opened a neighborhood of homes in the hills west of the Strip selling for $1.7 million to $3 million. Several houses have sold to residents of adjoining neighborhoods who lived in their houses for less than five years, including homes built by the same developer, said Erika Geiser, the company's vice president.”
“‘They feel their residence is obsolete,’ she said. ‘They're looking for something more innovative, more cutting-edge.’”
Cutting-edge, indeed. Like so many glass pianos of yesteryear whose tops are now marred by the fine cuts of straight razors and the occasional syringe, the old homes are indeed pathetic vestiges of a bygone era, and I don’t blame the homeowners from moving on. Here is a table displaying some of the bare necessities that people expect to find in their new homes:
|5,000 to 7,000 square feet||8,000 to 10,000 square feet|
|Walk-in showers||7 foot by 7 foot showers|
|Granite tile bathtub||Granite slab bathtub|
|12” by 12” polished travertine tiles in entrance||20” by 20” polished travertine tiles in entrance|
|Stainless steel counters, glass tiles in kitchen||Stainless steel counters, glass tiles in laundry room|
|Plastic chandelier||Chandelier made of human sternums*|
*May or may not be an exaggeration. Would it be all that surprising if it were true?
All of this is to say, it takes knowing the future of what people will want in a home—and where people will want that home—to win at investing in ultra-lux homes in Vegas, and in the end you’re probably better off the blackjack tables. Take the sad story of Mr. William Derentz, for example:
“William Derentz, who heads the company that runs the annual Harvest Festival in Laguna Hills, bought a 5,400-square-foot home in Las Vegas for $2 million in 2004. He never moved in, since he planned to resell it in a year or two at a hoped-for profit of $1 million.”
Alas, the market tanked and defeated Derentz moved into the house in February, but while there, he will remodel the backyard, adding “his-and-her” cabanas to make it a more competitive seller. He may want to make those “his-and-her” reservoirs instead, given that the Las Vegas real estate market may never recover if it runs out of water first.
More on the increasingly dire water crisis in the Southern U.S. and Mexico in tomorrow’s post: “Water, Water Everywhere, But Not A Drop To Fill My 49 Square-Foot Shower,” or perhaps “The Day After Tomorrow Part II: The Day After Cinco De Mayo.”
In a residential bubble epic proportions - like the one leading to this year's market collapse - the luxury, "High End" home will always fall the farthest.
Interesting that Vegas is also the home to the "Foreclosure Bus" and is luring "stupid money" from all over to buy these foreclosed houses at a huge "discount" based on overvalued comps.
My advice is don't buy ANYTHING in Vegas in 2007, no matter what anyone says about how "cheap" it is.
Re-evaluate in '09 and see if anything has changed.
In the meantime if you are set on investing in Residential Real Estate ... look at "bread and butter" in a working class market that cash flows.
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