Investing 102

[Panteracer]

I get a commercial real estate news letter every day
Again Silicon Valley. Some are rethinking and subleasing their
office space but it is amazing how many of the big investors
are buying things at big money like tomorrow is going to be
a lot better.... some guys that bought a bldg at lets say $80 mil
are making $40 to $60 mil more than they bought it two years back

We also have Google, Facebook, Apple etc buying all sorts of property
My office building is across the freeway from Google and many of
the other owners on my street have sold out to Google many years back and renting back.

I do a lot of Lab renovations as a contractor and their vacancy is still
very low as the labs still need to be there so they can do their work
South SF is the so called Bio Tech Capitol of the world and has grown
so much in the last 5-10 years.. Many are moving south or north because
the rents for them there are getting so high

Hard to figure things out.. maybe Google will make an offer we can't
refuse on our bldg... until then we keep plugging away

Bob

[Vegas69]

Originally Posted by dontlifttoshift

I imagine mortgage rates doubling will have that effect. According to Redfin, vegas housing prices were up 22.5% in June compared to last year......and approximately 50% since June of 2019.

Even with the recent drop the SP500 is still up ~195% over the past ten years.

That sounds about right. Some depreciation is a good thing long term. Affordability has gotten out of control. The rent vs. ownership ratio is too far out of whack with the hike in interest rates. It will all sift out. This isn't Silicon Valley.

With that said, it's by far the most rapid shift in the market I've witnessed in 22 years in the real estate business in Vegas. It's like a light switch. Sales were down 40% from just one year ago. Inventory has tripled in months. While 2021 is not a fair bar to measure by long term, it's the weakest July since at least the great recession. Frankly, I'm surprised the market endured as long as it did.

As always, if you are in it for the long haul, it probably doesn't matter.

[srode1]

Homes are still selling over asking and buyers are making offers the first day on the market here, very competitive but Zillow seems to think prices are waning based on what I see for our home anyway.

Commercial Real Estate is another situation. My wife just renewed her retail lease for a minimal increase vs 2 years ago after some negotiation and there are so many huge office spaces that are vacant, just an endless stream of 'Available' signs driving around. Retail seems to be holding up much better than office space around here.

[Vegas69]

It appears the more laid back markets in the mid-west are far stronger than say Vegas, Phoenix, Boise, etc... Our prices shot up over 45% since the pandemic. When interest rates nearly doubled, affordability went to crap. In fact, the average monthly payment in the valley shot up $750 per month over night. That's a tough pill to swallow for an average buyer. I've witnessed a median priced property where the rents were $600 less per month than ownership with a minimum down payment. My research showed that our only chance was to sell to an instiitutional investor. We had virtually NO showings/interest on a median priced house in regards to a primary residence buyer. After aggressive price cuts, we did secure an institutional investor that will lease it. Many Vegas neighborhoods are dominated by hedge fund type investors.

One the high end, the absortion rate is very low. People are just throwing in the towel and withdrawing their listings. Conditioning is a factor. It's a completely different market almost overnight. That means it will take far more patience and aggressive strategies. It will take agents and sellers some time to adapt.

[BonzoHansen]

Originally Posted by Vegas69

It appears the more laid back markets in the mid-west are far stronger than say Vegas, Phoenix, Boise, etc... Our prices shot up over 45% since the pandemic. When interest rates nearly doubled, affordability went to crap. In fact, the average monthly payment in the valley shot up $750 per month over night. That's a tough pill to swallow for an average buyer. I've witnessed a median priced property where the rents were $600 less per month than ownership with a minimum down payment. My research showed that our only chance was to sell to an instiitutional investor. We had virtually NO showings/interest on a median priced house in regards to a primary residence buyer. After aggressive price cuts, we did secure an institutional investor that will lease it. Many Vegas neighborhoods are dominated by hedge fund type investors.

One the high end, the absortion rate is very low. People are just throwing in the towel and withdrawing their listings. Conditioning is a factor. It's a completely different market almost overnight. That means it will take far more patience and aggressive strategies. It will take agents and sellers some time to adapt.

As a local in the know, do you think the constant national level news of water issues, lake mead, etc., are impacting the vegas & area (maybe all SW?) markets, especially relocations?

[Vegas69]

I think it's starting to have an effect. Our population shrunk last year by about 2%. That's the first time we've lost population in 50 years I believe. I plan to leave here in 18 months and it's a factor in the decision. Have I had a client leave in 22 years due to the water? Not directly. I think it's a factor now and it will become more imposing if mother nature's path continues on the track it's on currently. The lake was nearly full 22 years ago. That's not really that long ago, but the SW has grown substantially in that time. Vegas is first in line and we have a 3rd intake near the bottom of the lake. Even if the lake gets to dead pool which means the river will stop in Lake Mead, supposedly we'll still have water. We only take about 5-10% as it is. I sincerely hope mother nature changes her tune and it never gets that severe as it will devastate the SW. Especially AZ, CA, and Mexico. There needs to be stricter measures in my opinion. Outlaw grass and pools at least for a while. The pool contractors here are so busy you wouldn't believe it. Imagine the amount of water it takes to fill a pool and replace evaporation. Grass needs to be watered 15 minutes a day, 7 days a week to have a chance to keep it alive in the hot months. There are so many things that can be done, but I don't think it will change until it gets really bad. That's seems to be the human way. I don't plan to stick around to see how it plays out.

[WSSix]

Where are you planning to go, if you don't mind me asking, Todd?

I've have to agree with you about the pools and grass. You're literally in a desert. It's amazing to me the number of pools people have in Florida. Florida has sink hole issues in certain parts specifically because they've been dropping the water table so much.

[Vegas69]

God willing, Spearfish South Dakota. We've loved it for almost 20 years. It's a thriving ecosystem with great people and a small town feel, but with reasonable convenience. The Black Hills is really a paradise. Ponderosa pines, prairies, streams, lakes, trails, and low humidity due to the elevation. Clearly they have some serious weather with snow and hail, etc, but we're ready for the seasons. All this sun is getting old. LOL I'm hoping for 5+ acres and a large detached shop.

[dhutton]

I’ve read a couple of times that Duluth Minnesota is the place to head to escape climate change, assuming you believe in it, but damn that is a cold place in the winter.

Don

[WSSix]

Sounds lovely, Todd. I haven't been to S Dakota but hope to some day. Best of luck on getting there and dealing with the winters.

Don, I was in Grand Rapids, MN three years ago during January or February. I was testing a new installation. It was -30*F so we were able to do cold start testing by just leaving the machine outside overnight, lol. It's a dry cold but everything is covered in ice and snow for months.