Las Vegas, Nevada Real Estate Agent’s Las Vegas Homes, Condos, Land, Commercial Real Estate and Personal Blog

Einstein once wrote that the most powerful force on earth is compound interest.  With all due respect to Professor Einstein, I have discovered a greater force and that is cash money that’s looking for a better return on investment. Investors can either build or break their community. Las Vegas has benefited from constructive investment until recently and was well on its way to be a great metropolis until it got hit by the destructive (speculative) investments. As Las Vegas residential real estate has depreciated by about 50% I predict a 20%-40% fall in commercial properties.

If you think that lots of money was lost in real estate, you should see the loss numbers for the stock market and recent 40% drop in oil prices. People’s money has recently acquired the bad habit of turning to smoke.

Banks fueled these speculative investments and went down because of it. Below is an excerpt from the Las Vegas Business press:

In June, the FDIC and state examined the bank and found, according to the order seizing the bank, that Silver State “exhibited extremely unsafe and unsound practices and conditions; exhibited a critically deficient performance; contained inadequate risk management practices relative to the institution’s size, complexity, and risk profile; and is of the greatest supervisory concern.”

It is noteworthy that Andrew McCain, the son of presumptive Republican presidential candidate John McCain was one of the bank’s board members and resigned from the Board of Directors of the Henderson, Nevada based Silver State Bank when it was obvious that the bank would go bankrupt.  

Keeping in mind that all the data which any future predictions were built on were faulty as we suddenly found out about three weeks ago, in a blog post that was titled

Why Las Vegas real estate’s future in three to five years is so bright, you need to wear shades

I wrote the following:

“US is the wealthiest country in the world, where mountains of cash are ready to be invested, except that in this country they have really four places to go; stock market, bonds, real estate, and funding new businesses.  The stock market and new businesses failed the investors, thus the money is poured into real estate and bonds.”

And

“Well, this is like déjà vu all over again. The stock market is weak and is kept standing only by being hand fed with consecutive rate cuts by the FED. When there are no good stock market or real estate opportunities, money goes to bonds. Bonds don’t pay well due to rate cuts and real estate is getting reasonable, so guess where the money is going next?”

This article is dated January 24, 2008. What I like about blogging is that it provides for a written record and shows that I am often prophetic. The stock market finally tanked and I don’t see any hope of rebounding soon as the 1.5 trillion dollars (not much, only 20 characters long) bail out is all the help financially that they are going to get.  The bond market doesn’t pay anything; all it does is guarantee that the investor’s money will not magically vanish.

When the dust settles, in a reversal from a couple of years ago, investing in Las Vegas real estate will provide the investors with a positive cash flow. Additionally, commercial real estate foreclosures will over-correct the price hikes of 2004-2007. The combination of Las Vegas real estate price drops, which leads to Las Vegas properties being a great value and being able to generate a positive cash flow, will make Las Vegas real estate investments safe and rewarding. These days it is possible to purchase a home or buy a condominium in Las Vegas and get a 8% plus positive cash flow. I believe that the same will happen in Las Vegas commercial properties in a span of about six to nine months the prices will become lower than the real value. In an uncertain world when it has become difficult to get any kind of return on an investment, Las Vegas will shine as a safe harbor for smart real estate investors.

It may sound crazy to do this article in today’s economic conditions, but I call them as I see them and this is my opinion today. Like I said, this blog leaves a written record and I am looking forward to six months from now. Then I can write that I was right six months ago.