Bigwig real estate investors starting to pull out of Las Vegas as home prices rise
When Las Vegas’ housing market crashed, wealthy investors pounced on the downturn and started buying cheap homes in bulk to turn into rentals. They helped revive local housing prices and values, which have been rising for months.
But the very recovery they sparked now is scaring them off.
Prices have climbed so high that some Wall Street heavyweights are looking elsewhere for better real estate deals. For some firms, the days of buying as many houses as possible in Las Vegas are waning.
“They’re being more selective,” said Platinum Real Estate Professionals agent Noah Herrera, vice president of the Greater Las Vegas Association of Realtors.
Blackstone Group and Colony Capital, two of the valley’s biggest investors in recent years, have pared down on local purchases. Other firms also have cut back or stopped buying here altogether, local real estate agents say.
A year ago, there were at least 50 investment firms snapping up homes in the valley. Now, there are just three main buyers, according to Platinum Real Estate agent Steve Hawks.
Las Vegas home prices have soared 35 percent over the past year, making it harder for investors to book big profits on new deals. What’s more, the rental market is softening because of increased inventory. Rental prices are slipping, and many rental homes reportedly are vacant.
“It’s all about (the purchase) price; they have to get a return on investment that makes them happy,” said Dave Tina, co-owner of Urban Nest Realty and GLVAR president.
Blackstone, one of the world’s largest investment firms, led the buying binge nationally. The New York company spent billions acquiring and fixing up homes in real estate markets battered by the recession, including Las Vegas, Phoenix and Southern California’s Inland Empire.
Through its subsidiary Invitation Homes, Blackstone bought 25,000 homes nationwide between June 2012 and June 2013. It now owns more than 30,000 properties.
Colony, of Santa Monica, Calif., bought 5,500 homes nationally in just seven months last year, spending more than $500 million, Bloomberg News reported.
In June, for instance, it bought 6437 Buttercup Creek St. in North Las Vegas for $95,000, according to Clark County records. The previous owner bought the 1,200-square-foot, two-story house for $240,000 in July 2005. Colony wants to rent it for $900 a month.
The valley, ground zero for the housing bust, now has some of the fastest-growing home prices in the country. The median price of a previously owned single-family home was $180,000 in July, up 35 percent from a year earlier. Sales prices have climbed in 17 of the past 18 months after bottoming out in January 2012 at $118,000, according to GLVAR.
Investors helped lead the turnaround, buying homes by the dozen. Institutional investors, groups that buy at least 10 houses a year, bought 15 percent of all homes sold locally from January through July. That was up from 11 percent last year and 7 percent in 2009, according to RealtyTrac.
That being said, this year’s data reflect deals that likely were in the works for months and do not account for the current drop in investor purchases, Hawks said.
Many investors wanted properties so badly they used multiple agents and bought houses sight unseen, said broker Robyn Yates, co-owner of Windermere Real Estate.
“They didn’t want to miss anything,” she said.
Now, some firms are buying as few as half the homes they bought after the housing market crashed.
“Prices are too high across the board,” Yates said.
The recent slowdown doesn’t mean all investors are leaving Las Vegas, though. If anything, there appears to be an influx of smaller buyers snapping up rental homes, agents say.
The market also is expected to cool off in the coming months. Home values, which rose 31 percent over the past year, aren't anticipated to drop but are expected to rise only 11 percent by July 2014, according to housing data firm Zillow.
That means investors who bought homes a year ago can sell for a large profit, but those who buy now won't make nearly as much money selling in the near future.
Still, that doesn’t mean investors will forget about Las Vegas if there are cheap deals to be had.
“As soon as the prices drop again,” Hawks said, “they’ll start buying again.”