Las Vegas is hot and it’s not because of its casinos and vibrant nightlife.
Sin City is the hottest housing market of 2018 based on home price growth. It has become a place where people want to live, not just play. Vegas has benefited from the high cost of homes and generally high cost of living in southern California and other neighboring cities. While Vegas’s home prices have skyrocketed this past year, the southern Nevada city is still among one of the cheaper metropolitan areas to live in the U.S.
“People are coming to Las Vegas. We have been seeing major job creation and diversification in industries,” said Chris Bishop, president of the Greater Las Vegas Association of Realtors. “All those things together led to a perfect storm.”
Since June, Vegas has led the S&P CoreLogic Case-Shiller 20-City Composite, dethroning Seattle as the city with the fastest home price growth. Vegas posted a 13.5% year-over-year increase in September. It, along with Phoenix and Tampa, had the biggest gains and largest losses 10 years ago, according to S&P.
“Vegas has been a boom and bust market,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones. “It was consistently one of the four fastest rising prices cities around and when the crunch came it was one of the cities that went down the most. It seems to be repeating its big swing practice now.”
Home prices are still 20% below its peak, according to Lawrence Yun, chief economist at National Realtors Association. Home prices plunged 62% to its bottom in 2012 from their peak in 2006, according to ATTOM Data Solutions, a real estate tracking firm.
Although prices have been heading upward, buying a home in Vegas is still far cheaper than most parts of southern California. In the third quarter, median home price in Vegas was $294,600, compared with $628,900 in Los Angeles, $830,000 in Orange County-Anaheim and $650,000 in San Diego, according to Yun. Earlier this year, Trulia noted that people living in coastal California markets tend to migrate to Sun Belt areas, namely Vegas. Similarly, Redfin examined searches from more than a million of its users in 90 metro areas and found the top destination for people leaving Los Angeles is Las Vegas.
“There are many people from Southern California who make a day trip and weekend trip,” said Cheryl Young, senior economist at Trulia. “Some may have realized that things are much more affordable in Vegas and consider a permanent move.”
Population and employment growth have fueled home price growth. The metropolitan Vegas area boasts a population of about 2 million — the city is among the fastest-growing U.S. cities. For the past few years, jobs in Las Vegas have increased at about 3% year-over-year, above the national job growth rate.
A hotbed for non-tourist industries
The job creation in recent years is also not necessarily from the usual sources: entertainment, hospitality and mining. While casinos like Wynn Resorts still dominate the Vegas economy (there’s an estimated $15 billion worth of development along the Vegas Strip in the works), the city is also home to online shoe retailer Zappos, which renovated Las Vegas City Hall for its headquarters in 2013. Zappos has been credited for the revitalization of downtown Vegas.
Meanwhile, Zappos’s parent company Amazon is constructing a 855,000 square-foot fulfillment facility in North Las Vegas that is expected to create 1,000 jobs — the third such warehouse it has in the area. Cosmetic retailer Sephora is also building a 714,000-square-foot distribution warehouse in North Las Vegas that will service 12 states in the West.
Additionally, Vegas has become a hotbed for professional sports teams and other events. The Raiders are constructing a new $1.9 billion stadium set to be completed by 2020, the same year the city is expected to host the NFL Draft. In 2017, Vegas Golden Knights NHL team was created, and this year the Las Vegas Aces WNBA team and Las Vegas Lights FC soccer team kicked off their inaugural seasons.
“This all added more value to the community,” said Bishop. ”It’s why people love our town.”
Facing similar challenges
Like the rest of the nation, Vegas is dealing with a housing affordability crisis. While jobs are being added, they aren’t well paying jobs. And as home prices rise in the region, wages aren’t catching up. That said, Vegas is still considered a relatively affordable market to buy a home in the U.S.
But in recent weeks, the Vegas housing market reportedly started experiencing a slowdown like the rest of the country. Home prices and sales activity have slipped, and inventory of homes doubled in November from a year earlier. Bishop isn’t too concerned, noting that with 7,000 homes for sale currently, the figure is short of the normal 12,000 homes and a far cry from the days of the housing crash when there were 20,000 homes for sale. “What I see is traditional appreciation and a stable market,” he said.
But some are a little bit more pessimistic and are asking whether the downward trend will continue into 2019. “It’s a gamble,” said Blitzer.
Amanda Fung is an editor at Yahoo Finance.