by
Doug French
My articles My booksMy videos
Follow on:

In Las Vegas, asset price inflation is combining with rising prices on building materials to create a real estate bubble of remarkable proportions.

Original Article: “The Real Estate Boom in Vegas Is More Frenzied Than Ever​​”

Summerlin, the suburb of west Las Vegas creeping ever closer to the mountains, looks to be crowded with fully paved streets, streetlights, block walls, and blue top lots. With lumber, labor, and other materials in short supply, home construction can’t keep up.

However, Ali Wolf, chief economist with Zonda, quoted by CNBC, claims, “The lot supply shortage is real, and it is causing prices to rise and builders to move further into the suburbs.”

Diana Olick writes, “The surge in lumber prices in the past year has added $35,872 to the price of an average new single-family home and $12,966 to the market value of an average new multi family home, according to the NAHB.”

Las Vegas in the early to mid-2000s enjoyed an epic housing boom. This one is crazier.

I popped awake at 1:00 a.m., anxiety my alarm clock. A half hour later, I feared someone was already on their way to be first in line for a prized lot, overlooking the city, one of only four being released by a large publicly held homebuilder for that subdivision.

My wife pleaded with me not to go that early. Surely, I’d lost my mind.

I drove into the subdivision and breathed a sigh of relief. I had told the saleswoman I would be there waiting for her, blocking the entrance to the sales office. It would open eight hours later.

With coffee and Kindle to keep me company, I enjoyed the cool breeze and dark silence. What I had forgotten was a seat cushion. At four, I thought maybe I was nuts. But only six hours to go. Surely, at my age, lining up as if hoping to score front-row seats to a Rolling Stones concert was silly.

With the sun finally up, a white Volvo station wagon wheeled into the project, stopping abruptly in front of the sales office.

“What lot are you here for?” asked the gentleman.

“Thirteen,” I answered.

“Oh, shoot. My client will have to settle for 12.”

“What time did you get here?”

“I’m embarrassed to say.”

“What time?”

I held up two fingers.

“Dude, you’re awesome,” he replied.

Once a realtor in California, I learned over the next four and half hours that he’s been in town since 2003 selling real estate. The market is hotter than he’s ever seen.

He made wonderful company. Just before six, another buyer arrived. He too, wanted lot 13 or lot 12. He’d now have to settle for across the street. Just before seven, a personal assistant arrived for another buyer. Soon after, a woman pulled up, rolled down her window, and shouted, “What lot are you here for?”

“We’re all here for 13,” my new friend said. “But this guy has it,” pointing at me. She was ready to drive away in a huff, but the enterprising realtor talked her into driving to one of his listings nearby.

Finally, the sales team arrived. The magic hour of 10:00 a.m. was near.

The raging housing market made the front page of the Las Vegas Review-Journal three days last week, with headlines like: “‘Now a full-price offer is a weak offer’: Las Vegas Housing a Seller’s Market.” Homes listed for sale numbered only 1,772 in March, down 69 percent from a year ago.

Jordan Rodriguez purchased “a southwest valley home from a builder in 2016 for nearly $293,000—and, he says, is now selling it for $560,000, $10,000 over the asking price,” Eli Segall reports.

At the other end of the price spectrum, “Frank Napoli of Berkshire Hathaway HomeServices Nevada Properties, recently put a $7 million home on the market and received a full-price offer within three hours.” Napoli told Segall, “It is an extreme seller’s market.” No kidding.

Incredibly, buyers are closing on homes and letting sellers live rent free until the seller’s new homes are ready. Segall writes, “[B]roker Shane Nguyen, owner of 1st Priority Realty, said he can’t recall seeing rent-free leasebacks in his 24 years of selling homes in Las Vegas until now.”

“It’s never been free,” Nguyen said.

“Lumber prices are skyrocketing for various reasons beyond just high demand from homebuilders and remodelers,” CNBC’s Olick writes. “Lumber tariffs had prices already rising a year ago, but then when the pandemic hit, production shut down. The expectation was that housing demand would dry up for a long time. But instead, after a brief pause, it came roaring back. Homebuilders were caught off guard, as were lumber producers.”

“Clearly, increasing the cost of imports via tariffs does not help the situation,” said Robert Dietz, chief economist for the National Association of Home Builders.

While Treasury secretary Janet Yellen claims there is no inflation, land, lumber, gypsum, copper, and virtually everything else required to build a house are skyrocketing in price.

The Federal Reserve’s money creation is at the root of all this. Affordable housing is a joke, bank analyst Chris Whalen said on Real Vision. “The appetite for yield is there, they just can’t find the assets,” he told Jack Farley. “It’s like people want to buy a house. The scarcity that you see in one to four family homes, and the scarcity you see in the bond market is the same thing. When Chair Powell gets up there and tells us the quantitative easing is not affecting home prices, that tells me he does not understand what he’s doing.”

At 10 a.m. I was ushered into the sales office. The door was locked behind me. The paperwork was simple. As I provided the required check, I told the sales staff, “If you want an anecdote for the home office, I was here at two this morning. Also, the gentleman in the third chair is offering the buyer after me $20,000 to trade places.” I turned down a $30,000 offer for my spot.

When I emerged from the office, the waiting buyers and realtors cheered, as if I had just won an award. One carried my chair to the car.

In my thesis “Early Speculative Bubbles and Increases in the Supply of Money,” written under Murray Rothbard’s direction thirty years ago, I closed with this: “What can be predicted with absolute accuracy is that fiat money, fractional-reserve banking, central banks, Keynesian monetary policies, and self-serving politicians will combine to ensure that there will be many more booms and speculative bubbles for future economists and historians to chronicle.”

I could not have imagined how many “many more” would be.

This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.

You Might Also Like

Weekly SNB Sight Deposits and Speculative Positions: Inflation is there, CHF must Rise

2021-05-25

Update May 24 2021: SNB intervening. Sight Deposits have risen by +1.9 bn CHF, this means that the SNB is intervening and buying Euros and Dollars.

Inflation Breeds Even More Inflation

2021-01-18

I. Warning against Fiduciary Media. Early in the 20th century, Ludwig von Mises warned against the consequences of granting the government control over the money supply. Such a regime inevitably creates money through bank credit that is not backed by real savings—a type of money that Mises termed "fiduciary media."

The Upside of Lockdowns: More Saving

2021-01-15

Something good is coming out of the covid lockdowns. Economist David Rosenberg released a special report via the eponymous Rosenberg Research, concluding “the pre-COVID-19 ‘norm’ of a 7% personal savings rate will morph into a post-COVID-19 norm of 10%.

Let Unsound Money Wither Away

2021-01-13

Chairman Paul and members of the subcommittee, I am deeply honored to appear before you to testify on the topic of fractional-reserve banking. Thank you for your invitation and attention. In the short time I have, I will give a brief description of fractional reserve-banking, identify the problems it presents in the current institutional setting, and suggest a potential solution.

Double Standards, Reparations, and War Crimes

2021-01-07

Joan Wallach Scott, a historian who is a professor emerita at the Institute for Advanced Study in Princeton, has come up with a most valuable insight. She is decidedly not “one of us,” but her insight makes her sound as if she might be.

How Austrian Is Your Business? Continuous Value Perception Monitoring Is One Measure.

2020-12-25

With the development of the Austrian Business Paradigm and the Austrian Business Model, and tools such as the "Value Learning Process," businesses of all kinds can utilize the deep insights of Austrian economics to further enhance how they facilitate value for their customers.

It Should Shock Us That There’s Any Consumer Price Inflation at All

2020-12-19

Thanks to lockdowns, high unemployment, and general uncertainty and fear over covid-19, the personal saving rate in the United States in October was 13.6 percent, the highest since the mid-1970s. This is down from April’s rate of 33.7 percent, which was the highest saving rate recorded since the Second World War.

Central Banks Put Wind at Bitcoin’s Back

2020-12-11

“Russia, Russia, Russia,” the current president used to sarcastically chastise opponents for wondering about 2016 election tinkering from Putin’s principality. Recent MAGA rallies featured “Covid, covid, covid,” with President Trump complaining that the press could think of nothing else.