As first-time homebuyers in Las Vegas struggle to find a place they can afford, one of their biggest rivals is the real estate investor.
With home inventory tight and prices at record highs, investors can swoop in on a house or condominium listing, offering all-cash deals with quick closings.
“The first-time buyer is at a big disadvantage,” said Brandon Roberts, president of the Las Vegas Realtors trade group. “Sellers want their money with the least amount of contingencies and as fast as possible. You can’t really blame them for that.”
In May, 34% of all home sales in the Valley closed as cash transactions, up from 31% in May 2021, according to Las Vegas Realtors. It’s a likely indicator that more investors are purchasing homes in the Las Vegas area.
In many cases, those homes are being rented out, taking what could have been someone’s starter home off an already squeezed market.
In May, the Las Vegas area had about a one-month supply of homes on the market, well below the six-month inventory of a balanced market.
“A lot of big companies are doing that now as a business model—they’re buying homes in order to rent them out,” said Vivek Sah, director of the Lied Center for Real Estate at UNLV.
“These are private equity companies and REITs [real estate investment trusts], but it can be difficult to tell how many of the homes purchased with cash will end up being owner-occupied,” Sah said.
There are still a significant number of homebuyers from California purchasing homes in Las Vegas with cash, Sah said. With interest rates creeping up, some people are opting to buy with cash, if possible, to avoid financing costs, he said.
When interest rates were near zero, even people with the means to purchase a home with cash often financed them, Sah said.
While the percentage of cash purchases is up in Las Vegas, it’s still a far cry from what it was after the Great Recession. The high for cash purchases hit 60% in March 2013, Las Vegas Realtors reported.
“I would definitely say there is speculation in this market right now,” Sah said. “That’s based on anecdotal evidence. What happens is cash purchases tend to displace a lot of people who would go the traditional route of financing a home. Most of the people affected by that trend will be first-time homebuyers or minorities. They end up having to compete against these corporate buyers.”
Sah said he doesn’t see a need to worry if the economy takes a deep downturn and investors sell off homes.
“In today’s market, any more supply is good for homebuyers who have been priced out,” Sah said. “Any investor looking to dump their property is actually beneficial for the housing market, in my opinion.”
With the median price for a home in the Valley at a record $482,000 in May, many people are in no position to buy right now.
At the same time, rents for homes and apartments have increased in recent months. Many people have had their rents increase by hundreds of dollars a month as landlords adjust prices for market conditions.
According to the National Association of Realtors, rents for single-family properties in the United States were up 13% in February compared with the same month in 2021.
NerdWallet, a personal finance website that tracks financial data, reported that “climbing prices and sinking inventory have dramatically altered” the housing markets in places like Las Vegas; Tampa, Florida; and Austin, Texas.
“Big corporate investors have been a big thing in our market lately,” Roberts said. “A lot of that is due to the fact that we have a market with increasing rents. It’s a good investment for these companies and Vegas is a strong investor market.”
Roberts said rent control legislation could help cool investor interest. Unless that happens, Southern Nevada will likely remain an attractive place for cash buyers, he said.
“I hear rumblings that because of how fast rents are increasing, our lawmakers might step in and do something,” Roberts said. “That would, I think, affect investors.”
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