IT SEEMS FITTING THAT THE LAS VEGAS Strip boasts the tallest building west of the Mississippi River, a hotel and casino called the Stratosphere—that's just where the Las Vegas area's economy appears headed.
Consider these numbers: According to the Bureau of Labor Statistics, between November 2003 and November 2004, the Las Vegas metropolitan statistical area (MSA) added 113,600 non-farm jobs, a 5.2 percent increase—the biggest jump of any MSA nationwide. The area's unemployment rate fell 1.3 percentage points over the same period, to 3.5 percent. The U.S. average unemployment rate in November 2004: 5.2 percent.
Planned developments look like they'll stoke the fiery Las Vegas market even more. Wynn Las Vegas, a casino, convention center, and 2,700-room hotel resort by developer Steve Wynn, is slated to open in April. In fact, Vegas resorts have cited plans to add nearly 20,000 hotel rooms to the area's 131,000 during the next five years; the Las Vegas Convention Center recently announced a $400 million expansion of its own.
Where the economy goes, housing is sure to follow. With all those new rooms come jobs—2.5 per room, by one estimate—and, therefore, new people. (The population of Clark County—home to the Las Vegas Strip and the cities of Las Vegas, North Las Vegas, and Henderson—skyrocketed a full 85.6 percent between 1990 and 2000, and the trend has continued since.)
But where to house them all? Demand for new housing far exceeds the available supply, and despite Vegas' location in the Nevada desert, there's strikingly little readily available land. As in almost all segments of a diversifying housing market across the country, higher density and higher buildings appear to be the answer.
A New Model Las Vegas is in a literal bind. The federal government owns about 87 percent of Nevada's land, and the 2002 Southern Nevada Public Land Management Act drew a boundary around the Las Vegas Valley. Land within the ring can be auctioned off by the federal Bureau of Land Management (BLM). But nearly all the non-BLM land inside the boundary has been bought, leaving builders and developers to compete at auction for the remaining parcels.
The combination of scarce available land and the predominance of national builders in the market who can afford to pay more has sent prices for dirt upwards of $700,000 per acre. Home prices have mirrored that trend, with appreciation leaping nearly 50 percent between the third quarters of 2003 and 2004. Speculators almost certainly fueled some of that jump, but they've left the market and high prices remain.
Dennis Smith, president of Home Builders Research, a Las Vegas market research firm, believes the balance between housing demand and land supply in Las Vegas is gone forever. “I don't see the price of land coming down at all,” he says. “How can the cost of a new home come down when it comes from the price of land?”
The Las Vegas housing market long has been marked by such large master planned communities of detached single-family homes as Summerlin and Green Valley. But questions like Smith's have people in the Vegas housing market rethinking the traditional formula.
“The typical, traditional model for a Western city has to be crumpled up and thrown out the window. Las Vegas has to think of itself as something other than a Western city,” says Richard Lee, director of public relations for First American Title Company of Nevada. Planners, developers, and builders should look toward major metropolitan cities—New York, Miami, even Paris—for models of higher density, he says.