Are land prices in Las Vegas really dropping? Ask anybody who’s tried to buy a piece of land recently, especially commercial land, and they will tell you the price has not gone down at all. Economics 101 teaches us that when supply is limited and demand is high, prices go up. There’s not much available land in the Las Vegas Valley, and only a few parcels of BLM land remain to be released. Commercial users are struggling to find land at prices that make economic sense for their projects, because homebuilders, trying to house the thousands of people moving into the Valley each month, are paying top dollar for any available parcel.
And yet, two respected Las Vegas publications ran headlines at the end of March declaring land prices were falling, or, as one put it, “Land Prices Plunge 47 Percent in Fourth Quarter.” “Plunging” sounds pretty serious, doesn’t it? Maybe we should all sell our land holdings before it gets worse, and run for the hills.
This situation illustrates the dangers of looking at numbers without doing a proper analysis of what they mean. This all began when Applied Analysis, a Las Vegas firm that specializes in crunching real estate numbers, issued a report in March comparing land prices in the third quarter of 2005 with prices in the fourth quarter 2005. Looking at the price paid per acre, one of the charts in the report showed that the average price declined 47 percent.
But averages can be tricky. If you put one hand in a bucket of ice water and the other in a fire, the average temperature of your hands would probably be in the comfort zone. If averages were all that counted, you wouldn’t have a reason to complain.
What happened in the case of the Applied Analysis report was that the largest transactions that took place in the third quarter were sales of land on the Las Vegas Strip, chiefly to developers of high-rise condo projects. Prices for these prime parcels can exceed $1 million an acre. Then, in the fourth quarter, the BLM held an auction in which the Olympia Group paid an average of $238,900 per acre for 2,675 acres of undeveloped land in North Las Vegas without any improvements. Obviously, these two types of sales were on opposite ends of the price spectrum, so comparing the per-acre prices wouldn’t make much sense. If you take out these huge transactions, the prices in the rest of the market were relatively stable.
Brian Gordon, a principal at Applied Analysis, said, “We got a few calls after the story was printed. It’s important to understand how the numbers work.” The report pointed out that, excluding the BLM transaction, the Valley-wide price per acre in the fourth quarter reached $578,000, which represented an 11 percent increase over the fourth quarter of 2004. “Each local submarket reported a healthy appreciation over the prior year,” Gordon added. So much for plunging prices.
What harm can it cause if people read misleading headlines? Kevin Orrock, top division executive for the Howard Hughes Corporation, oversees the Summerlin master-planned community. “The danger is that a lot of people don’t get past the headline,” he said. “In this case, the math in the report was correct, but the conclusion in the headline was incorrect. If you’re a public company that owns land, or an investor or a borrower, you’re going to get calls from people you’re doing business with who are outside the market. They’re going to want an explanation for why land prices are going down in Las Vegas, when in fact, the dynamics of the marketplace are still very positive. Sensationalism doesn’t do anybody here any good.”
There are many sources for in-depth reports on real estate and other segments of the economy, including this magazine. But, a word to the wise: look past the headlines. It’s a good idea to read the fine print, whether it’s in a business contract or a newspaper article.
Welcome to Henderson!
When Nevada Business Journal recently moved its corporate offices to Henderson, we didn’t think too much about being in a new city. Although those of us who have lived here for a number of years can remember when Henderson was a separate town several miles from Las Vegas, the two cities have now grown together into what seems like one big metropolis. Since our move, we’ve come to appreciate the perks of doing business in a city that takes care of business.
The first hint we had of the city’s pro-business attitude was when Bob Cooper of the Henderson Economic Development Department called to make an appointment to visit us in our new building. This wasn’t because we knew Bob or had done business with him (which we had), but rather because that’s what his department does with new businesses moving into town. The meeting was all about what the city could do to help our business succeed in Henderson. As it turns out, Bob has been conducting these meetings for years as part of the city’s business retention plan.
In April, we unfortunately had an occasion to call the Henderson Police Department regarding an overnight break-in at our new offices. The response was immediate and the investigation was through. The responding officers were extremely professional and spent most of the morning taking statements, dusting for fingerprints and gathering evidence. We’ve all heard horror stories of shabby investigations, long response times and rudeness from police officers. Our experience was just the opposite, and we would like to thank the Henderson Police Department for a job well done.
We’re proud to be located in Henderson and appreciate the hospitality and service provided by the city. It really is a great place to do business.
Thanks to Our New Neighbors
When we moved our offices from leased space in Las Vegas to a new building in Henderson in February, we didn’t think too much about being in a new city. Although those if us who have lived here for many years can remember when Henderson was a separate town several miles from Las Vegas, the two cities have now grown together into what seems like one big metropolis. But recent events have proved that the city of Henderson is actually a great place to be.
The first hint we had of the city’s attitude was when Bob Cooper of the Henderson Economic Development Department called to make an appointment to visit us in our new building. This wasn’t because we knew Bob or had done business with him (which we had), but rather because that’s what his department does with all businesses moving into town. Two members of the Economic Development staff came by and spent quite awhile talking to us about our business model, our needs and challenges, and what the city could do to help. Thanks, Bob. It was really above and beyond.
In April, we unfortunately had an occasion to call the Henderson Police Department, and were very impressed with them as well. One night, our office was broken into and some computer equipment and other things were stolen. When we discovered what had happened, we called the police, who sent an officer right away. He spent most of the morning taking statements, dusting for fingerprints and gathering evidence. I’m sure we’ve all heard stories of police not bothering to investigate property crimes because they’re too busy or think they aren’t worth the effort. Although the investigation is still continuing, we’d like to thank the Henderson Police Department for responding promptly and giving it their best effort.
We’re proud to be located in Henderson and wanted to give credit where credit is due.
