According to an assessment in HousingWire, large investors are beginning to find rental property attractive again in many U.S. housing markets. In fact, the rental housing market for the country is expected to increase by over six million units through 2016. Many regions that suffered from very severe downturns during the Great Recession now enjoy increased rental rates and a greater demand. Las Vegas was specifically mentioned, along with other parts of the Southwest, as one of the markets that may be attractive to investors in 2016.
In fact, Las Vegas, other parts of Nevada, and Arizona were described as low-hanging fruit in the eyes of property investors. The very fact that the city did experience a big downturn during the housing crisis is what may make it particularly attractive now. Property values are still rising but haven’t been judged overvalued, and there is still room for rental price growth. Also, an improving job market may increase renter confidence to encourage them to spend more. It may also attract more renters to the city.
Las Vegas Is a Top U.S. City for Rent Growth
The assessment above is backed up by looking at Axiometrics statistics about rental growth in Las Vegas for a 12-month period from 2014 and 2015. In the period between May of 2014 and May of 2015, effective rent growth increased from 3.8 percent to 6.6 percent. This might be compared to the national average of just about five percent in May of 2015. Of all major U.S. cities, Las Vegas ended up ranked in tenth place for rental growth. Out of the nine cities that ranked above Las Vegas, over half were in California.
At the same time, the occupancy rate in Vegas increased exactly one percentage point to finish at 94.4 percent. Typically, full occupancy is considered about 95 percent. The best news for investors and managers could be that revenue growth increased from 4.8 percent to 7.5 percent in the same period.
Third-Quarter Demand for Rentals in Las Vegas Was Slightly Softer
After the rush upwards, some investors may have been slightly disappointed to note a negative demand for Las Vegas apartments in the third quarter of 2015. Still, net move-outs of about 120 apartment units was reported. This is a drop of just about .1 of a point from the second quarter of 2015 to the third. A drop of about a hundred units is not large in a city like Las Vegas. The U.S. Census says this city has over 200,00 housing units. Also, over 30 percent of Las Vegas housing comes from units in multi-unit buildings.
The trend for the entire year is still very positive. Las Vegas rental occupancy has still increased by 1.1 points for all of 2015, even after the modest drop in the third quarter. In addition, the 94.4 percent rental occupancy rate was the second-best one in seven years. Other third-quarter signals to note include an effective rent of $820 and the addition of 22,000 jobs in the city.
Las Vegas Rental Property Trends for 2016
It’s fair to expect an active and growing rental market in 2016. If the job market continues to improve, rental prices are likely to keep edging upwards too. One thing to note is that Las Vegas is one city that has caught the eye of big property investors. While rental prices, occupancy, and prices are expected to climb, more money for investments is likely to contribute more rental units to the city’s inventory. This could cause some temporary pressure on occupancy rates.