Las Vegas Apartment rents plunge

The effects of the central bank’s pandemic zero interest policy are still with us. The Las Vegas Review Journal business page blasted this headline today, “Rent-price drop highest in the U.S.”

Rents have fallen 13.6% from 2022, tying Atlanta for the largest drop of any metro area followed by once sizzling Austin at 13.4%. These numbers are according to realtor.com. 

The LVRJ pointed to the problem, “Las Vegas saw both a population and multifamily building boom due to the pandemic as financing rates bottomed out and remote work allowed many residents to relocate to cheaper areas, largely from California.

Immigration to Vegas has decreased since 2022 but “most multifamily projects that were started during the pandemic have now come online and are being leased.” 

Jiayi Xu, an economist at Realtor.com wrote in her report, “In recent years, migration has slowed, and a surge in multifamily supply has increased options for renters, putting downward pressure on prices. Together, these factors have pushed rents down more sharply than in other markets.”

“But the pipeline for new multifamily projects has stalled significantly and most of the projects either underway or about to break ground are billed as ‘luxury units’ due to market constraints making cheaper apartment complexes harder to build,” wrote  Patrick Blennerhassett. 

Murray Rothbard explained

… inflation is not the only unfortunate consequence of the government's mental expansion of the supply of money and credit. For this expansion distorts the structure of investment and production, causing excessive investment in unsound projects in the capital goods industries. This distortion is reflected in the well-known fact that, in every boom period, capital goods prices rise further

 than the prices of consumer goods. The recession periods of the business cycle then become inevitable, for the recession is the necessary corrective process by which the market liquidates the unsound investments of the boom and redirects resources from the capital goods to the consumer goods industries. The longer the inflationary distortions continue, the more severe the recession adjustment must become.  

First the rents go down, then the value of the complexes. But, the debt remains the same.