Moz Dumps Amazon Web Services, Citing Expense and 'Lacking' Service - <AUTHOR> http://www.xconomy.com/seattle/2014/01/30/moz-dumps-amazon-web-services-citing-expense-and-lacking-service/ <comment><USER2> For what _many_ orgs need to do, a myriad of lesser-known VPS providers would be just fine, and be a fraction of the cost. But most people I've known don't investigate or educate themselves much - it's been a herd mentality towards AWS, irrespective of needs or costs (because often, it's not them paying - it's "the company").

Perhaps as a freelance consultant right now I take a sharper look at the costs involved - if a client has, say, $50k to budget on a project, I really don't want $10k of that to go to hosting if it doesn't need to - I'd rather it be available for my services directly (obviously) or to give us more play for marketing, testing, whatever.

I've known a couple of small to medium sized companies where they were using AWS rather strategically as part of their services - dynamically spinning up test environments for running parallel testing, off-peak data crunching, etc - but even in those cases, there weren't gigantic savings vs other options.

What bugs me most is the false dichotomy I get when I talk about this with friends; their choice is presented as either use AWS or "hire a full-time sysadmin, buy multiple server-grade boxes and manage all this in a rented data center". I've been told Amazon is saving people "easily" $100k/year by not having to hire staff and buy expensive hardware. Hrmm... not all hardware is expensive, and instead of hiring a sysadmin, you've now got multiple developers spending time learning the AWS API, and building critical business processes around AWS, tying you to Amazon for the long haul, all while they _could_ be focusing more on line-of-business stuff that you hired them for in the first place.

I don't doubt that in some cases there's robust cost savings, but it's never struck me as a terribly cost-efficient way of doing any web stuff. In some cases it may be the _only_ way to deal with certain problems, but in those cases cost probably isn't a consideration anyway.

<comment><USER3> > if a client has, say, $50k to budget on a project, I really don't want $10k > of that to go to hosting if it doesn't need to

On a $50k project, how are you even dropping $10k on AWS? I've found a medium instance (~$100/mo) handles with ease 100k+ visitors/mo without breaking a sweat.

<comment><USER2> $50k/$10k is possibly a bit extreme - say $80k/$8k perhaps.

Typically when my clients do a project, they're budgeting out for the year, so that's $8k/year, not per month.

AWS would be cheaper with reserved instances, but then (IIRC) you're prepaying in advance for something you may not need. Even if it's cheaper, it's sort of defeating the purpose of "i can scale on demand". (which, yes you can still do, but you're back to 'on demand' pricing).

As someone else pointed out, some of where AWS gets you is the storage and traffic. I've got a setup right now where I need to have at peak 2-3 servers to handle traffic, as there's a moderate amount of computation going on - it's not all the time, nor every day, but when I need it, I need it. And it's processing documents (photos, etc) and we need to store them. Then show them back to the user. With on demand pricing, and the amount of traffic, this can be ~$600+ per month (*12 = ~$7000/year).

Could I optimize the code more to use less CPU, and perhaps require 1 less server? Possibly. Could I optimize some other stuff? Possibly, but that will cost more time, in order to save money with AWS.

Reserved instances would probably be the best, but if we ended up needing more later, it's harder to go back 6 months later and say "hey, we need more $ for X", as the budget was already done and processed for project Y.

I've got some projects like this at digitalocean, and one on month-to-month dedicated hardware, and the pricing is about 50%, mostly because of the built- in storage that AWS line items separately.

Can AWS do more functionally? Sure. Do we need it? Usually not, and paying for that infrastructure when it doesn't match the core needs isn't usually an option. Elastic IPs would be nice, but we could get much of that utility at linode if need be, and still pay less.

<comment><USER4> Reserves instances long-term don't make much p&l sense, it makes more sense to rent dedicated hw where most of the other costs are cheaper.

<comment><USER2> Agreed, which is why I don't do it or recommend it. I had a client look in to it once, and it was a toss up between renting dedicated servers vs reserved instances, and they went dedicated.

</comment></comment></comment></comment></comment><comment><USER5> To be clear, we haven't dumped AWS for short running stateless processing. We dynamically spin up spot instances as needed for all our stateless processing using AWS and other cloud services. At our current size our AWS bill will not be 7 million but closer to 500k-1 million a year. Not exactly pocket change. Some of the cost savings we are realizing is due to working with AWS as well on best practices.

For our longer stateful processing or apps that need to be available 24/7 with no variability in load we have purchased our own hardware (a process that has been going on for over 18 months). Owning the equipment plus the data center will run us approx 1.2 million including growth to build a hot back up.

It should be noted, staffing cost was not a factor. We must have staff to manage 1000s of servers at AWS or at our own data centers. The biggest factor was paying for compute on boxes that crashed and yielded nothing we could use to move our business forward. Well, I take that back, we got really good at check points and rollbacks. Other than that, not much.

No matter how you slice it, AWS and other cloud services are a great service for the right types of processing, and applications.

Skinner Moz CTO

<comment><USER6> Thanks for the additional information. It was difficult to decipher your problems from the original article. I'm guessing the "no variability in load" processes are where AWS was the most unnecessary.

<comment><USER5> Yes! 95% of our services were running at AWS. Paying AWS for running our website is not a good use of money. Many cheaper ways to host a website.

Paying for 70-100 hours of compute and having the server crash in the middle of calculating your predictive analytics not exactly all that bright either. So, we bought our own gear.

AWS works and worked with us pretty damn closely as we pulled apps out of the cloud.

<comment><USER7> I'm curious to know if you considered other hosting providers as an alternative to building out your own hardware/datacenters? I think it's reasonably well known that AWS is around 3 times more expensive than alternatives where you pay by-the-month instead of by-the-minute. Was a Rackspace/Linode/whoever implementation costed against a buy-your-own-boxes solution, and if so, is there anything you could share about why you chose the way you did?

(Oh, and thanks for the information you've already shared - even if you can't answer my curiosity here…)

<comment><USER5> We use other cloud services as well. Rackspace and Nimbix are a couple of them. We even looked at Azure figuring no contention for boxes but we don't have any MSFT in our stack (sorry to my whole neighborhood of MSFT employees). We never depend on just one and have a detailed cost breakdown before we decided to buy or move a service. The ROI needs to be there.

As an aside, AWS has everyone beat when it comes to regions however. We can be close to our customers in Europe, US and so on.

To date, no one is spinning up cloud fronts and services in more areas than AWS. It will take the MSFT , IBMs and the like to move the global cloud along. MSFT just needs to realize not everyone wants Sharepoint, SQLServer and .net.

Which service you use is really situational. Plenty of good ones out there. AWS is just one!

<comment><USER8> I'm very curious about your ROI analysis for colo vs. a service like Rackspace's "Managed Colocation" [1] where a hosting provider runs the DC and provides the hardware and your folks manage the OS layer and up.

I run technical operations for a company with a fraction of your footprint (but growing quickly). We're at the point where we are growing out of the RAX public cloud but by my calculations, the decision to run our own private cloud in colocation vs. lease one from a service provider is (financially) a wash.

From a practicality standpoint, the scales tip towards leasing bare metal from a provider. I'm curious to hear your experiences with colo. How many folks do you have working in your colocation facilities doing hardware maintenance? What about network engineering? I presume you also keep a sizable stock of spares?

1: [http://www.rackspace.com/managed_hosting/managed_colocation/](http://www.rackspace.com/managed_hosting/managed_colocation/)

<comment><USER5> All good questions. The answer is pretty long winded. In short, we love our bare metal and you are not going to be able to rip it out of our cold dead hands. It is stable, fast and cost efficient.

Now for the long winded:

1\. We do have a decent amount of spares but not a ton. Our contracts require replacement parts within hours to a day. Some items like F5 gear we have two and no spare. They just replace their gear in hours.

2\. Each data center has 24/7 support that can do some minor tasks.

3\. Yes, Networking is a pain and you need the right people to do it. It is not cheap either! Luckily our VP of Tech Ops is a networking guru.You mess up networking and you are hosed. Our first networking guy wasn't exactly Tops! So, we know first hand.

Having said all of that, for us there are economies of scale. It is the case if we want to test different machines, databases or any other combination at scale it could cost us several hundred thousand dollars just to run the tests. Yep, we have dropped over 100k for testing at scale. Its simply not sustainable and an irresponsible way to spend investors cash. Also, when you add in multiple environments for dev, test, staging and integration you can quickly see we consume a lot of boxes. So, many in fact, a lot of colocation/cloud services will not work with us unless we plop down large amounts of cash. Let's also factor in AWS wants large up front spend for reserved instances. Thus, if you need the capital to get the amount of compute you need to run your business it is not very hard just to call Dell, Cisco, Nimbix, Equinix or any other vendor and negotiate our own deals. If any of these companies can get half our spend a year they are willing to at least talk.

</comment></comment></comment></comment></comment></comment></comment><comment><USER9> Not surprised to see this, although I am surprised more companies aren't following suit. We abandoned AWS a year and a half ago and cut our server / infrastructure costs by 90% in the process.

<comment><USER4> Yup. Folks like Netflix and Zynga are showing off how much money they are willing to spend for more potential agility. They could save a ton for predictable capacity by deploying dedicated boxes + openstack. That's where the savings are obvious, because AWS is like living at a hotel.

<comment><USER10> You're assuming Netflix and Zynga are paying the prices that are published on the webpage. I'm fairly confidant that that isn't the case.

</comment></comment></comment><comment><USER11> Public cloud is not for everyone. If you have a large number of machines that have to run all the time and are being taxed, then public cloud services do not make sense. If you are doing complex machine learning, large scale web crawling/scrapping, or generating large quantities of data (images/video/etc.) then services like AWS might not be a fit. They are incredibly awesome though for certain types of workload, but for others it is a very expensive option that isn't economical.

Personally I think the best is some mix of both public and private, so you have the scalability when you really spike but have cheaper more capable machines handling baseline and things like analysis or storage workloads.

<comment><USER12> It's for people not making enough money (or not having the clue) to hire systems talent.

If you read the Moz report, they appear to have gotten a new CEO and are now building out a datacenter presence. They spent 7MM+/yr on AWS in 2013, there is no way that won't be viciously slashed by renting racks.

<comment><USER13> > It's for people not making enough money (or not having the clue) to hire > systems talent.

That may be true compared to doing your own racks, but not compared to renting managed servers at a monthly basis.

Every time I price out AWS vs alternatives, I end up with the same: If you need a server for more than about 8 hours a day, renting a managed server at a monthly basis tends to come out substantially cheaper. And that doesn't increase sysadmin workload; in fact many hosting providers now offers APIs for provisioning monthly billed services too, just generally with lead times in hours instead of minutes/seconds, so it takes really bursty traffic before taking the hassle of auto-scaling with cloud instances becomes worthwhile.

</comment></comment></comment><comment><USER14> What I find most perplexing is that people don't really understand that the point of Amazon is elasticity to make capacity planning easier for high growth situations.

That elasticity only makes financial sense when you use it properly. Like, if you keep your entire infrastructure turned on all the time, and cranked up to 11, but you aren't using reserved instances, then you are missing the point and you might as well just build/rent your own datacenter space and run your own servers (or pay someone like Rackspace to do it).

If you are using AWS, then you need to make use of reserved instances and the elasticity to spin down things that are being underutilized. If your infrastructure is too fragile to safely handle spinning up and down instances, then you probably are missing the cloud or aren't taking full advantage of what it has to offer.

I'm not saying Moz wasn't doing all of these things, I'm just saying that if you are spending $7 million a year, but aren't doing the appropriate capacity planning, then you are making a mistake.

At the very least, the exercise of doing real capacity planning by moving into physical data centers probably had a lot to do with the cost savings as well.

<comment><USER8> What you're saying may apply to simple SaaS companies who might build a two- tier application that can be easily scaled up and down by adding front-end nodes and r/o database nodes, but it doesn't always apply to data analysis companies like Moz, who may use large ElasticSearch clusters that don't autoscale. I run technical operations for such a company. The vast majority of our infrastructure remains static, simply because the underlying technologies don't allow for autoscale. The best place for a company like ours is in a private cloud, be it at Rackspace, SoftLayer, or in colocation.

<comment><USER14> Right, and that makes total sense. I haven't ran the numbers, but I know that if you have some amount of fixed capacity required, you would absolutely want to do reserved instances on all of those and consolidate as much as you can where it makes sense.

However, if the numbers don't work out on reserved instances and you have a pretty steady demand, going with your own infrastructure makes total sense.

</comment></comment></comment><comment><USER15> My employer spends a small fortune with AWS, and we make use of many of the services. There's no way our small team could have built our product on any other platform.

Still, as my colleague observed, it must be the only business in the world you can spend $1m a year on and get only basic support, with web-only tickets that take hours or days to get a resolved.

<comment><USER16> Why aren't you spending even the $50 support tier if not enough for one of the higher tiers if you're dropping that much in usage costs? I don't understand why anyone expects free support when every little thing in AWS is charged for as a utility.

<comment><USER17> The paid support tier is also atrocious and close to useless. AWS routinely denies the existence of major flaws for months or years, until they eventually admit it, often by just documenting it instead of fixing it.

They're horrifically expensive, and low quality.

It's really, really sad that so many startups have been convinced that it's "cheap" when it's almost comically expensive and lousy.

<comment><USER16> I don't mean to claim otherwise, but I'd be interested to see what instances led to your observation.

<comment><USER17> As a simple example, if you have a moderate number of hosts in a single security group (e.g. 200+ hosts), you can expect to have intermittent communication problems between the nodes. They used to deny this was a problem.

here's a source, since you're attacking and disbelieving everybody who doesn't love AWS: [http://searchcloudcomputing.techtarget.com/news/2240203992/N...](http://searchcloudcomputing.techtarget.com/news/2240203992/Networking- security-issues-still-irk-large-AWS-shops)

<comment><USER18> It may or may not be the same issue, but from what I have been able to gather a modification of a security group is basically a "delete, recreate, repopulate" operation. All of our intermittent network issues could be reasonably tied back to SG modifications.

<comment><USER17> That's a different issue. This one is instances that are launched into an sg that is then left unmodified. If there are a moderate to large number of instances in that sg, intermittent network connectivity problems will ensue.

The issue you mention (where you have to treat sg's as being immutable if you want them to work reliably) is another problem with the sg's.

</comment></comment></comment></comment></comment></comment></comment><comment><USER19> Did anyone else think "Moz" was short for Mozilla?

<comment><USER20> Not I, but I'm part of their demographic -- [http://d2v4zi8pl64nxt.cloudfront.net/2013-in- review/52e9b643...](http://d2v4zi8pl64nxt.cloudfront.net/2013-in- review/52e9b6437a2607.51764974.jpg)

<comment><USER21> Weird. I recognize only half the companies on that chart, and I'm not sure what Adobe or salesforce have to with marketing.

<comment><USER22> so you're telling us you don't know what content creation or CRM has to do with marketing?

</comment></comment></comment></comment><comment><USER23> I bet one of the leading factors is the number of sites blocking the AWS servers. As a scraping service, the fact that Amazon makes all their public IPs known ([https://forums.aws.amazon.com/ann.jspa?annID=1701](https://forums.aws.amazon.com/ann.jspa?annID=1701)) is really inconvenient for anyone "crawling" the web. Rackspace also makes their list available, albeit incomplete ([http://www.rackspace.com/knowledge_center/article/cloud- site...](http://www.rackspace.com/knowledge_center/article/cloud-sites- outbound-ip-addresses)).

As more websites setup default blocks for all accesses from AWS services, the Moz exit was inevitable.

<comment><USER24> We've actually never crawled out of Amazon (mostly because it was expensive to do so), so the crawl blocking stuff is unrelated, at least for us. As Sarah noted, it's really been costs, service, and support issues.

<comment><USER23> I'd redact my suggestion then if I could. Thanks for answering so directly and promptly! (and great seeing you on HN)

<comment><USER24> Thanks dude! Totally fair question & assumption BTW :-)

</comment></comment></comment></comment><comment><USER25> there are dozens, if not hundreds of smaller TRUE managed hosting providers popping up to service these kinds of accounts. that's what my startup does. we routinely steal large $5k-50k/month accounts from AWS and rackspace and softlayer (IBM) and the like. they just do a shitty job for an exorbitant price, plain and simple.

folks... _NOBODY_ gives a fuck about you at those companies, and you better believe it. not the account manager, not the engineer working on your 5 day old ticket, not the sales guy who probably isn't even paid a decent commission, and certainly not the executive management who is pulling down 300k+/year annual salaries plus huge stock grants and bonuses (check out the SEC filings!)

a well managed cluster of computing equipment running baremetal operating systems, hypervisors of your choice, and maybe something like openstack or docker is both profitable for the vendor and a MASSIVE price reduction for the customer.

if you know what you're doing, you're spending $10k/month for $100k/month worth of equivalent amazon services. yes, you heard me right. it is an order of magnitude of cost savings. once you scale past $10k/month, using amazon for all your needs is an INCREDIBLY STUPID business decision.

the genius of AWS, of course, is that they disguise all their marketing as technical spec sheets and deliberately design their collateral and sales process to appeal to the "engineer" types with acronyms, numbers, and highly specific jargon.

it's quite clever. but not clever enough to fool everyone. and those that are fooled, learn eventually that maybe paying 300% more than you should isn't that smart.

<comment><USER26> I'm interested in knowing more since we do development and system integration for client in this kind of budget, and we didn't find a decent hosting provider in years of trying. Could you name some of those managed providers, including the one you work for?

<comment><USER25> i put my email in my profile. i don't promote my company by name on HN, but send over your requirements and we can take a look.

thanks.

</comment></comment></comment><comment><USER27> I'm curious about what is behind Moz's statement "The business impact is profound. We're spending less and have improved reliability and efficiency."

I don't have the experience with large AWS setups to comment about the cost implications, but improved reliability and efficiency strikes me as questionable - AWS's reliability has improved markedly over the last 18 months to the point I cannot remember when their last major outage was.

I'm keen to hear other peoples' thoughts on this..

<comment><USER28> There may not have been a recent total outage of the kind that hits the news, but I would bet Moz are referring to degraded service (slow CPU/disk/network) that causes their application to fail (or their error rate to rise).

I'm not very familiar with Moz, but it looks like they have an analytics product, which is probably particularly sensitive to slowdowns.

<comment><USER29> Sounds like they are more at a size that makes sense to have an on site setup vs. a cloud based one.

The cloud market is maturing now and a hybrid private/public model I think is going to become more of the norm, for companies that are large enough that this makes sense.

It is cheaper to run your own hardware when you are big enough, and then use AWS for failover / load spikes / cool tech, etc.

<comment><USER30> The scale where doing your own thing makes financial sense can be much lower than many think.

About two thousand dollars a month gets half a rack with a high-speed, highly- reliable connection in co-location. The lease payments on several extremely high performance, flash storage rack servers would be a couple thousand dollars a month. Throw on some shared nothing redundant virtualization, and you have the equivalent of an army of 4xmegaxlargemongos.

AWS has a place (such as being the redundant offsite backup for that scenario, or for extremely variable service requirements), but endlessly on here we see people disbelieving alternatives make sense.

<comment><USER31> I own 15 OVH servers (32 GB RAM, 2 TB HD, quad-core), and the cost monthly is less than $1000. What can that buy more in Amazon? Maybe a huge instance? But I surely can't run thousands of distributed crawlers and store a distributed search index.

<comment><USER32> You can get some decent beef with the new C3 instances, but you have to pay a good chunk of the year upfront (called a reservation) to get the sane rates. If you do that, the prices are OK.

But you don't come to AWS just for EC2 instances. You're there to combine their portfolio of services in various ways. Because of this, it'd probably be wrong to just compare $1000 on AWS vs what you are paying now.

</comment></comment></comment></comment></comment></comment><comment><USER33> Cloud premise is an ability to fire expensive sysadmins and let cloud babysit your needs. Amazon was the first in the world to create the cloud but it's still a bare-metal cloud today. "Lacking service" ? Of course - they didn't promise any service whatsoever to begin with.

In other words you pay more to use Amazon cloud + you still have to hire and pay sysadmins to babysit the whole pile of Amazon cloud mess.

That's what MSFT is perfectly positioned to solve with Azure + their excellent set of mature tools and services.

MSFT came late to the cloud game (as Ballmer was mostly doing in all other games for the last 10 yrs) - but they are getting this enterprise play right step by step.

</comment><comment><USER4> (I was part of a preferred AWS solution provider shop that demonstrated AWS' enterpriseness.)

Pair (US), ByteMark (UK) and Linode (global) are top choices for budget stuff. ByteMark has setup VMware boxes with freenas storage for us in the past. (For us being sysadmins, budget dedicated is way cheaper than AWS.). Pair and Bytemark support are top notch.

For enterprisey stuff self-service/remote hands/support... OpSource, SoftLayer and RackSpace.

Also the killer cost in a datacenter is power followed closely by labor, so reducing needs by using the simplest / COTS solution can be much cheaper. Servers tend to sprawl, not decrease... So cull viciously.

</comment><comment><USER34> At some point, I'm going to guess that even moderately large AWS configurations would be better off getting a high capacity business FiOS line (or whatever the next tier is), get a couple racks full of home rolled high- end systems and staff 2 or 3 guys full time to run everything. The systems will be faster, probably about as reliable, everything will be cheaper even with extra people on payroll.

I'd love to see some numbers on this though.

<comment><USER35> Where do you just throw a couple racks of computers? Closet? Sounds great, now let's deal with cooling them and the maintenance around that. Then there is power. You think your standard office had all the necessary circuits to drive a couple racks full of servers?

There is so much more to running a server farm than just buying a couple racks of computers and upgrading the FiOS line.

<comment><USER36> Yes, to all of that. Apparently you weren't around 15 years ago when startups pretty much _had_ to do that if they wanted servers and an internet presence. I lived through a startup during that era and that exactly what we did. We had our fancy ISDN line and could server our web site to the world at a blistering 128K baud.

We bought a $300 air conditioner from Home Depot, cut a whole in the server room door with a sawzall and installed the air conditioner. Ok technically we only used the air conditioner in that configuration on the weekends when there was a human in the room and the main building air was off (we couldn't override it) but I like that story.

You're not going to get 5 nines this way, but you would be surprised at how much you can do, even when there exactly zero dedicated sysadmins.

</comment></comment></comment><comment><USER37> While AWS can be a good solution depending on the needs and the costs/earnings ratio (for example there are companies netting tens of millions every year that have relatively limited computational requirements: if they spend 200k/year on EC2 is not the end of the world), I bet that part of its popularity is due to the following interesting feedback: at the end of the day, the sysops/devs picking EC2 are not paying for the bill. At the same time they are not going to be fired if the service is down, as "eveybody is down right now". This creates an environment where EC2 is not just a popular pick, but also praised by most, even when actually for the specific company needs other solutions could be way more cost effective or even provide a way better environment.

<comment><USER4> AWS is best for PoC, bursting capacity, batch jobs and getting around corporate policies.

</comment></comment><comment><USER38> It makes total sense for a small team (whether a startup or in a large organization) to be on AWS rather than going the DIY route by renting VPS out of some datacenter and managing everything from patching to migration to troubleshooting. What most fail to realize is the fact that a complete AWS package comes at a much cheaper cost than all of the above tasks combined. It just requires one to use some smart infrastructure planning in order to keep the bills low by tuning most of the configurable services which AWS provides.

<comment><USER39> AWS doesn't automatically upgrade your OS image or anything like that. If you want to do that you have to do it yourself. And AWS isn't going to troubleshoot shit unless you pay a huge amount for support which is hard to even find the option for that.

However, on Ubuntu server at least there are literally about two commands to run for upgrading the OS.

</comment></comment><comment><USER40> Their m1.small is still a pretty good deal if you're in need of root access to an OS image, and your capacity needs are very small. Anyone aware of anything comparable?

<comment><USER41> DigitalOcean is fabulous. It's very nice hardware and not very expensive. No AWS services, but if all you need is root access to an OS image, I can't recommend it enough.

</comment></comment><comment><USER42> If Moz is a privately held company, why do they publicly release their financial data?

<comment><USER43> This link would probably help answer that: [http://www.feld.com/wp/archives/2012/05/seomoz-tagfee-and- me...](http://www.feld.com/wp/archives/2012/05/seomoz-tagfee-and-me.html)</comment></comment>


Las Vegas Housing Weakness Signals the Slowdown Is Spreading - <AUTHOR> https://www.wsj.com/articles/las-vegas-housing-weakness-signals-the-slowdown-is-spreading-11544702400 <comment><USER2> I'm not an expert on real estate trends, but Las Vegas real estate is not something that should be used as an indicator of anything.

IMO, what's happening in Vegas is that a lot of people who swooped in and bought houses when the bubble burst and trying to become mini-millionaires off of their investments.

Houses that went for $120,000 four years ago are listed for $400,000+ for no other reason than people think they can cash in, and see all the other listings for the same unrealistic prices, and they're trying to "get theirs while the getting is good."

The problem is that they've priced themselves out of the market, since very few people who move to Vegas are tied to the city. They just move elsewhere. So there's lots of houses sitting around with $500,000 price tags on them that aren't being bought because they're simply not worth that much.

I base this largely on three people I know who are currently trying to sell their homes. The person who best exemplifies this is a guy who bought his house for $200,000 in 2014. He's trying to sell it for $459,000 now. Why? No reason. He just thinks that he can get that much for it.

People have to stop using houses as piggy banks.

<comment><USER3> I never understood the LV housing market. There is literally land in all directions as far as the eye can see. If people want to live there, a house can certainly be built.

<comment><USER2> Actually, no. Very little of the land you see from the tourist zone can be developed. LV is hemmed in very tightly by military bases, national parks/monuments/protected areas, and state parks.

Look at an app like FlightRadar24 and see the vast areas that jets have to avoid because so many military installations surround Las Vegas.

Plus, it's the desert. Nobody wants to buy a house without access to water.

<comment><USER4> I've done a lot of traveling in the Vegas area (and, sadly, into Vegas itself). In addition to BLM land (Vegas runs right up to Red Rock Canyon these days) and all the military and other federal/state land,you just can't use a lot of land in a way that's unfamiliar to people in a lot of areas. You look outside Las Vegas in a number of directions and there's literally nothing there because it's undeveloped desert with no water source and Vegas is already using too much water itself.

<comment><USER2> _Vegas is already using too much water itself._

Vegas uses very little water. Almost all of the water is cleaned, then recycled back into Lake Mead, where it originated.

The houses are intentionally close together to reduce the number of miles of water lines, and therefore the number of leaks, which every water system has in abundance.

The water you see in the fountains, etc... is not suitable for drinking or other uses because it is groundwater with crazy high mineral content, and ends up back in the ground where it came from. That's why when a drunken frat boy jumps in the Bellagio fountains, the metrocops use a boat to get him out, rather than just swim for him. You don't want to touch most of the fountain water in Vegas.

The vast majority of the water from the Colorado River gets pumped to Los Angeles. Nevada gets a tiny fraction (about 7%, IIRC).

</comment></comment></comment></comment></comment><comment><USER5> Housing can't be a good investment and affordable

[http://cityobservatory.org/housing-cant-be-a-good- investment...](http://cityobservatory.org/housing-cant-be-a-good-investment- and-affordable/)

<comment><USER6> The US economy revolves around housing. You can't unwind that without tanking everything.

Dollars are created via lending. The largest pool of loans in the US is lending for housing. It's worth about 9 trillion dollars.

When housing prices go down, borrowers walk away from houses and mortgages, and banks with single-digit equity (basically all of them) become insolvent. When banks become insolvent, the economy crashes.

When that happens, the Federal Reserve steps in and prints trillions of dollars to prop up asset prices, and houses (and equities) go back up.

I don't see this changing anytime soon.

<comment><USER7> You are describing what happened once as a generality.

<comment><USER6> The Federal Reserve would no doubt respond in the same way if we find ourselves in a similar situation.

<comment><USER8> Labor will give up on seeking housing long before the Fed stops propping up traditional asset prices.

</comment></comment></comment></comment></comment><comment><USER9> One of the causes of this is the 1031 tax exchanges (allows a person/company to roll over a gain on real estate into a "like-kind" asset, again: real estate). I have a friend that has rolled over a few houses and duplexes into ever more valuable property (he's done well, but he's levered 3-4x). I've often asked him, "when will you cash out?" His answer, "I can't, I don't want to pay the capital gains tax." "Are you worried about a crash?" "No, because even if rents dip 20% I can make the mortgage payments and repairs and wait for the market to recover." I don't know how much this has driven real estate speculation in my area (Denver, CO), but if there is a semi-serious market turn, enough to cross some sort of pain threshold for speculators, there's got to be some forced selling.

<comment><USER10> > "No, because even if rents dip 20% I can make the mortgage payments and > repairs and wait for the market to recover."

20% is the guaranteed max price he would pay on capital gains tax assuming he's held the property for more than a year, and then he'd have the money in the clear. His "even if..." scenario is not the worst case scenario for not selling.

</comment></comment><comment><USER11> I have family out there. Over the summer, they said that a fairly large % of houses were not appraising for selling price, requiring buyers to make up the difference between what the bank would lend and what the selling price was in cash.

To me, that was a pretty clear indicator of where that housing market was heading.

<comment><USER12> Why would anyone pay significantly more than appraising price?

<comment><USER13> Little to no availability of homes. It's happening in the Boston area now. Too many people, not enough space.

</comment></comment></comment><comment><USER14> 1 Billion Dollars for New Raider Stadium, 1 Billion for New Wynn Casion0 and Amazon opening New Shipping Center N. LV in 2019 1000 new jobs, lowest unempolyment in 10 years CA homeowners have lots of equity and high taxes. The same gurus that didn't buy 5 years now know the LV market NOT

</comment><comment><USER6> I'm really wondering what the Fed's game plan is. Raising rates quickly and launching quantitative tightening in a globally weakening economic environment seems crazy.

<comment><USER15> I feel like I haven't seen appreciably high interest rates from the fed since the 90s. It feels like we're in a boom right now like in the dot com era, so I'd like to see rates in the 3-5%+ range so they have room to take the brakes off in a recession.

The real problem to me though is that the fed interest rate no longer reflect reality. Who cares if it's 2% when people are paying 15-30% on their credit cards. If we really wanted to help the middle class, we should tie bank and credit card interest rates to a maximum multiplier, say no greater than 2:1 or something for secured debt, and 4:1 or something for unsecured debt. So a mortgage could only be 5% if the fed rate is 2.5% and a credit card could only be 20% if the fed rate is 5%.

<comment><USER16> This would simply limit lending to riskier borrowers who would then seek financing through other, less desirable means (title loans, or even loan sharks).

Credit Card interest rates can be 1000%, as long as you pay off your statement balance in full before due date, it doesn't matter (cash advances notwithstanding).

</comment></comment></comment><comment><USER17> Recently was reading that housing is high risk investment. How come it is if you can buy the house when economy crashes and in 5-10 years it is priced even higher?

<comment><USER18> That's exactly why it is risky. How do you know you're at the bottom of the crash? How do you predict the next crash? If you think you can, you can make a lot of money, but if you're wrong, you stand to lose lots of money.

<comment><USER19> Seems like a high risk investment if you aren't sitting put for a long time. If you plan on living in the house for a decade or more, the chances of you losing money seem pretty low. But people are less likely to sit put in one job or area these days than in the past, and there are external factors too, like potentially being laid off and needing to sell or move for another job.

So as an actual investment tool in the short term, housing seems like it could be risky, but if you are looking for a place to put down roots, you would almost surely be coming out ahead.

</comment></comment></comment><comment><USER20> Anybody have a sense of how other countries have minimized these problems? I've read about Denmark controlling rents by private landlords, and Sweden helping people finance land in exchange for controlling the sales price. But, really, I'm wondering what things are being tried.

<comment><USER21> As much as people dislike the new tax bill that was passed, it does contain some good moves, namely reducing the amount of mortgage interest that people can deduct from their taxes. Personally, I'd like to go even further and eliminate all government support to Freddie and Fannie. This would remove a lot of government backstops which would cause short term pain, but produce long term gain in the form of a more stable housing market.

</comment></comment><comment><USER22> [http://archive.is/WvYmq](http://archive.is/WvYmq)

</comment><comment><USER23> Who wants to live in Vegas anyways?

<comment><USER24> Alex Honnold the famous free climber spoke highly of it in a recent interview when talking about where he bought his house. Apparently it's a good area for outdoorsy stuff, lots of wild things within reach, cooler at high elevations, while still having a city center.

<comment><USER25> I lived in Las Vegas for two years, and loved it. I don't drink or gamble, and I was born and raised in Brooklyn for context. I loved biking, hiking, climbing, kayaking, and skiing there. It's sunny almost all year long, and this had a great affect on my attitude. The restaurants, malls, and other off- The-Strip amenities are what you are used to in most East coast suburban areas. There is music and art being made there, and flying in and out of McCarran airport is as easy as it gets. I saw the movie 'Free Solo' three weeks ago, and it shows Alex settling in to a house he bought with his girlfriend in Las Vegas. Really good movie BTW.

<comment><USER24> I believe it, most of the USA deserts are comically underrated.

Las Vegas also has Mount Charleston [1] nearby for when the summer gets too hot.

I have a small acreage near Joshua Tree National Park and it's a lot of fun, plenty of outdoorsy activities and low costs so one doesn't have to waste much time on working. My assumption is that there are similar circumstances to be had in Nevada. We also have a mountain escape nearby in Big Bear for when it's hot.

[1] [https://en.wikipedia.org/wiki/Mount_Charleston](https://en.wikipedia.org/wiki/Mount_Charleston) [1.bis] [https://en.wikipedia.org/wiki/Mount_Charleston,_Nevada](https://en.wikipedia.org/wiki/Mount_Charleston,_Nevada)

<comment><USER25> Yes, it's amazing how less you spend, and how much your health and attitude improves when the environment is conducive to being outside on your bike, skates, or shoes! A mountain range far enough away that it doesn't feel like a barrier, but close enough to look to for awe. I am thinking about LV, or back to Indonesia where I lived for over a year in the rice fields of East Java. Now, I am trying to see how I can build a business in a remote area without being a remote worker. I find trying to do what I do back here in NY/NJ doesn't work for me. I like the separation of worlds.

</comment></comment></comment></comment></comment><comment><USER26> There was a story a while back about sales of NYC apartments over 5 million slowing.

I think this is actually due to Trump capping the state income tax deduction. States with high income tax rates are seeing less real estate speculation.

<comment><USER27> Does Nevada have high income tax? Is that why this is happening maybe?

<comment><USER28> Nevada has no income tax. This is actually why this observation is interesting to me. I thought tax changes were causing the slowdown in my area in Northern CA as well, and figured NV would be getting a bit of a boost, but I guess not.. so maybe it is a real slowdown after all.

<comment><USER29> A data point for your consideraton: One month ago, I briefly flirted with moving to Las Vegas for tax reasons. I was shocked at the expense (and shabbiness) of high-end housing there. Construction costs were similarly high --I was quoted $450-$500/sqft, on par with NYC. My realtor explained to me that rich Californians were "stampeding" into Nevada and causing some serious dislocations in real estate. She thought the market was eventually going to crater.</comment></comment></comment></comment>