The long-term sellers’ market continues this month in spite of a significant slowing in the pace of home sales. In March, the Greater Las Vegas Association of REALTORS® totals show the number of homes sold continues to trail the previous year, but prices remain stable.
March 2019 sales dropped over 17% from the year before, and this is a trend we expect to continue, although not always to this degree. Although, for the first quarter, sales are down a little over 15%, the Las Vegas real estate market is still considered a sellers’ market because inventory remains tight, with just a 2.89 month (87 days) supply of homes available. A 120-140 day supply of homes in Las Vegas is considered historically “normal”.
Prices have held steady since September 2018. The Median Price for March was $302,000. What we are finding is an affordability limit with ever fewer homes available in the price range below $275,000.
We certainly can’t blame interest rates, as today’s 30-year fixed rated conforming loan quoted by Wells Fargo Bank is 4.375% with APR of 4.443%. With the Federal Reserve disclosing their increased reluctance to raise rates, we do not anticipate mortgage rates rising much this year.
Projected sales for April also lag the year previous. It will be interesting to see what happens with prices.
Las Vegas real estate prices remain stable in February as the number of homes sold continues to trail 2018. The median price remained in the same area as it has been since August 2018 at $298,000, but it is up over 7% from February 2018. The number of Las Vegas homes sold in the first two months of 2018 is down over 14% from last year because we seem to have hit an affordability limit!
Interest rates remain in the sub-5% range, so it is price that is limiting affordability. Sellers tend to overprice the homes at the start, but we are seeing a sizable number of price reductions each week. This year, just under half the homes sold have been on the market for 30 days or less. Last year at this time, almost two-thirds (63%) of the homes sold within the first 30 days. Available inventory of homes with no offers rests at almost a 4-month supply, almost double the supply of homes we had last year.
New home sales, according to SalesTraq (a Las Vegas research company), declined 12% in January compared to a year earlier. The median price of new homes rose 6% compared to January 2018.
The trend of declining sales seems to be continuing into March as projected closings of resale homes seem to be well below March 2018. The economy continues strong but ever increasing prices must end some time, and that time seems to be 2019. Each month, we will likely see ever smaller price increases year over year as Las Vegas drops from the ranks of the hottest housing markets nationwide.
January 2019 continued the Las Vegas home sales trend of fewer sales at slightly higher prices. The $303,000 median sales price was the highest here since June 2007, which was just as prices started spiraling downward for three and a half years. However, adjusted for inflation, we are nowhere near that peak number.
So, how is the Las Vegas real estate market? Is Las Vegas real estate in a bubble? Sales, although down 20% from the year before, remain strong. Low mortgage rates are helping people decide that they should buy now rather than hope prices and interest rates will go down. Most likely, neither will. So, are we in a bubble? No. Our local economy continues to grow, bringing new residents to fill new jobs. And we still have 3 billion-dollar-plus construction projects under way.
Our inventory rests at about a four month supply, which, for Las Vegas, is about normal. Gone are the days sellers would have three or four offers within a day of listing their home for sale. In fact, for the past two months, more homes listed for sale on the market have reduced their listing price than new homes have come on the market. For example, last week 879 homes on the market reduced the asking price, while only 735 new listings entered the market.
The much feared rise in interest rates appears to have moderated. It seems the Federal Reserve is less inclined to raise interest rates as much in 2019 as it did in 2018. Most lenders are offering 30-year FHA loans well under 5% these days. We can only hope that continues.
So, what is the Las Vegas real estate forecast for 2019? In the opinion of this REALTOR® Broker, I see the number of sales decreasing 5-10% compared to 2018 while prices inch upward because of the growth of the economy.
Sticker Shock! Mortgage Rates! Lack of Inventory! These three issues contributed to a slowing in the number of sales of existing single family homes in Las Vegas in 2018.
Sticker shock comes with the ever increasing prices sellers are asking for their homes. That issue is in the process of being resolved as inventory grows, allowing buyers more options. We also saw a flattening of the Median Sales Price in 2018. It rose only a little over 1% from May through December. Many buyers are pausing to see if prices will decline. With an increasing population and solid employment in the valley, that is not likely, but neither can prices continue to increase at such a rate. The Median Price rose 26.8% from $235,000 in December 2016 to $298,000 in December 2018. That is not a sustainable rate of growth.
As for mortgage rates, they rose about one-half percent in 2018 as the Federal Reserve increased its rates three times. For a person with a $250,000 loan, that adds about $75 per month to their mortgage payment. Thus, houses become less affordable. It is predicted that the Federal Reserve will increase rates through 2019, but that depends on the overall economy. Mortgage rates certainly will NOT decline, so they will continue to be a factor slowing sales. For us older folks, it is difficult to imageine buyers thinking 4.5% interest is HIGH, when we remember rates of 7% being celebrated as reasonable in the early 2000’s and rates in double digits in the late 1970’s and 1980’s.
Finally, inventory has been tight. Through August of 2018, inventory hovered under a two-month supply. That caused buyers to match or exceed list price in their offers on many occasions. Those days are over! Since September, sales have slowed considerably. In fact December 2018 sales were 19% below December of 2017. Buyers have hit the pause button. Inventory of homes not under contract currently available is right around 7,000 today, so we now have over a three month supply of homes. Another good sign for buyers is price decreases of existing unsold listings almost equal the number of new listings. The market is correcting.
New home sales continue to outpace the year before. According to an article written by Eli Segall in the Las Vegas Review Journal on January 25, 2019, 2018 NEW home sales, including single family homes, townhomes and condominius, totaled 10,669 with a median price of $396,994. Although 10,000 new home sales is very good when compared to the recent past, it is far short of 2005 when 10,000 new homes sold in the 3rd Quarter! The median price for new homes did rise 7% from 2017. We expect that to stay level as sales of more affordable product such as condominiums increase in 2019.
So what lies ahead for Las Vegas home sales in 2019? REALTOR.com projects Las Vegas prices will rise over 8% in 2019, and volume will inch up over 2018 (a year in which sales went DOWN 7.4% from 2017). That may be true if you include new homes, condos and townhouses, but I see a much smaller increase in the median price for resale homes, as interest rates and affordability have started to curb buying power in a valley not known as a high wage center. I predict fewer homes sold in 2019 with a median price that inches up at a much slower pace.
During the housing market crash, Gen X homeowners lost more wealth than other generations. However, things are changing now! A strong economy, increasing home prices, and the recovery of the housing market are helping this generation to regain their lost wealth.
“Their fortunes have rebounded more than those of other generations during the post-recession economic expansion and as home and stock prices have risen. Since 2010, the median net worth of Gen X households has risen 115%. In fact, in 2016, the most recent year with available data, the net worth of a typical Gen X household had surpassed what it was in 2007 ($84,200 vs. $63,400)”.
The same report also mentioned,
“15% of Gen X’s homeowners were ‘underwater’ on their homes in 2010 (meaning they owed more than they owned). By 2016 only 3% were underwater.”
As a result of homes regaining market value and their increasing net worth, many Gen Xers are presented with the opportunity of selling their current home in order to move up to the house they always dreamed of!
A lot is happening in the world, and it’s having a direct impact on the housing market. The reality is this: some of it is positive and some of it may be negative. Some we just don’t know yet.
The following three areas of the housing market are critical to understand: interest rates, building materials, and the outlook for an economic slowdown.
1. Interest Rates
One of the most important things to consider when buying a home is the interest rate you will be charged to borrow the money. In our recent post we posed the question, “Are Low Interest Rates Here To Stay?” The latest information from Freddie Mac makes it appear they are. We are currently at a 21-month low in interest rates.
2. Building Materials
Talk of tariffs could also affect the housing market. According to a recent article, the National Association of Home Builders reports that as much as $10 billion in goods imported from China are used in homebuilding. Depending on the outcome of the tariff and trade discussions between several countries, there could be as much as a 25% boost in the cost of building materials.
3. Economic Slowdown
In a prior blog post on this topic, we began the year with many economic leaders thinking we could expect a recession in late 2019 or early 2020. As spring approached, we reported that economists had started to push that projection past 2020. Now, three leading surveys indicate that it may begin in the next eighteen months.
We are in a strong housing market. Wages are increasing, home prices are appreciating, and mortgage rates are the lowest they have been in 21 months. Whether you are thinking of buying or selling, it’s a great time to be in the market.
In a real estate market where home prices are rising, many have begun to reexamine the idea of buying a home, choosing instead, to rent for a while. But often, there is a dilemma: should you keep paying rent, knowing that rent is rising too, or should you lock in your housing cost and buy a home?
Let’s look at both scenarios and analyze the pros and cons of each:
With the housing market crash in 2008, many homeowners lost their homes and became renters. According to Iproperty Management, “the number of households renting their home … rose from 31.2% of households in 2006 to 36.6% in 2016”.
Some choose to rent because it is more convenient for their lifestyle. Those whose job requires frequent moves need the flexibility that a 6-12 month lease agreement gives them so they can move to their next assignment!
Many renters believe that renting is cheaper because they do not have to pay for maintenance and repairs. (Not true! Landlords work those expenses into your rent and other fees). Another reason many rent is that they feel like they cannot afford the down payment and closing costs required to buy a house, due to their inability to save much after paying their monthly expenses.
That can be true! Nearly 1 in 4 renters spend at least half their household income on rent. In 2017 the “severely” burdened renters’ rate was 24.7% with 24.9% reporting they were “moderately” burdened.
Renting also brings some financial disadvantages. Homeowners can take advantage of tax deductions that let them claim their property taxes and mortgage interest. Additionally, there is a big risk that your rent will go up every time you renew your lease, as we know the median asking rent has been increased steadily since 1988!One of the major challenges with renting is that you don’t have a space to call your own. When you rent, you are paying your landlord’s mortgage, and therefore they are the beneficiaries of the equity gained from paying that mortgage.
Now let’s explore the other side: Homeownership
In the past, we have mentioned the many financial and non-financial benefits of becoming a homeowner. So, let’s just focus on the one big difference between renting and owning, the ability to lock in your housing cost!
Assuming you will have a fixed-rate mortgage, your costs are predictable! You will know exactly what your mortgage payment will be for the next 15-30 years. The homeownership rate in 2018 was 64.4%, and has been on the rise. Those households locked in their housing cost rather than wait for their landlord to raise their rent again!
What are the disadvantages of owning a home? Well, it is a long-term financial commitment! It is not easy to pack quickly and move. You will need time and good planning to do it in a short amount of time.
Unless you have a homeowner’s association (HOA) (and you pay an HOA fee) or a home warranty, you will be responsible for maintenance and taking care of the home. This may range anywhere from regular landscaping to major repairs.
Like everything in life, there are pros and cons. What is better for you depends on your situation! If you are interested in becoming a homeowner and want to discuss the pros and cons, let’s get together to help you review your current situation and answer any questions you may have!
If you are a “baby boomer” (born between 1946 and 1964), you may be thinking about selling your current home. Your children may have finally moved out. Your large, four-bedroom house with three bathrooms no longer fits the bill. Taxes are too high. Utilities are too expensive. Cleaning and repair are too difficult. You may be ready to move into a home that better fits your current lifestyle. Many fellow boomers have already made the move you may be considering.
The National Association of Realtors recently released their 2019 Home Buyer and Seller Generational Report. The report revealed many interesting tidbits about both categories of baby boomers: younger boomers (ages 54 to 63) and older boomers (64 to72). Here are a few of the more interesting topics.
Percentage of Buyers who Looked Online First
All Buyers: 44%
Younger Boomers: 46%
Older Boomers: 44%
Where Boomers Found the Home They Purchased
The two major ways buyers found the home they purchased:
All buyers: 50% on the internet, 28% through a real estate agent
Younger Boomers: 46% on the internet, 33% through a real estate agent
Older Boomers: 36% on the internet, 35% through a real estate agent
Distance Seller Moved
The distance between the home they purchased and the home they recently sold was much greater for boomers than the average seller.
All sellers: 20 miles
Younger Boomers: 27 miles
Older Boomers: 50 miles
Tenure in Previous Home of Seller
The percentage of older boomers who lived in their previous home for more than 20 years was almost twice the amount of the average seller.
All sellers: 16%
Younger Boomers: 20%
Older Boomers: 31%
Primary Reason to Sell their Previous Home
Want to move closer to friends or family
Home too large
View of Homeownership as a Financial Investment
83% of Younger Boomers see homeownership as a good investment
82% of Older Boomers see homeownership as a good investment
If you are a boomer and thinking about selling, now might be the time to contact an agent to help determine your options.