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.
In a recent Insights Blog, CoreLogic reported that rent prices have skyrocketed since 2005. Meanwhile, the typical mortgage payment has actually decreased.
“CoreLogic’s national rent index was up 36% in December 2018 compared with December 2005, while the typical mortgage payment was down 4% over that period.”
Why the difference between the costs of renting versus owning?
It makes sense that rents have risen. However, how did mortgage payments decrease? CoreLogic explained:
“It’s mainly because mortgage rates back in December 2005 were significantly higher, averaging 6.3% for a fixed-rate 30-year loan, compared with 4.6% in December 2018.
The national median sale price in December 2005 – $190,000 – was lower than the $220,305 median in December 2018, but because of higher mortgage rates in 2005 the typical monthly mortgage payment was slightly higher back then – $941 – compared with $904 in December 2018.”
Additionally, a recent report by the National Association of Realtors (NAR) showed that purchasing a home requires less of your monthly paycheck.
According to the Economists’ Outlook Blog, NAR’s February 2019 Housing Affordability Indexshowed that the “percentage of income needed” to pay the typical mortgage has decreased the last three months.
November – 17.3%
December – 16.9%
January – 16.2%
February – 15.9%
What does this all mean to the current housing market? We think First American said it best in a post last week:
“The mortgage rate-driven affordability surge has arrived just in time… Rising affordability has already benefited home buyers and, if the lower rate environment persists, we’re in for a great spring home-buying season.”
There has been a great amount written on millennials and their impact on the housing market. However, the headlines often contradict each other. Some claim this generation is becoming the largest share of first-time home buyers, while others claim millennials don’t want to own a home, blaming them for the dip in homeownership rate.
While it is true that millennials have achieved milestones like getting married, having kids, and buying homes later in life than their parents and grandparents did, they are not solely to blame for today’s housing market trends.
Freddie Mac’s Insight Report explored the impact of the Silent and Baby Boomer Generations on the housing market.
If millennials are unable to find a home to buy at a young age like their predecessors, then who is living in those homes?
The answer: Seniors born after 1931 are staying in their homes longer than previous generations, instead choosing to “age in place.”
Freddie Mac found that,
“this trend accounts for about 1.6 million houses held back from the market through 2018, representing about one year’s typical supply of new construction, or more than half of the current shortfall of 2.5 million housing units estimated in December’s Insight.
Older Americans prefer to age in place because they are satisfied with their communities, their homes, and their quality of life.”
According to the National Association of Realtors, inventory of homes for sale is currently at a 3.5-month supply, which means that nationally we are in a seller’s market. A ‘normal’ housing market requires 6-7 months inventory, a level we have not achieved since August 2012.
“The most important fundamental in today’s housing market is the lack of houses for sale. This shortage has been identified as an important barrier to young adults buying their first homes.”
If you are one of the many seniors who desires to retire in the same area you’ve always lived, you’re not alone. Will your current house fit your needs throughout retirement? If you have any questions about demand for your house, let’s get together to discuss the opportunities available today!
According to a new survey from Move.com, the wave of first-time homebuyers hitting the market this summer has resulted in an interesting statistic. Nearly 60% of buyers searching for a home this spring are willing to consider buying a fixer-upper, with 95% believing that the projects needed will increase their new home’s value!
Realtor.com’s Chief Economist, Danielle Hale, pointed to low-inventory at the entry-level price range for the increase in willingness to renovate.
“The combination of rising home prices and limited entry-level homes for sale is prompting many home shoppers to consider homes that need renovating.
Replete with inspiration at their fingertips – like Pinterest, Instagram, and various home renovation TV shows – some home shoppers are comfortable tackling home renovation jobs to find a home that balances their needs with their budget.”
Just over half of all respondents who said they would be willing to buy a home in need of some TLC, would also spend more $20,000 to make the home fit their needs.
The most common ‘expected’ renovation is a kitchen remodel which can run anywhere from $22,000 for a minor remodel to $66,000 for a major remodel.
This isn’t a new trend by any means. According to the Joint Center for Housing Studies at Harvard University, home improvement project spending reached a new high in 2018.
“Americans spent $336.9 billion on remodeling projects, up 7.4% from the $313.6 billion a year earlier.”
Home renovation television shows have given many buyers hope that they could renovate a home they can afford into their dream home!
If you are one of the many Americans considering buying a home this spring, let’s get together to help you find a house with the potential to be your dream home!
With home prices on the rise and buyer demand still strong, some sellers may be tempted to try to sell their homes on their own rather than using the services of a real estate professional.
Real estate agents are trained and experienced in negotiation while, in most cases, the seller is not. Sellers must realize that their ability to negotiate will determine whether or not they get the best deal for themselves and their families.
Here is a list of just some of the people with whom the seller must be prepared to negotiate if they decide to For Sale by Owner (FSBO):
The buyer, who wants the best deal possible
The buyer’s agent, who solely represents the best interests of the buyer
The buyer’s attorney (in some parts of the country)
The home inspection companies, which work for the buyer and will almost always find some problems with the house
The termite company, if there are challenges
The buyer’s lender, if the structure of the mortgage requires the sellers’ participation
The appraiser, if there is a question of value
The title company, if there are challenges with certificates of occupancy (CO) or other permits
The town or municipality, if you need to get the CO permits mentioned above
The buyer’s buyer, in case there are challenges with the house your buyer is selling
The percentage of sellers who have hired real estate agents to sell their homes has increased steadily over the last 20 years. Let’s get together to discuss all that we can do to make the process of selling your house easier for you.
“The majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons — including control of living space, flexibility in future decisions, privacy and security, and living in a nice home.”
The top reason millennials choose to buy is to have control over their living space, at 93%.
Many millennials who rent a home or apartment prior to buying their own homes dream of the day when they will be able to paint the walls whatever color they’d like or renovate an outdated part of their living space.