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.