Classic supply and demand continues to rule the Las Vegas home market. Inventory is low, demand is high so home prices continue to creep higher. In May, the Greater Las Vegas Association of REALTORS® MLS shows 3142 homes sold, down 7% from a year earlier, but the median price continues its rise, now $294,000. That is the highest median price since August 2007. Just six years ago, in May 2012, the median price of the 3330 homes sold was $129,000, so prices have risen 129% in six years. Back then, 48% of the homes were sold to cash buyers! Last month, only 19% of homes were purchased with cash.
In fact, looking back six years gives a great view of how far the market has come. In May 2012, 65% of the sales were either short sales or repos. This May, only 3% of sales were short sales or repos. Back then, inventory was huge, so a buyer had several homes to see with new listings hitting the market daily. Today, homeowners are staying in their homes while new residents contnue to move in from California, Texas, Florida and other areas. Therefore, resale homes are in short supply and demand for new construction is increasing.
In April 2018, new home sales rose 22% in April over last year with a median price of just less than $375,000. Builders sold 9400 new homes in 2017 and have closed over 3000 homes through April of this year. Although these seem to be giddy highs, they pale when compared to the boom years like 2005, when over 39,000 new homes were sold.
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. The monthly cost of your PMI depends on the home’s value, the amount of your down payment, and your credit score.
Below is a table showing the difference in monthly mortgage payment for a $250,000 home with a 3% down payment and PMI vs. a 20% down payment without PMI:
The first thing you see when looking at the table above is no doubt the added $320 a month that you would be spending on your monthly mortgage cost. The second thing that should stand out is that a 20% down payment is $50,000!
If you are buying your first home, $50,000 is a large sum of money that takes discipline and sacrifice to save. Many first-time buyers save for 5-10 years before buying their homes.
To save $50,000 in 10 years, you would need to save about $420 a month. On the other hand, if you save that same $420 a month, you could afford a 3% down payment in less than a year and a half.
In a recent article by My Mortgage Insider, they explain what could happen in the market while you are waiting to save for a higher down payment:
“The time it takes to save a (larger) down payment could mean higher home prices and tougher qualifying down the road. For many buyers, it could prove much cheaper and quicker to opt for the 3% down mortgage immediately.”
The article went on to say,
“Since renters typically devote a higher percentage of their income to housing than homeowners, providing flexible down payment options can help renters with solid earnings purchase a home – and gain a fixed-rate mortgage with principal and interest payments that will not increase over the life of the loan.”
If the prospect of having to pay PMI is holding you back from buying a home today, Freddie Mac has this advice,
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
Based on results of the most recent Home Price Expectation Survey, a homeowner who purchased a $250,000 home in January would gain $50,000 in equity over the next five years based on home price appreciation alone (shown below).
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.
Home values have risen dramatically over the last twelve months. In CoreLogic’s most recent Home Price Index Report, they revealed that national home prices have increased by 6.2% year-over-year.
CoreLogicbroke down appreciation even further into four price ranges, giving us a more detailed view than if we had simply looked at the year-over-year increases in national median home price.
The chart below shows the four price ranges from the report, as well as each one’s year-over-year growth from July 2017 to July 2018 (the latest data available).
It is important to pay attention to how prices are changing in your local market. The location of your home is not the only factor which determines how much your home has appreciated over the course of the last year.
Lower-priced homes have appreciated at greater rates than homes at the upper ends of the spectrum due to demand from first-time home buyers and baby boomers looking to downsize.
If you are planning to list your home for sale in today’s market, let’s get together to go over exactly what’s going on in your area and your price range.
The interest rate you pay on your home mortgage has a direct impact on your monthly payment; the higher the rate, the greater the payment will be. That is why it is important to know where rates are headed when deciding to start your home search.