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.
The housing market has been anything but normal for the last eleven years. In a normal real estate market, home prices appreciate 3.7% annually. Below, however, are the price swings since 2007 according to the latest Home Price Expectation Survey:
After the bubble burst in June 2007, values depreciated 6.1% annually until February 2012. From March 2012 to today, the market has been recovering with values appreciating 6.2% annually.
These wild swings in values were caused by abnormal ratios between the available supply of inventory and buyer demand in the market. In a normal market, there would be a 6-month supply of housing inventory.
When the market hit its peak in 2007, homeowners and builders were trying to take advantage of a market that was fueled by an “irrational exuberance.”
Inventory levels grew to 7+ months. With that many homes available for sale, there weren’t enough buyers to satisfy the number of homeowners/builders trying to sell, so prices began to fall.
Then, foreclosures came to market. We eventually hit 11 months inventory which caused prices to crash until early 2012. By that time, inventory levels had fallen to 6.2 months and the market began its recovery.
Over the last five years, inventory levels have remained well below the 6-month supply needed for prices to continue to level off. As a result, home prices have increased over that time at percentages well above the appreciation levels seen in a more normal market.
That was the past. What about the future?
We currently have about 4.5-months inventory. This means prices should continue to appreciate at above-normal levels which most experts believe will happen for the next year. However, two things have just occurred that are pointing to the fact that we may be returning to a more normal market.
1. Listing Supply is Increasing
Both existing and new construction inventory is on the rise. The latest Existing Home Sales Report from the National Association of Realtors revealed that inventory has increased over the last two months after thirty-seven consecutive months of declining inventory. At the same time, building permits are also increasing which means more new construction is about to come to market.
2. Buyer Demand is Softening
Ivy Zelman, who is widely respected as an industry expert, reported in her latest ‘Z’ Report:
“While we continue to expect a resumption of growth in resale transactions on the back of easing inventory in 2019 and 2020, our real-time view into the market through our Real Estate Broker Survey does suggest that buyers have grown more discerning of late and a level of “pause” has taken hold in many large housing markets.
Indicative of this, our broker contacts rated buyer demand at 69 on a 0- 100 scale, still above average but down from 74 last year and representing the largest year-over-year decline in the two-year history of our survey.”
With supply increasing and demand waning, we may soon be back to a more normal real estate market. We will no longer be in a buyers’ market (like 2007-February 2012) or a sellers’ market (like March 2012- Today).
Prices won’t appreciate at the levels we’ve seen recently, nor will they depreciate. It will be a balanced market where prices remain steady, where buyers will be better able to afford a home, and where sellers will more easily be able to move-up or move-down to a home that better suits their current lifestyles.
Returning to a normal market is a good thing. However, after the zaniness of the last eleven years, it might feel strange. If you are going 85 miles per hour on a road with a 60 MPH speed limit and you see a police car ahead, you’re going to slow down quickly. But, after going 85 MPH, 60 MPH will feel like you’re crawling. It is the normal speed limit, yet, it will feel strange.
That’s what is about to happen in real estate. The housing market is not falling apart. We are just returning to a more normal market which, in the long run, will be much healthier for you whether you are a buyer or a seller.
Real estate sales in July 2018 were not quite as hot as the weather but remained extremely strong. Las Vegas, Henderson and North Las Vegas real estate agents sold 3077 resale single family homes, up 3% from July 2017 but down 3% from June of this year. With slowly rising interest rates and prices, these are strong numbers.
The median price has hovered in the $289,00-293,000 range for the fourth straight month. Are prices leveling off, as the $290,000 median price for July might indicate, or do we look back the past three years and see that prices tend to rise early in a year, then moderate to the end of that year? That has been the case in 2015, 2016, 2017 and, now, 2018, so it is not yet time to say the market has peaked.
Inventory remains very tight with just a 48 day supply of homes without offers. The industry norm is 180 days for a balanced market, so we are way out of balance toward the sellers’ side. The last month Las Vegas had a supply of homes over two months was February 2017, so buyers must be extremely motivated and ready to act! Gone are the days of seeing a home, mulling it over for a few days and asking the sellers for a contribution to the buyer’s closing costs.
Buyers must be prepared with a strong mortgage approval letter and a willingness to get out and see homes as soon as they are on the market. Cash buyers represent only 18% of the transactions last month, so a loan letter may now be the deciding factor when a seller looks at multiple offers. Of the 1242 homes homes for sale available at or below the median price of $290,000 August 8, 2018 in Las Vegas, Henderson and North Las Vegas, 346 have been on the market 7 days or fewer. Another 135 have been on the market over 90 days, so you know those homes are overpriced!
Looking for a short sale or foreclosure to purchase at a bargain? Might want to check another area! Only 46 foreclosure properties are currently available and 66 short sales. Thirty-six of the short sales have been on the market over 30 days, as have 14 of the 46 foreclosed properties. In a hot market, overpriced listings still do not sell.
Overall, the market might be taking a breather or this could possibly be the start of the end of the sellers’ market. Las Vegas remains a working wage town. We lack the high-tech salaries that have destroyed affordability in the San Francisco Bay Area, and the building of new homes continues apace. Again, Las Vegas and Henderson alone have 4 of the top 20 selling master planned communities in the nation, and new homes add supply to a tight market. Wages are inching up and job growth continues to be good, but this is not a town of vast wealth and incomes. Propelled by irresponsible lender practices and a raging speculative fever, the median price for resale homes edged over $300,000 briefly in 2007. Thankfully, the market is slowing as we approach the $300,000 mark again. Perhaps it is time for a pause.
The chart above indicates the number of resale single family homes DECLINED 10% from June 2017, however prices rose 13% over the previous June. But that is a small part of the story. Inventory of all homes in the valley is a VERY tight 1.4 months (traditionally, a 6 month supply is considered normal). Worse yet, if you are a buyer looking for a home below the MEDIAN PRICE of $293,000, you have only a 20-day supply. And worst of all, those looking for $250,000 and below, you have only a 15-day supply! That means you must act quickly Multiple offers are the norm in this price range and GOOD HOUSES are sold in a matter of 3-4 days!
Why is the Las Vegas housing market so hot? Compared to the median price of $850,000 a San Francisco Bay Area home, our $293,000 median for resale homes is a steal. Our $370,000 median price for NEW homes is a bargain as well. Yet, when you PAY over a million dollars for a home here, you can end up with a newer, OR NEW, highly upgraded home with a pool, not a clapped out 1960’s era home with easy acces to a one hour commute to work!
Our inventory is low because we who live here love the city and valley and do not want to move. The lack of a personal income tax and low property taxes make this an affordable city with great roadways, low congestion and a fabulous mix of retail, culture (yes, don’t snicker), sports, outdoor life, bicycle and hiking trails and restaurants. My wife and I just drove 3 hours to Brian Head, Utah, to spend a weekend hiking and ATV’ing though the mountains, complaining only about the chilly evening temperatures. Easy drive, wonderful weekend, easy drive up and an easy drive home. No bridge tolls, no 10-20 mph bumper to bumper traffic!
A recent article written by Eli Segall (July 10, 2019) in our Las Vegas Review Journal pointed out that four of the master planned communities in the Las Vegas Valley rank in the top twenty communities nationwide in the number of NEW HOMES sold! Those are Summerlin and Skye Pointe in Las Vegas, Inspirada and Cadence in Henderson. Each of these communities is reporting huge double digit gains over the previous year. I highly recommend you get a copy of that newspaper and give it a read.
Summit Properties real estate agents are busy! In fact, our listings are going under contract so0 quickly, we frequently have only one current listing available! Check us out at www.SummitPropertiesVegas.com . Our agents are also managing to help their buyers win in multiple offer situations, often without being the highest price offered. We are also PROTECTING our bvuyers from exposing themselves to the dangers of “overbuying”, such as committing to pay an obscene amount over the appraised price. We use the appraisal to protect our buyers. We lived through 2006 and 2007!
So if you want to escape California and Las Vegas is a possibility, contact us through our website. We are here to assist and support you in your move to Henderson, North Las Vegas or Las Vegas.