What goes down must come up.
After suffering through one of the country’s worst housing downturns, Las Vegas and Nevada are bouncing back big time, easily beating the pace of national recovery, according to two studies released Tuesday.
Still, prices here remain well below peak levels, cash buyers continue to reign, and real estate observers increasingly ask how much longer Southern Nevada’s double-digit appreciation rate can last.
But for now, breakneck price gains rule, and that has broader economic implications, local economists say.
The Greater Las Vegas Association of Realtors reported a median existing single-family home price of $167,000 in April, up 30.6 percent compared with April 2012. The median for condos and townhomes surged to $85,000, up 41.9 percent.
What is more, real estate data provider CoreLogic said Nevada led the nation in appreciation in March, with an annual price gain of 22.2 percent. That is more than double the 10.5 percent national increase. Following Nevada were California, 17.2 percent; Arizona, 16.8 percent; Idaho, 14.5 percent; and Oregon, 14.3 percent.
Higher prices filter through the economy in important ways, said Steve Brown, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.
“It starts re-creating the incentive to build houses, and it’s also indicative of the fact that the Las Vegas economy is improving, and people are willing to spend money,” Brown said. “Also, every new household that’s formed means purchases at furniture and appliance stores. And if people are buying existing homes, then there’s a lot of minor remodeling that’s taking place. I think it’s a very good stimulus to the economy.”
Rising home prices can help sustain the housing rebound. More buyers may jump in before prices rise further. Homeowners are more likely to put their houses on the market if they expect a good price.
Higher home values boost Americans’ overall net worth too. That can encourage consumers to spend more, driving more economic growth. Consumer spending accounts for roughly 70 percent of economic activity.
Brown said the newest figures also may support estimates of population growth from the Census Bureau, which said in March that Clark County added 19,000 new residents in 2012, the county’s biggest increase since 2008.
“If the Census Bureau is right, part of what we’re seeing happen here in the housing market is basically the creeping up of the population beginning to put pressure on the housing market,” he said.
Though the degree of appreciation was different, rising prices in Nevada and the nation had similar underpinnings: steady job growth, low interest rates and more buyers chasing a limited supply of homes for sale.
In Las Vegas, the Realtors’ association showed 3,161 units listed without offers in April, a drop of 24.1 percent year-over-year and just a month’s supply based on the market’s 3,000 or so monthly sales. Nationally, the number of homes on the market slumped 17 percent, for 4.7 months of supply. A healthy market has six months of inventory.
The latest news isn’t worry-free, though.
For starters, cash buyers accounted for 59.3 percent of all local existing home sales in April, up from 57.5 percent in March and near February’s record of 59.5 percent. Cash buyers, who are often investors, crowd out mortgage-backed buyers, who typically buy a home to live in.
Plus, the local market has 14 to 20 months of shadow inventory, or homes that may still come on the market because they’re vacant, in foreclosure or otherwise distressed, Brown said.
“Everybody’s waiting for that shoe to drop,” he said.
Finally, prices are nowhere near their 2006 highs. Las Vegas is barely more than halfway back to its $315,000 peak, according to the Realtors’ association. Nevada is still 49.2 percent below its record price, CoreLogic said.
But that just means more room for price growth.
Dave Tina, president of the Realtors’ association, acknowledged a rising tide of concern over the sustainability of this spring’s price increases and whether the city is watching another housing bubble inflate. He said he believes today’s market is not a bubble, and prices today are still lower than what they would have been had the pre-recession bubble never happened. He also said he doesn’t foresee legions of homeowners ditching the properties they buy today. People who pay cash don’t walk away, he said, and moderate improvements in the job market and overall economy should help lift the housing market more.
Brown called current appreciation rates “fairly sustainable” and said prices could grow significantly for at least the next 18 months. Homebuilders are out of developed lots for new construction, and it could be at least a year before they have more land for subdivisions. The median existing-home price here is still below construction cost. Values would need to jump another 20 percent to 25 percent for building to make sense, he said. A shortage of new-home inventory should help keep a lid on housing supplies, and put upward pressure on prices.
Nor do banks have the staff to dump thousands of foreclosures on the market at once. And with prices rising, there’s even less incentive for banks to shed distressed properties en masse, Brown said.
Finally, it could be two more years before the Federal Reserve raises the short-term interest rates that undergird borrowing costs.
Brown estimated the market could gain another 35 percent in its median home value over the next year and a half.
The Associated Press contributed to this report.