Could tariffs dampen Las Vegas’ burgeoning luxury real estate market?

Uncertainty is hitting the Las Vegas Valley’s burgeoning luxury real estate market just as the sector seems poised for a takeoff, according to a recent market report from one of the area’s top brokers.

Ivan Sher of IS Luxury said within the $1 million to $3 million price range, the luxury market saw a notable increase in inventory in June of this year, up 2 percent from May and 41 percent from the same time last year. There was also a 16 percent drop in new inventory within that price range however sales have remained relatively stable from this time last year (down only 2 percent).

The Las Vegas Valley’s luxury real estate market has boomed since before the start of the pandemic as the average price of a luxury home has more than doubled since 2019, according to a Concierge Auctions study. The valley has also seen a 107 percent jump in the average price of an “ultra luxury” home from 2019 through 2024. Concierge defines “ultra luxury” home sales as the 10 most expensive in each market.

Sher said in the first quarter of 2024 his company made $82.7 million on 12 homes, a number that jumped up to $120 million in the first quarter of this year on 18 residences. However headwinds could be in store for the market, said Sher, acknowledging that the uncertainty around tariffs could potentially dampen the sector moving forward.

Market uncertainty

The Trump administration’s tariffs have not only created market uncertainty, they have also forced Americans to rethink large purchases while the homebuilding sector is already seeing increased costs due to materials imported for construction from other countries including China, Canada and Mexico. Sher said they have already seen tariffs come into the luxury market’s data.

“We had a record-breaking first quarter, and while the uncertainty around tariffs has introduced some short-term hesitation among buyers and investors in Q2, I see that as temporary,” said Sher. “When there’s ambiguity around how trade policies will impact business operations or investment portfolios, a pause is natural. The thinking is that within Q3, momentum will start to pick back up. As policies stabilize both domestically and abroad, Nevada’s unique position as a luxury destination could benefit significantly from that reset.”

Regarding the $3 million to $5 million market, the total inventory rose 2 percent from May to the end of June, which is up 22 percent from a year ago. New listings are up 52 percent from a year ago in June and while new inventory was up 7 percent from May to June, sales slowed 20 percent.

Matt Hennessy, a local mortgage adviser, said tariffs have brought a new level of uncertainty to the American housing market, and luxury sales are not immune to the overall trends. He said the overall housing market is still dealing with elevated rates, as Freddie Mac has the 30-year fixed rate mortgage at 6.7 percent, a rate that has not gone below 6 percent since September of 2022.

“In regard to the impact tariffs have had on mortgage rates, we have been on a roller coaster of uncertainty from one day to the next,” he said. “Depending on where we are at in the news cycle, when there is an announcement imposing tariffs or pausing the implementation of tariffs, the reaction in the stock market and more importantly the bond market is almost always immediate.

“On one hand the result of imposing tariffs creates an outcome where the higher costs can be passed on to consumers, leading to inflation. If inflation was to reverse course and start climbing, mortgage rates would follow.”

Contact Patrick Blennerhassett at pblennerhassett@reviewjournal.com.