After starting the year with a burst of sales, Las Vegas’ housing market now faces risky terrain.
Sales could tumble as Southern Nevada shuts down to contain the new coronavirus, real estate pros said. In just a few weeks, the outbreak has shut off the valley’s main economic engine — tourism — with statewide casino closures and waves of canceled or postponed conventions, not to mention sweeping retail lockdowns and consumer hoarding of toilet paper, bottled water and other goods.
There are still plenty of unknowns, including the virus’ ultimate reach and how long businesses will remain closed to help contain the spread. But the public health crisis could leave a huge portion of Las Vegas jobless for a stretch of time, wiping out their ability to buy a house, or too rattled to wade into the market.
All told, Nevada “will likely lose” 5.3 percent of its private-sector jobs — more than 66,650 positions — because of the outbreak, according to the Economic Policy Institute.
Nevada’s possible job loss, as a share of the workforce, is the highest in the nation, the institute projected.
“Everybody’s scared,” said broker Tom Blanchard, president of trade association Las Vegas Realtors.
So far, there are no signs the housing market evaporated as the valley shut down the past few weeks. But the longer people go without a paycheck, the more it can dent the housing market.
“It’s pretty safe to say sales activity will go down for new homes,” said Las Vegas housing tracker Andrew Smith, president of Home Builders Research.
There’s also a chance that, given Southern Nevada’s heavy reliance on tourism, its housing market could take a worse beating than other cities.
“I think Las Vegas will get hit harder,” said Lawrence Yun, chief economist with the National Association of Realtors.
‘Huge negative impact’
Locally this month, newly signed sales contracts and new listings are down 27.5 percent and 7.7 percent, respectively, from year-ago levels. But sales cancellations also fell nearly 30 percent, showing that people under contract to buy aren’t bailing in rising numbers, according to Las Vegas Realtors data.
Still, Blanchard expects prices to drop. Las Vegas’ recently set record median price of $316,000 for a previously owned single-family house will be “short-lived at best,” he said.
Nationally, homebuyer interest has dropped sharply this month, a new report indicates.
The National Association of Realtors said 48 percent of members reported in a survey this week that buyer interest has decreased because of the outbreak. That’s triple the share of members who reported last week that buyer interest had fallen over the virus.
It would be “naive” to not expect sales to slow amid the turmoil, though a pullback in would-be sellers could “moderate” the price drops, said Cheryl Young, a senior economist at listing site Zillow.
Frank Nothaft, chief economist with housing tracker CoreLogic, said mortgage rates are “dirt cheap,” lowering buyers’ borrowing costs. But he also pointed to the “huge negative impact” the outbreak is having on the economy, and how rapidly the virus has changed the country.
“It’s just crazy,” he said.
‘Stronger than before’
Just a few weeks ago, Southern Nevada’s economy was on strong footing after years of clawing back from the depths of the Great Recession.
Locals could point to billions of dollars’ worth of real estate projects underway. Tourism numbers were strong, and home sales, after slumping in 2019, were surging.
On the resale market, buyers picked up about 2,470 single-family homes in February, up almost 26 percent from the same month last year, and around 2,280 in January, up 25 percent, according to Las Vegas Realtors, which reports data from its listing service.
Meanwhile, builders closed about 740 sales in January, up 21 percent from a year earlier, Home Builders Research reported.
Then the coronavirus hit, pushing the nation into a rapid shutdown.
Blanchard hopes Las Vegas recovers faster from this crisis than it did after the housing market crashed more than a decade ago.
Once the hotels reopen and tourists return, he said, “the lights will come back on, and Vegas will be even stronger than before.”