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Las Vegas’ once-heated rental market cools off

Updated February 11, 2023 - 1:35 pm

When Las Vegas home sales dropped sharply last year and sellers cut their prices, it wasn’t the only side of the housing market to pump the brakes.

Landlords dialed down their rent hikes, investors bought fewer apartment complexes, and apartment vacancies climbed higher.

Tenants also started trying to negotiate rental rates, a tactic that was “pretty much nonexistent for the past couple of years,” said Brian Hartsell, owner of Key Property Management.

Renters are still leasing units in Southern Nevada, landlords are still buying buildings, and developers are still putting up projects. But after a stretch of huge rent growth that raised concerns about tenants’ ability to keep up, Southern Nevada’s rental market has cooled down.

Las Vegas isn’t alone. The U.S. overall ended last year with three consecutive months of sliding rents, listing site Zillow reported.

“We have a little bit more breathing room in the market,” Zillow senior economist Nicole Bachaud told the Review-Journal.

Rent hikes ‘on hold’

The average monthly rent for a Southern Nevada apartment was $1,422 last year, down about 1 percent from 2021, according to data released by the Nevada State Apartment Association. By comparison, rents skyrocketed 22 percent in 2021.

“This slowdown represents one of the most abrupt declines in rent growth of any U.S. market,” Robin Lee, executive director of the association, said in a news release last month.

Mosi Gatling, sales manager in North Las Vegas for mortgage lender LoanDepot, said renters were “consistently” trying to buy homes in 2021 amid record-low borrowing costs and sharp rent increases.

Tenants reported monthly hikes of $200 to $1,000, Gatling recalled, though rent increases now seem to be “on hold.”’

People have been “less apt” to move lately amid the wobbly economy, and units are now sitting empty longer before they’re leased again, said Hartsell, whose firm manages roughly 1,600 rental units in Southern Nevada.

Around early last year, properties in his portfolio were typically rented within 14 days of being listed, he said. Now, it takes about 30 to 45 days.

People might think tenants’ issues have been solved to some degree lately, said Wally Swenson, vice president of corporate affairs at affordable housing developer Nevada HAND.

But Nevada has long grappled with a shortage of affordable units for low-income residents, and Swenson noted plenty of people are still calling his group for an available home.

Its portfolio of 4,700-plus units in Southern Nevada has only 26 vacancies. Over the past 30 days, more than 3,500 prospective applicants expressed interest in renting a place from Nevada HAND, he said last week.

Debbie Shaw, a 60-year-old graveyard shift worker for UPS, moved to a rental home in Henderson a little over a year ago. She lives with housemates and pays $200 a week, up from $100 a week at their previous house where the overall rent was also cheaper.

She has been looking for a place of her own but, given her budget, can only afford to live in dicey areas.

“It’s slim pickings,” she said. “I’ve seen some pretty scary parts of Las Vegas.”

‘Values just exploded’

In 2021, Las Vegas’ housing market accelerated to its most frenzied pace in years. Fueled by record-low mortgage rates, median sales prices hit new all-time highs practically every month, houses sold rapidly, buyers flooded properties with offers, and builders put buyers on waiting lists.

The rental market also accelerated as tenants, including an influx of new residents to Las Vegas, looked for more space amid widespread work-from-home arrangements during the pandemic.

Overall, it became increasingly expensive and difficult — for buyers and renters — to find a place in Southern Nevada.

At a kickoff event for a state-run $500 million affordable housing program last spring, Rep. Steven Horsford, D-Nev., said affordable housing was a “real crisis right now.”

He pointed to Las Vegas’ “astounding” rent hikes, saying too many people were left “wondering what will happen if they can no longer afford these rapidly escalating rents.”

As the apartment market heated up, landlords also snapped up more buildings at fast-rising prices.

Investors purchased 199 apartment complexes in Southern Nevada in 2021, up more than double from the year before, according to the state apartment association, which pulled data from real estate tracker CoStar.

The average sales price was $219,958 per unit in 2021, up almost 55 percent from the prior year.

Tenant demand was high, interest rates were low and, according to Las Vegas apartment developer Doug Eisner, investors were piling into lower-density, suburban-heavy markets like Southern Nevada.

“Values just exploded,” said Eisner, co-founder of The Calida Group.

Cooling demand

A sharp jump in mortgage rates last year doused Las Vegas’ housing market with cold water. Sales totals dropped sharply, prices fell and available inventory soared.

After a stretch of big rent hikes — and as higher prices for gas, groceries and other goods squeezed people’s finances — the rental market also slowed.

The state apartment association said that “record-setting inflation will continue to cool apartment demand” and noted vacancies reached their highest level in almost a decade.

Investment sales also tumbled, as landlords purchased 144 apartment complexes last year, down almost 28 percent from 2021.

In another sign of the easing rental squeeze, Shaw, the UPS worker, said she has been told she is now “hundreds down” on a waiting list for affordable housing.

“Initially I was in the thousands,” she said.

Contact Eli Segall at esegall@reviewjournal.com or 702-383-0342. Follow @eli_segall on Twitter.

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