79°F
weather icon Clear

Vegas housing market sits on stable foundation

Are we in another bubble? When is the big crash coming? Should I sell my house right now? These are just a few of the questions that I — and probably every housing professional — hear regularly from friends and acquaintances.

It is no secret that the housing market in Southern Nevada (and the entire country) can be said to be “booming.” For many homeowners, the length of this period of growth is at a point where the feeling of satisfaction kindled by increased equity is giving way to worries about “when will it end?” Those living in Las Vegas during the Great Recession and its aftermath are particularly sensitive to this unease, and rightfully so.

This applies to individual homeowners but also real estate agents, contractors and homebuilders as well. Thankfully, the market sits on a much more stable foundation than it did nearly two decades ago.

While the focus in the media has mainly been on the numbers since the start of the pandemic, the market has been building momentum for quite some time. Southern Nevada finally began climbing out of the depths of the recession a decade ago, and housing market metrics, like new home sales/closings and building permits pulled, have been increasing basically every year since.

On the resale side, the number of closings has fluctuated somewhat from year to year and really began showing a higher level of activity all the way back in 2017.

By now, most are familiar with the headlines describing historically low home inventory along with rapidly increasing prices. As we head into the spring selling season for 2022, let’s look at a few market fundamentals to see how things might shake out for the next few months.

Demand high, supply low

Our friends on the resale side of the market are still sharing stories of homes selling at or above list price within days, sometimes even before being officially listed. Receiving multiple offers over the list price is still a relatively normal occurrence for “good” listings, especially in the higher price ranges.

On the lower side of the resale price spectrum, we are hearing institutional investors are ramping up homebuying activity once again making it even more difficult for buyers looking for a home under roughly $400,000. We ourselves have tracked no less than 3,500 resales going to either investment funds or larger scale “landlords” over the past 14 months.

Demand from buyers moving to the valley from out of state continues to be a factor in the market, as well. Overall, the inventory of resale homes on the market remains dramatically low at around 1½ months’ supply.

On the new home side, local builders are doing all they can to build homes fast enough. The familiar headlines regarding supply chain problems, material cost increases and labor shortages are particularly relevant here. Nearly every local builder has had to self-regulate their sales by restricting the number of lots they release for sale because they must account for the inevitable delays and material cost increases that have become the norm.

Another major factor contributing to rising new home prices is the lack of available land in the valley. It may surprise some to know that with all of that desert around our city, the vast majority is owned and managed by the federal government and is not available to developers. Sen. Cortez Masto has introduced legislation in an attempt to help ease the situation, but the timetable and the ultimate outcome are unknown at this point.

The other major factor that could have a serious effect on home sales in the short- and mid-term is rising mortgage interest rates. Rising rates not only hinder buyers from actively searching for a home, but they also can discourage homeowners from putting their homes on the market.

Many would balk at the thought of giving up the low rate they may have locked in while purchasing or refinancing over the past number of years, only to get into a new mortgage with a rate of 5 percent or higher.

For the next few months, I do not expect much change in the way the market is performing.

The ultra-low supply and sustained demand will mean sales of both new and resale homes will remain strong. They may sag a bit compared with 2021, but there will be no dramatic drop-off.

As for prices, I again do not expect much to change. Resale closing price appreciation may soften slightly, but basic supply and demand again point to more of the same. With new homes, dramatic increases in land and material costs will mean that price appreciation in that sector will continue and builders and buyers will have to continue to adapt.

Andrew Smith is the president of Las Vegas-based Home Builders Research.

Don't miss the big stories. Like us on Facebook.
THE LATEST
How concerned should you be about interest rates?

As the rates begin approaching pre-pandemic levels, they are still going to remain within a record-low margin. Southern Nevada’s 30-year fixed mortgage rate is currently averaging 5.1 percent. The 15-year fixed mortgage rate is averaging 4.2 percent and the five-year adjustable-rate mortgage (ARM) is averaging 3.5 percent. Compared to 15 to 20 years ago, we were seeing rates as high as 8 percent to 10 percent.

New homes showcased for spring buying season

Despite the many challenges we have faced in the last few years and uncertainty from recent global geopolitical events, I don’t anticipate the demand decreasing. In fact, I anticipate the market outlook will look pretty similar to last month’s and will remain stable over the next few months.

Making the most of Las Vegas’ historic luxury boom

We are in the heart of a historic time for our local luxury market. There were more homes sold over $5 million in 2021 than any other year in our history. Forty-six homes sold over $5 million in 2021, marking a nearly 60 percent jump from 2020 alone.

Homes in master-planned communities tend to hold value

The coming year brings many opportunities and challenges for master-planned communities. The housing market is still strong and there is demand for new housing.

What do rising interest rates mean for homebuyers

What will rising interest rates mean to you if you are considering purchasing a home or doing a cash-out refinance loan?

Operation Home! seeks property partners

Through an initiative called Operation HOME! a coalition of agencies is assisting people experiencing homelessness with rental assistance and supportive services. A key component to the success of the program is the need to secure ongoing partnerships with property partners, like homeowners, property managers, investors and developers to access affordable vacant units quickly.

Bitcoin buyers kick off 2022 with a bang

Now, that cryptocurrencies are entering the mainstream in financial portfolios, the floodgates have opened! I’ve had more conversations about digital wallet transfers than ever before, just in the first two months of 2022.

Months’ supply key indicator for market behavior

While you have probably heard a wide range of methods that industry professionals use to foresee a market downturn, the most accurate predictor of market behavior that I have seen in my nearly two decades of selling homes is months’ supply.