Over the past few months, some national reports have suggested that home prices in Southern Nevada are the most “overvalued” in the nation.
That has sparked several news stories, stemming primarily from a Fitch Ratings report.
Chris Bishop, 2018 president of the Greater Las Vegas Association of Realtors, said Fitch issued similar reports over the past few years ranking Southern Nevada near the top of its list of “overvalued” housing markets. “And each time,” Bishop said, “our local home prices kept rising.”
According to a June 13 news story in the Las Vegas Review-Journal, “Las Vegas was the most overpriced market among the 20 listed in Fitch’s report. The credit-ratings company deemed prices sustainable in six metro areas, undervalued in two, and overvalued in the rest.”
Fitch based its report on a variety of factors, including unemployment rates, household income, rent levels and mortgage rates, according to Fitch analyst Grant Bailey.
“Personally, I don’t buy the notion that home prices here are overvalued or somehow headed for another housing bubble, as some people fear when they hear such things,” Bishop said. “After a decade of falling home prices in our local housing market, we’re finally seeing strong and steady appreciation and light at the end of the tunnel. Just as we’re finally approaching the peak home prices we saw back in 2006, now some of these national sources like Fitch are calling it overinflation.”
Southern Nevada is one of the few major metro areas in the country where local home prices have not returned to their pre-recession peak. According to GLVAR, the median price for existing single-family homes sold in Southern Nevada during May through its Multiple Listing Service was $295,000. That’s up 2.1 percent from the previous month and up 18 percent from $250,000 in May 2017.
That’s still short of the peak set in June 2006, when the local median home price was $315,000. Prices have been rebounding since hitting a post-recession bottom of $118,000 in early 2012.
Bishop believes local homes prices are about where they should be based on historic trends.
“If you chart local home prices over the past few decades on a graph and remove the dramatic peaks we saw during the last housing boom — and the even more drastic valleys we saw during the Great Recession — we would be right on par, or about where we should be based on a normal appreciation rates,” he added.
“And none of those numbers take into account regular inflation that any market would experience with the gap of almost a decade. With average inflation, our market high of $315,000 would be much more than that today.”
Bishop concedes that anything is possible and that there’s no predicting what home prices will be like years into the future.
He leaves the predictions to experts such as National Association of Realtors Chief Economist Lawrence Yun. After reading the recent RJ story citing the Fitch report, Yun offered this comment: “If viewing only in terms of home price to income, yes, (Southern Nevada home prices) could be overvalued. If factoring in wealthy retirees moving in to the state and Californians selling their expensive homes to buy a cheaper one in Nevada, then home prices will keep going higher. Not necessarily desirable, but a reality.”
As for fears of another housing bubble, Yun didn’t seem worried about that when addressing the Nevada Realtors State Conference in Las Vegas.
As he told the RJ in a June 5 interview, “If one was to look at the metrics like home prices in relation to income, one might say that Vegas is overvalued. However, in terms of the likelihood of a price decline, the answer is no. It’s fundamentally different from 10 years ago. We don’t have easy lending, and we don’t have an oversupply of homes. Lending standards are very tight, and we have a lack of supply.”
GLVAR was founded in 1947 and provides its more than 14,000 local members with education, training and political representation. The local representative of the National Association of Realtors, GLVAR is the largest professional organization in Southern Nevada. Each GLVAR member receives the highest level of professional training and must abide by a strict code of ethics. For more information, visit www.LasVegasRealtor.com. E-mail your real estate questions to firstname.lastname@example.org .