After conducting a series of deep dives into housing markets across the United States, including Seattle, Denver, and Phoenix, one major trend is becoming apparent. The real estate markets in prominent cities such as Las Vegas experienced a surge in housing activity from 2021 to mid-2022, but have since cooled off. Despite this moderation, home prices remain at historical highs compared to pre-pandemic levels. The following trends were observed:
The housing market slows down after two years of growth
The numbers declined by 13.6% from December 2022. However, the median sales price of previously-owned single-family homes remained the same as in December 2022, with a slight decrease of 2.3% from January 2022, currently standing at $425,000. While buyers may view this as an opportune time, sellers may struggle to sell their properties quickly. The data suggests that the housing market will remain competitive in 2023, with high demand and rising home values.
Property Records of Nevada indicates that the Las Vegas real estate market currently favors both sellers and buyers. He also expects the median sale price of homes to decrease by about 4%. While Steven G. Thomson, a broker at Signature Real Estate Group, also anticipated a slowdown in sales figures, he did not expect it to happen as abruptly as it did.
High-interest rates are likely to impact home values, making it difficult for buyers to secure favorable financing and afford properties. Despite this, the desirable lifestyle, strong job market, and growing population in Las Vegas contributed to high housing demand, stabilizing the market.
The rental market experiences a decrease after two years of growth
In the third quarter of 2022, the average rental price was $1,451, below the national average of $1,620. In the fourth quarter of 2022, the rent further decreased by 1% to $1,420 per month. These figures contrast with the previous years, which saw a steep spike and an annual rate change of over 20% from 2020 to 2021. Peter R. Walls of rent.com attributes the low demand for rental housing to seasonal factors.
Walls explains that apartments usually experience high demand from late spring to summer, while demand slows down in winter due to fewer people moving. The executive director of NVSAA, Robin Lee, believes that the rental landscape in Las Vegas reached a plateau this year. Lee predicts a slight increase in rent prices in the coming year. Despite the high vacancy rates, there are new apartment units being developed in the area. The existing inventory is set to expand by 5.2%, bringing the total number of local apartment units to 9,300. Hector P. Docson of rent.com believes that rent prices in Nevada are unlikely to drop below pre-pandemic levels. Nevada remains one of the few states experiencing a significant drop in rents. However, renters interviewed by The Nevada Independent still find the city’s apartment costs to be too high.
Low inventory and unemployment impact mortgage rates and the housing market
In November 2022, the home construction market in Las Vegas came to a halt as builders faced challenges. The sales cancellation rate for builders reached 40%, a significant increase from the 12% rate in November 2021. Andrew Smith, the president of Home Builders Research, noted that sales are shifting rapidly as base home prices change. Sales are moving from the $500,000-plus range to the $400,000 range.
Smith highlights that prices remain a major concern in the current housing market, as they reached peak levels during the pandemic. However, the conversation around prices has shifted from rapid declines. Builders are offering high commissions to agents and incentives to buyers, but the market continues to struggle due to affordability challenges and disruptions in the supply chain. Elevated construction costs also contribute to the market’s difficulties. The rising interest rates, with 30-year fixed mortgage rates exceeding 6% for the first time since 2008, may further cool down the Las Vegas real estate market. Unlike 2022, when rates dropped as low as 6% and soared as high as 7%, rates are expected to increase this year.
The higher mortgage rates are likely to result in a slowdown in the Vegas housing market. These rates reflect the Federal Reserve’s efforts to combat inflation. Low unemployment rates also contribute to the decline in home prices, as even employed individuals struggle to afford mortgage payments or build equity in their properties. Despite the strong desire to live near a vibrant city with abundant economic opportunities, high mortgage rates limit options for potential buyers. Many prospective buyers are unable to participate in the market, while sellers must seize any opportunity to make a sale.
Home prices continue to decline compared to previous years
The number of townhomes and condos sold in November had a median sales price of $260,000, which dropped by 5% to $246,950 in December. However, the median sales price increased by 2% compared to the previous year. Within the luxury market, December recorded 60 home sales with an average price of $1 million and higher. This figure slightly dipped compared to November 2022, where 63 home sales were recorded.
Luxury homes also experienced a decline in median sales price, with $1,512,500 in December compared to $1,350,000 in November. Furthermore, about 6,211 single-family homes listed for sale received no offers by the end of December 2022, representing a significant increase of 175.9% compared to the same time in the previous year.
The Las Vegas housing market continues to see a decline in home prices compared to previous years as it enters the slowest time of the year. Lenard Brooks, president of Las Vegas Realtors, notes that falling prices and increased home inventory are creating a balanced market, which can benefit buyers despite the supply challenges it presents.
Inflation rates impacting the cost of living
The nation is experiencing job sector growth, with many companies creating new jobs. As job creation increases, the unemployment rate dropped to 3.5% from 3.6%, reaching a 53-year low, according to the Labor Department. However, the average hourly pay growth slowed down in December for the first time in 16 months. This slowdown may force employers to raise prices to offset high labor costs.
In Las Vegas, employees earned, on average, 4.6% more in hourly wages in December 2022 compared to the previous year. The growth was 4.8% in November and 5.6% in March. Ken Johnson of Hiring Lab believes that if job market trends continue, there is hope for a sustainable labor force. However, the job landscape in 2023 remains uncertain, with economists predicting a recession in the second half of the year due to high-interest rates. Federal Reserve Chair Jerome Powell emphasizes that strong job growth may lead employers to increase wages, attracting more workers and helping counter inflation. Powell and other officials from the Federal Reserve believe that a rise in unemployment from the current low level can aid in fighting inflation.
The experience of the Las Vegas housing market reflects a larger theme, indicating that home prices throughout the region and the state of Nevada as a whole are at historic highs. While this has helped cool down overheated housing markets in 2021-2022, home prices have only declined to a certain extent. In general, homes in the Las Vegas metro area are significantly more expensive than before the pandemic.
Homes available for purchase in the Las Vegas housing market are experiencing extended periods on the market
Another important metric to consider for housing market activity is the average number of days a home for sale remains on the market before being sold. Property Records of Nevada, in collaboration with Redfin, analyzed this measure, known as “days on the market.” In the Las Vegas metro area, the median number of days on the market for a home increased from 18 days in March 2022 to 67 days in March 2023, representing an annual increase of approximately 272.2%. The length of time a home spends on the market nearly quadrupled within a year. The trend is consistent for the overall housing market in Nevada, with a year-over-year increase of 235% from a median of 20 days on the market in March 2022 to 67 days in March 2023.
This increase in the number of days a home remains on the market is observed in all the housing markets analyzed. As an example, North Las Vegas witnessed a significant shift in the median number of days homes stayed on the market. In March 2022, the average was 11 days, but in March 2023, it skyrocketed to an impressive 69 days, marking a staggering year-over-year surge of 527.3%. Among all the housing markets, North Las Vegas experienced the highest rate of growth. In Enterprise, the median number of days on the market increased from 12 days in March 2022 to 63 days in March 2023, reflecting a year-over-year growth rate of 425%. Whitney had the lowest rate of growth, with the median days on the market rising from 30 in March 2022 to 54 in March 2023, an 80% increase.
These trends indicate that houses for sale in the Las Vegas housing market are taking longer to sell
The increased number of days on the market suggests a slowdown in buyer demand or increased competition among sellers. Buyers now have more time to consider their options and negotiate better deals, while sellers may face challenges in attracting potential buyers quickly.
In conclusion, the Las Vegas real estate market in 2023 is experiencing a slowdown in housing activity after a period of growth. Home prices remain high compared to pre-pandemic levels, although they have shown some decline. The rental market has also experienced a decrease in prices, while the length of time homes spend on the market has significantly increased. Factors such as high-interest rates, low inventory, and unemployment rates impact mortgage rates and the overall housing market. Despite these challenges, the strong demand, desirable lifestyle, and economic opportunities in Las Vegas continue to support the housing market. Property Records of Nevada provides valuable insights into these market trends and helps individuals navigate the dynamic real estate landscape in Nevada.