While you may have seen recent stories about the volume of foreclosures recently, context is important. Nationwide one in every 4,580 housing units had a foreclosure filing in April 2022.

Some Highlights

• If you’re deciding whether you should make updates before you sell your house, lean on your trusted real estate advisor to be your guide.
• In today’s sellers’ market, buyers have limited options and may be more willing to take on repairs themselves.
• If you’re thinking about selling your house, let’s connect so you have expert advice that’s customized to your home and our local area.

In 2021, rents grew dramatically. According to ApartmentList.com, since January 2021:

“. . . the national median rent has increased by a staggering 17.8 percent. To put that in context, rent growth from January to November averaged just 2.6 percent in the pre-pandemic years from 2017-2019.”

That increase in 2021 was far greater than the typical rent increases we’ve seen in recent years. In other words – rents are rising fast. And the 2022 National Housing Forecast from realtor.com projects prices for vacant units will continue to increase this year:

“In 2022, we expect this trend will continue and fuel rent growth. At a national level, we forecast rent growth of 7.1% in the next 12 months, somewhat ahead of home price growth . . .”

 

That means, if you’re planning to move into a different rental this year, you’ll likely pay far more than you have in years past.

 

Homeownership Provides an Alternative to Rising Rents

If you’re a renter facing rising rental costs, you might wonder what alternatives you have. Move back home, get new roommates, rent a room from someone, or make the move to consider homeownership. One of the many benefits of homeownership is it provides a stable monthly cost you can lock in for the duration of your loan. 

As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“. . . fast-rising rents and increasing consumer prices, may have some prospective buyers seeking the protection of a fixed, consistent mortgage payment.”

If you’re planning to make a move this year, locking in your monthly housing costs for 15-30 years can be a major benefit. You’ll avoid wondering if you’ll need to adjust your budget to account for annual increases.

Homeowners also enjoy the added benefit of home equity, which has grown substantially right now. In fact, the latest Homeowner Equity Insight report from CoreLogic shows the average homeowner gained $56,700 in equity over the last 12 months. As a renter, your rent payment only covers the cost of your dwelling. When you pay your mortgage, you grow your wealth through the forced savings that is your home equity.  

Henry Ford said, "Whether you think you can, or think you can't--you're right."

That's right, it's all in your mindset. It is in your head. Of course, you may be thinking, I don't know where to start, my credit isn't exactly perfect, the home prices are skyrocketing and there is no affordable housing so to speak. While there are real obstacles to clear, all can be accomplished with the right mindset. Many people overestimate the difficulty of getting approved or qualifying to buy a home.  Many people believe myths they have heard, and rumors keep people from trying. Things such as needing to have a 700+ credit score, having 20% down, or even that they have to find a home first and then start.  If you want to know how easy it is, just check out this link on buying a home with me or give me a call directly.  

Ready to Explore the Las Vegas Market? 

If you’re thinking about buying a home this year,  want to talk to someone with no fear about the process or obstacles being faced, or even begin the home buying process. Give Valerie Brown with Realty Edge a call. It’s important to keep in mind the true costs you’ll face, the real obstacles against you, not the ones you imagine and she will help make sure you get the right home and make the process as easy as possible.. 

Some Highlights

• In Las Vegas the pandemic affected the way America looks at housing choices.  Las Vegas and other cities greatly benefited from the migration trends, mostly from California migrants.  
• Las Vegas is in its infancy of becoming a Sports Mecca, and enjoying quite the economic boom as more teams and families make their way to southern Nevada. It should come as no surprise as Las Vegas is already the Entertainment Capital of the World. 
• Las Vegas is experiencing a historic boom in the luxury homes market as well. Almost 50 luxury homes have sold for over $5 Million dollars in 2021, more than any other year in Las Vegas history. 
• Interest rates are rising which may stabilize the housing prices, so long as inventory continues to come to market. And Bidens Housing Plan unveiled new opportunities in key areas to assist with the housing shortage and skyrocketing rents. 
• What does the rest of the year hold for the housing market? Here’s what experts at corelogic and Fannie Mae have to say about what lies ahead.
• Home prices are projected to rise based on economic factors and surveys and so are mortgage rates. Experts at Freddie Mac and the National Association of Realtors are also forecasting another strong year for home sales as people move to meet their changing needs.
• Looking to find out what else the Las Vegas Real Estate Market has in store? Let’s connect!

If you’re ready to move up, you may be trying to decide whether you want to buy a home that's already on the market or build a new one. And since the supply of homes available for sale today is low, you’re willing to consider either avenue. While home builders are doing everything they can to construct more houses and help narrow the supply shortage, they’re also facing delays due to factors outside of their control.

Here’s the latest on some of the key challenges homebuilders are experiencing today and how they could impact your plans to move up. When you know what’s happening in the industry, you can make an informed decision on whether to look for a newly built or an existing home in your home search.

Supply Chain Issues

The first hurdle builders are dealing with is the lack of supply of various building materials. According to a recent article from HousingWire:

“. . . Nearly everything needed in the homebuilding process is facing some sort of delay and subsequent price increase.”

The supply issue isn’t just with lumber, even though that’s what’s covered most in the news. The article explains many other supplies are impacted too, including roofing materials, windows, garage doors, siding, and gypsum (which is used in drywall).

The difficulty in getting these items is dragging out timelines for new homes as builders wait on what they need to finish construction. And since materials are in short supply, even when they do get the product, the principle of supply and demand is driving prices up for those goods. HousingWire explains it like this:

“When supplies are low, charges inevitably go up, . . . Meanwhile, a lack of availability is causing huge delays, meaning builders are struggling to stay on schedule.”

The National Association of Home Builders (NAHB) agrees:

“Builders are grappling with supply-chain issues that are extending construction times and increasing costs.”

We've also heard permitting is taking months longer than usual, here locally in Las Vegas. 

Skilled Labor Shortage

But that’s not the only challenge with new home construction today. Builders are also having a hard time finding skilled labor, which means they’re short-handed, further dragging out their timelines. Odeta Kushi, Deputy Chief Economist at First American, says this is an ongoing challenge for the industry:

“The skilled labor shortage in the construction industry is not new – it’s been an issue for more than a decade now.”

But there is good news. The February jobs report shows employment gains in the construction industry. Kushi puts this encouraging news into perspective in the article mentioned above:

“Overall this was a good report, . . . The supply of workers continues to fall short of demand, but the underlying momentum of the labor market recovery is strong, and falling COVID case counts provide further forward momentum.”

That means, while finding workers continues to be a challenge for builders, there are signs of positive momentum moving forward.

How This Impacts You

HousingWire explains how these things can impact move-up buyers today:

“The residential construction industry is facing a crisis as builders manage the critical shortage of building materials and labor. Explosive supply and labor costs are forcing long delays. . . .” 

So, when you weigh your options and try to decide between building a home or buying an existing one, factor the potential delay in new home construction into your decision. While it doesn’t mean you should cross newly built homes off your list, it does mean you should consider your timeline and if you’re willing to wait while your home is being constructed.

Bottom Line

When planning your next move, understanding the latest market conditions is key to making the best decision possible. To make sure you have all the information you need, let’s connect. Together we can make sure you know what’s happening in our local market so you can confidently decide what’s right for you, your priorities, and your timeline.

Everywhere you look nationwide home prices are increasing month over month. The end doesn't seem to be in sight with inventory shortages and a never-ending supply of would-be buyers. This leaves many wondering, is there a real estate bubble? Is Las Vegas Real Estate overpriced? Is it worth it to buy a home in Las Vegas? Are house prices going to stabilize? or are house prices going to go down in Las Vegas?

Homeownership has become a major element in achieving the American Dream. The American Dream of owning a home, where your family can grow and also owning the land to which it belongs. That is why so many are choosing Las Vegas. Las Vegas has long been known for the affordability among other things. Las Vegas is appealing for many other reasons and this hit a high note during the Pandemic.  A recent report from the National Association of Realtors (NAR) finds that over 86% of buyers agree homeownership is still the American Dream.

Prior to the 1950s, less than half of the country owned their own home. However, after World War II, many returning veterans used the benefits afforded by the GI Bill to purchase a home. Since then, the percentage of homeowners throughout the country has increased to the current rate of 65.5%. That strong desire for homeownership has kept home values appreciating ever since. The graph below tracks home price appreciation since the end of World War II:

The graph shows the only time home values dropped significantly was during the housing boom and bust of 2006-2008. If you look at how prices spiked prior to 2006, it looks a bit like the current spike in prices over the past two years. That has led some people to be concerned we’re about to see a similar fall in home values as we did when the bubble burst in the past. To help alleviate some of those worries, let’s look at what happened last time and what’s happening today.

What Caused the Housing Crash 15 Years Ago?

Back in 2006, foreclosures flooded the market. That drove down home values dramatically. The two main reasons for the flood of foreclosures were:

1. Many purchasers were not truly qualified for the mortgage they obtained, which led to more homes turning into foreclosures.
2. A number of homeowners cashed in the equity on their homes. When prices dropped, they found themselves in an underwater situation (where the home was worth less than the mortgage on the house). Many of these homeowners walked away from their homes, leading to more foreclosures. This lowered neighboring home values even more.
3. Builders over built homes, assuming they would keep selling. This led to a huge inventory increase in vacant homes in Las Vegas.

This cycle continued for years. In October of 2012, Las Vegas and the surrounding areas had nearly 28K active listings, with a median sales price of $125K, and took an average of 60 days on the market. In October of 2021 Las Vegas and the surrounding areas had 6,800 active listings with an average of 11 days on the market.    

As you can see the overwhelming supply of homes in 2012 and length of time on market shows the market was a heavy Buyers Market. Plenty of homes in inventory, a major surplus and not as much buyer interest in properties. However in 2021, you see a significantly lower inventory and very short time on the market. Buyers are scooping up properties as soon as they hit the market. This shows a very small supply of homes available and a huge buyer demand for properties. Almost all homes have multiple offers bidding properties up. 

Why Today’s Real Estate Market Is Different

Here are two reasons today’s market is nothing like the one we experienced 15 years ago.

1. Today, Demand for Homeownership Is Real (Not Artificially Generated)

Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. Today, purchasers and those refinancing a home face much higher standards from mortgage companies.

Data from the Urban Institute shows the amount of risk banks were willing to take on then as compared to now.

There’s always risk when a bank loans money. However, leading up to the housing crash 15 years ago, lending institutions took on much greater risks in both the person and the mortgage product offered. That led to mass defaults, foreclosures, and falling prices.

Today, the demand for homeownership is real. It’s generated by a re-evaluation of the importance of home due to a worldwide pandemic. Additionally, lending standards are much stricter in the current lending environment. Purchasers can afford the mortgage they’re taking on, so there’s little concern about possible defaults.

And if you’re worried about the number of people still in forbearance, you should know there’s no risk of that causing an upheaval in the housing market today. There won’t be a flood of foreclosures.

2. People Are Not Using Their Homes as ATMs Like They Did in the Early 2000s

As mentioned above, when prices were rapidly escalating in the early 2000s, many thought it would never end. They started to borrow against the equity in their homes to finance new cars, boats, and vacations. When prices started to fall, many of these homeowners were underwater, leading some to abandon their homes. This increased the number of foreclosures.

Homeowners didn’t forget the lessons of the crash as prices skyrocketed over the last few years. Black Knight reports that tappable equity (the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio, or LTV) has more than doubled compared to 2006 ($4.6 trillion to $9.9 trillion).

The latest Homeowner Equity Insights report from CoreLogic reveals that the average homeowner gained $55,300 in home equity over the past year alone. Odeta Kushi, Deputy Chief Economist at First American, reports:

“Homeowners in Q4 2021 had an average of $307,000 in equity - a historic high.”

ATTOM Data Services also reveals that 41.9% of all mortgaged homes have at least 50% equity. These homeowners will not face an underwater situation even if prices dip slightly. Today, homeowners are much more cautious.

 

 

3. Builders learned their lessons and primarily built homes as the lot is purchased, not in advance to meet market future needs.

One of the major reasons the inventory shortages are being faced nationwide is because building halted for many years so that the market could absorb the existing inventory. The demand was not there for new housing. If you look at housing starting from 2006 through around 2011-12 you can see the significant dip and flat line that occurred. This was a historic all-time low since the housing starts have been tracked before 1968. According to the Wall Street Journal's article, it is projected by NAR to take at least a decade to level out inventory. 

Las Vegas Real Estate a Housing Bubble?

Everyone is quick to jump and say this time is not like last time, or that won't happen again. We have all seen the sky rocketing prices, insatiable demand from Buyers moving from California and high tax states looking for a reprieve. It feels like last time, so why isn't it like last time in Las Vegas? 

Las Vegas is in a historic Luxury Boom due in part to being in its infancy of becoming a sports mecca. Since the work from home model seems to be permanent for many companies, the appeal of Las Vegas is not lost. We've seen many from Simi Valley, Calabasas, San Diego and other luxury areas. The large scale businesses moving here to Nevada and the sports that are following are leading the way in the luxury market. 

We are in a huge deficit of homes, with a high buyer demand. These buyers are coming from out of state with cash in hand and driving up prices. It's not only this, but we have many people wanting to own short term rentals (airbnbs), or even long term rentals for income in this town. The rental market in Las Vegas is also red hot. Many first time buyers who can't qualify are now competing against renters with less qualifications. There is a huge demand in rentals and many of the rentals are looking for 700 FICO Score, make 4 times income to rent, and have 6 months of reserves on hand, all things many renters simply do not have.  

There is a true struggle for housing in Las Vegas from the top of the luxury market all the way to the rental market. It encompasses every tier across the board. The demand cannot be met fast enough, and the wave of foreclosures we once thought may be coming to market are easily avoided by equity in the home or forbearance programs. 

The Bottom Line

The major reason for the housing crash 15 years ago was a tsunami of foreclosures from risky lending products. In today's lending environment we have a much stricter mortgage standards and a historic level of homeowner equity, the fear of massive foreclosures impacting today’s market for the same reasons is not realistic. While we are in unprecedented times of high rising prices, its as simple as supply and demand. We also have quantitative easing and monetary policy and rising interest rates, and black swan events; to try to account for. However, real estate is truly as simple as supply and demand, we simply do not have the supply to meet the demand.  Las Vegas is not currently overpriced in this snapshot in time because the demand exceeds the available inventory.