Las Vegas Valley Real Estate and Community News

May 15, 2022

Foreclosure Numbers Are Up, What Does it Mean?

 

Two people talking on a home porch with coffee

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.

States with the highest foreclosure rates were Illinois (One in every 2,241 housing units with a foreclosure filing); New Jersey (one in every 2,292 housing units); Ohio (one in every 2,585 housing units) Indiana (one in every 2,660 housing units; and here locally Nevada (one in every 3,043 housing units).

There were a total of 30,674 US Properties with foreclosure filing - default notices, scheduled auctions or bank repossessions - down 8 percent from a month ago but up 160 percent from 1 year ago. 

Yet lenders actually repossessed only 2,830 U.S. properties through completed foreclosures (REOs) in April 2022. Down 36 percent from last month but up 82% from last year. According to ATTOM's monthly foreclosure report.

 Rick Sharga, executive vice president of market intelligence for ATTOM says, "The extreme difference between foreclosure starts and foreclosure completions in April might be the beginning of a trend. Record levels of homeowner equity should provide financially distressed homeowners the opportunity to sell their homes prior to a foreclosure auction, meaning we should continue to see fewer foreclosure completions. While it may take several months to determine if this is actually what's happening, it seems like a real possibility.." 

During the pandemic, many homeowners were able to pause their mortgage payments using the forbearance program.  Both nationally and locally in Las Vegas, the goal was to help homeowners financially during the uncertainty created by the health crisis.

When the forbearance program began, many experts were concerned it would result in a wave of foreclosures coming to the real estate market, the same as there was after the housing crash in 2008. Here’s a look at why the number of foreclosures we’re seeing today is nothing like the last time.

1. There Are Fewer Homeowners in Trouble

Today’s data shows that most homeowners are exiting their forbearance plan either fully caught up on payments or with a plan from the bank that restructured their loan in a way that allowed them to start making payments again. The graph below depicts those findings from the Mortgage Bankers Association (MBA):

Pie Chart of Forbearance Program Members from 2020

The same MBA report mentioned above estimates there are approximately 525,000 homeowners who remain in forbearance today. Thankfully, those people still have the chance to work out a suitable repayment plan with the servicing company that represents their lender.

2. Most Homeowners Have Enough Equity To Sell Their Homes

For those who are exiting the forbearance program without a plan in place, many will have enough equity to sell their homes instead of facing foreclosures. Due to rapidly rising home prices over the last two years, the average homeowner has gained record amounts of equity in their home.

Marina Walsh, CMB, Vice President of Industry Analysis at MBA, says:

“Given the nation’s limited housing inventory and the variety of home retention and foreclosure alternatives on the table across various loan types, . . . Borrowers have more choices today to either stay in their homes or sell without resorting to a foreclosure.”

3. There Have Been Fewer Foreclosures over the Last Two Years

One of the seldom-reported benefits of the forbearance program was it gave homeowners facing difficulties an extra two years to get their finances in order and work out a plan with their lender. That helped prevent the foreclosures that normally would have come to the market had the new forbearance program not been available.

Even as people leave the forbearance program, there are still fewer foreclosures happening today than before the pandemic. That means, while there are more foreclosures now compared to last year (when foreclosures were paused), the number is still well below what the housing market has seen in a more typical year, like 2017-2019 (see graph below):

Bar Chart of foreclosures from 2017 to 2021

4. The Current Market Can Easily Absorb New Listings

When the foreclosures in 2008 hit the market, they added to the oversupply of houses that were already for sale. People were just walking away from homes.  It’s exactly the opposite today. People are fighting over homes today and there aren't enough of them to go around. The latest Existing Home Sales Report from the National Association of Realtors (NAR) reveals:

“Total housing inventory at the end of March totaled 950,000 units, up 11.8% from February and down 9.5% from one year ago (1.05 million). Unsold inventory sits at a 2.0-month supply at the present sales pace, up from 1.7 months in February and down from 2.1 months in March 2021.”

A balanced market would have approximately a six-month supply of inventory. At 2.0 months, today’s housing market is severely understocked. Even if one million homes enter the market, there still won’t be enough inventory to meet the current demand.

Bottom Line

If you see headlines about the increasing number of foreclosures today, remember context is important. While it’s true the number of foreclosures is higher now than it was last year, foreclosures are still well below pre-pandemic years and equity is up, so owners have a choice. If you want more information regarding Las Vegas foreclosures or if you have questions about the Las Vegas Real Estate Market, let’s connect to talk through the latest market conditions and what they mean for you.

 

May 14, 2022

Should You Update Your House Before Selling?

 

Should You Update Your House Before Selling? Ask a Real Estate Professional. [INFOGRAPHIC] | MyKCM

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.

 

Send me an email

May 10, 2022

Rents are rising! See how much prices are up in Las Vegas!

Rents are Rising Chart

 

Check out this handy tool from the Washington Post, where you can check how high rents have increased since 2019. In Clark County, Nevada rents are up 28.5%. Based on multifamily rentals in counties with at least 1,000 units. 

 

Avoiding the Rental Trap in 2022

The rental trap is real! 

Want to buy a home in the year ahead — but feel glued in place thanks to ever-rising home prices? You’re not alone. 

As a renter, you understand you are caught between a rock and hard place. When rents are rising, but it costs more to move, you just renew the lease and pay more year over year. It's important for you to know rents have been rising since 1988, not just since 2019. While skyrocketing since 2019, the rents have gradually appreciated since 1988.

If you are like many renters you want to buy, but the market seems intense and as many put it crazy. Yet you know another rent increase is coming. You may find yourself worrying and wondering how bad it will be? And if you will have to move when your lease is up. Before you decide whether to look for a new apartment it's important to understand the true costs of renting and buying in 2022. 

Avoid the Rental Trap in 2022 | MyKCM

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.. 

May 7, 2022

Is More Inventory On the Way in Las Vegas?

house in a shopping Cart & Alarm Clock

Are more homes coming to the market in 2022? Is the Real Estate Shift happening now?

More homes go up for sale sometime between July and September in the normal years or a healthy real estate market. While recent years have been anything but normal, rather "the new normal", 2022 could start heading back into a normal-ish direction. 

According to a Realtor.com report, About 64% of prospective home sellers plan to list their properties by the end of August 2022. Of these tentatively planned sales, a sizable 43% of those selling have expected prices below $350,000 — the range more first-time buyers target — and about 21% anticipate listing between the prices of $350,000 and $500,000. 

We know an inventory shortage won't always be the case, and here in Las Vegas, we are seeing more inventory consistently every month.

Available homes in the Greater Las Vegas Area at the end of each month without offers

February 2022 - 1,741

March 2022 -  2,005   

April 2022 -  2,441 

May week ending May 8, 2022 - 2,949 

Danielle Hale, chief economist at Realtor.com

“Our forecast expectation is that inventories would increase between 0% and 1% this year. We may see a slower pace of sales in the fall because rising mortgage rates are pushing up housing costs so much. It may even cause a slightly bigger-than-usual recovery in for-sale inventory.”

Len Kiefer, deputy chief economist at Freddie Mac

“Buyers have been thrown for a loop because of how frenetic the housing market is and how fast homes are selling. I anticipate we get a much more typical seasonal pattern this year; people start listing in the spring, and of course, activity heats up too. Then the homes that didn’t sell through spring and summer sit on the market and that’s where you see inventory pick up.”

The interest rate factor

In 2022, we saw mortgage rates soar. Historically, rates tend to skyrocket over a very short period and then parachute down over a longer duration.  The mortgage rate jump has pushed first-time buyers out of certain markets where affordability is scarce.  Furthermore, it has concerned sellers who currently have a low mortgage balance and a very historically low-interest rate, giving them pause. Sellers have been worried about trading their current mortgage in for a more expensive one at a higher interest rate. Even before rates jumped, home prices have grown at double-digit percentages annually for each of the past 12 months.

The shift in the market could come sooner than expected. If sellers collectively decide to list at the same or similar times this could be a quick injection of more than anticipated inventory, wherein similar homes are listed for sale and buyers have some choices. Buyers could gain some leverage back if inventory does flex. 

This could affect the double-digit returns currently in play; as more inventory comes to market the more the prices will stabilize. This is on the principle of basic supply and demand. There will be more homes for buyers to choose from, and sellers are more likely to have 1 or 2 offers instead of the 10 or 20 we saw in February of 2022.  The market could slow down with more inventory available and that means homes will sit for sale longer and more inventory can continue to accumulate. The market, however, may not fully normalize until 2024 or 2025 as demand, bottlenecks, and inventory all catch up to each other. 

Advice for homebuyers in 2022

Trying to buy a house right now is tough with the growth in prices and mortgage rates and the lack of homes for sale. 

Of course, there are many success stories when you partner with the right agent and use the right tools and negotiations you have a strong advantage to help strengthen your buying position.  Contact Valerie Brown today at (702) 826-1545 to get your strategy together and make your dream of homeownership a reality. 

May 6, 2022

2022 Housing Market Forecast

 

National Housing Market Stats - Infographic

 

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!
May 5, 2022

¡Feliz Cinco de Mayo!

¡Feliz Cinco de Mayo!

May 4, 2022

Las Vegas Bans Ornamental Grass

A deep look into the law banning ornamental grass. 

They are banning Ornamental Grass, you heard it correctly.  Does it sound a bit extreme? On the surface sure and it may be extraordinary, but hard times call for tough measures to be taken.

If you are from Southern Nevada or have lived in Southern Nevada for the last year or more, this comes as no surprise. Grass in the front yard has already been prohibited since 2003 and backyards can only have 50% of the yard size. Locals are constantly reminded through local efforts about water conservation. 

If you are new to the desert lifestyle, it might be a bit of a shock. Las Vegas is known for its decadence, spare no expense, extravagant & over the top atmosphere, but this imagery doesn't apply to our use of water.

Las Vegas and the general Southwest is in a drought and not just any drought but a MEGA Drought, that is a drought lasting more than 2 decades. The Colorado River has been shrinking at rapid levels year over year since early 2000, dropping by around 150ft. Early in the 2000s with a swift call to action in Southern Nevada, the community created and implemented the most comprehensive water conservation plan in the nation. 

According to the Las Vegas Valley Water District, Las Vegas gets 90 percent of its water from the Colorado River, and we are in the worst drought in recorded history. The Colorado River plays an important role in Las Vegas and serves as the source of most of our community's drinking water. 

Recently the Nevada Legislature passed a law, bill AB356, prohibiting the use of the Colorado River water for unused, decorative grass around the Las Vegas Valley. Banning grass is one of the strict measures being taken to mitigate the effects of the drought and force water conservation in Las Vegas. 

WHAT IS THE PURPOSE?

The ban is geared to “non-functional turf”. It will apply to grass no one really uses at office parks or in street medians, and at the entrances to housing developments. It excludes single-family homes, parks, and golf courses. The law set a deadline of 2027 for the work to be completed. 

 The new law is really geared to help ensure what water is left goes further. It’s an example of the kind of strict measure other regions may be forced to take to mitigate damages. 

 The Federal government is also making some hard choices. The federal government on Tuesday announced it will delay the release of water from one of the Colorado River’s major reservoirs, an unprecedented action.  It is a temporary fix to an ongoing battle against mother nature.

 The decision means they will keep more water in Lake Powell, the reservoir located at the Glen Canyon Dam in northern Arizona.  Rather than allowing it downstream to Lake Mead, they will keep it at Glen Canyon Dam, which is the river’s other primary reservoir.

Without taking this action, electricity for about 5.8 million customers in the inland West will be put in jeopardy. If water levels get too low at the Glen Canyon Dam, it will no longer be able to generate electricity. Water levels at both reservoirs reached their lowest levels on record. Lake Powell’s water level is currently at an elevation of 3,523 feet. If the level drops below 3,490 feet, the so-called minimum power pool, there is grid failure for millions of people. 

COLORADO RIVER MANAGEMENT & OVERSIGHT HISTORY

Important to note the Colorado River water is managed by the Colorado River Compact and several other agreements known as the "Law of the River". The Colorado River Compact was signed in 1922, providing the governing and allocation of water rights to the parties of the compact. The parties are Colorado, Utah, Wyoming, New Mexico, Arizona, California and Nevada. Their interests are broken down in the table below from wikipedia.com 

Upper Basin, 7.5 million acre·ft/year (293 m³/s) total
Colorado 51.75%* 3.86 million acre·ft/year (150.7 m³/s)
Utah 23.00%* 1.71 million acre·ft/year (67.0 m³/s)
Wyoming 14.00%* 1.04 million acre·ft/year (40.8 m³/s)
New Mexico 11.25%* 0.84 million acre·ft/year (32.8 m³/s)
Arizona 0.70% 0.05 million acre·ft/year (2.0 m³/s)
*Percentages with a star are a percentage of the total after Arizona's
0.05 million are deducted. Arizona's percentage is of the total.
Lower Basin, 7.5 million acre·ft/year (293 m³/s) total
California 58.70% 4.40 million acre·ft/year (172 m³/s)
Arizona 37.30% 2.80 million acre·ft/year (109 m³/s)
Nevada 4.00% 0.30 million acre·ft/year (12 m³/s)

Because it was signed in 1922, the population in each respective state was much smaller and the allocations made sense. However, the population in all states have increased significantly. The allocations have caused many disputes and disgruntled parties throughout the years.

Since the development of the Colorado River Compact, California has been using the surplus water that has been left over from all the other states. 

There has always been a huge concern regarding Nevada's increasing population and the state's water usage. Nevada, with the smallest water allocation, is finding the water supplied by the Colorado River will not meet the state's growing needs.  Additional allocations of water have not been altered because our State has maintained through water conservation efforts the ability to sustain what is allocated to us. The Natural Resources Division (NRD) of the Colorado River Commission of Nevada (CRC) is responsible for protecting the rights and interests of the State of Nevada’s allocated share of Colorado River water. 

 

 

The ban follows years of extensive efforts to cut water use, including a voluntary “cash for grass” program, still going on today. It began in 1999, for individual homeowners to lose their lawns, put limits on watering, and establish a team of water waste investigators.  If you want information about cash for grass contact www.snwa.com today.  Not only is this program saving you money, it is also saving our community!

WHAT CAN YOU DO?

 According to the Las Vegas Valley Water District www.lvvwd.com, as a resident or business owner, you can help safeguard our community's water supply by

    •  Following your mandatory watering schedule, either change your own irrigation clock each season to comply or make sure your landscaper does so.
    •  Replacing purely decorative grass with desert-friendly landscaping.
    •  Fixing leaking sprinklers or anything else that’s causing water to flow or spray off your property.
    • Make sure water isn't leaking inside your home or in your yard.
    • Take advantage of financial incentives to update your old watering clock, purchase a smart water leak detector, or remove grass.
    • Reporting water waste around town when you spot it happening.

 

WHAT CONSTITUTES WATER WASTE?

According to the Las Vegas Valley Water districts site (www.lvvwd.com)

Water waste is defined by the Las Vegas Valley Water District service rules as:Allowing water provided by the Water District to flow or spray off the property.

While the restrictions do add another layer of things to know about Las Vegas, they are not difficult to meet, and everyone's contributions over the past two decades have really helped our city manage the water we do receive and stay within the "water budget' we are allocated.

Southern Nevada water teams have done an outstanding job mitigating the effects of our mega-drought and work tirelessly to continue making progress. These teams include but are not limited to:

Everyone involved over the last 20 years has done an exceptional job managing, controlling, making aware, and stepping into the challenges presented. Water is a precious resource and this work will continue over the next 20 years. 

May 3, 2022

What to Know, Before you Owe | Buying a Home With Solar Panels

Las Vegas Roof Tops with Solar Panels Aerial View

 

Buying a new home is an exciting move, whether it’s your first home, tenth home, or investment property. It can also be very daunting if you don't have any information about what it will mean for you to buy a home with Solar Panels already leased. If you’re looking at properties with solar, you may be anticipating saving on your energy bills and reducing your carbon footprint for the environment. You may also be apprehensive about the solar panels if you are not familiar with the details.

 

Solar can be a great investment, especially in Las Vegas with nearly 300 days of sunshine. This can add value to your home and savings to your pocketbook for the lifetime of the system. Although, it’s important to remember that there are hundreds even thousands of brands of solar panels on the market, ranging in quality and efficiency. As your real estate agent, I’m not an expert in how electrical systems work, or which ones are the best, so it’s important to do your due diligence. 

 

RESEARCH EVERYTHING

When buying a home with solar panels in place with a lease, or even owned, it's important to understand exactly what you are buying into. You want to KNOW BEFORE YOU OWE.  

 

1.   ASK FOR THE ORIGINAL PURCHASE CONTRACT

a.   The purchase contract should detail the terms and conditions that apply to the system, things such as

                                              i.     How much they paid for the system

                                            ii.     How much they put down on the system

                                           iii.     When they purchased the system

                                          iv.     The term of the repayment plan

                                            v.     The error on installation warranty term and more.

 

This information is very valuable in making decisions about homes with solar panels. It gives plenty to think about and how that fits into your budget, savings, and life.

 

2.   ASK FOR WARRANTIES & SERVICE AGREEMENTS

a.   The limited installation warranties if any exist

b.   The lifetime warranties if any exist

c.   The manufacturer warranties if any exist

d.   The service agreements or maintenance agreements if any exist

 

Making sure you know who to contact if or when things go wrong is super important. You want to know what to do if something comes up, and you want to make sure it is serviced as required. Las Vegas is full of wind and dust, and that can lead to debris on your roof. You also want to make sure it is fenced off so birds and other animals cannot make nests underneath the panels, which can lead to damage.

 

3.   ASK FOR THE SPECS ON THE SOLAR PANEL SYSTEM

a.   The kilowatt hour rating

b.   The useful life of the system

c.   All the details of the system, panels, and hookups on the home you are considering purchasing.

 

Research the system, and the company find out the useful life and the good and bad of the company who makes the panels. You can find out the positives and negatives and get a deeper understanding of that system itself. There are so many different types depending on the age of the system.

 

4.   ASK FOR THE LAST 12 MONTHS OF POWER BILLS

a.   Asking to review the previous 12 months of power bills is critical to see how much power they pull from the grid on any given month.

b.   It can also show how efficient the system is for the size of the home and electrical needs.

                                              i.     Consider how large the family is living there

                                            ii.     Consider if they have electrical cars or not

                                           iii.     Do they run the air all the time? or do they strictly monitor their power consumption?

                                          iv.     Do the panels also power a heated pool or another source of energy consumption?

 

The family size, the home size compared to the number of panels, the electric consumption you intend to use, vs how they use can all be big factors to consider. These factors can all affect the sustainability and savings you may realize.

 

5.    ASK WHO THE LENER IS FINANCING THE PANELS

a.   Ask for the original note

b.   Ask for the process for assumption

c.   Ask about the fees for assumption

d.   Ask about the term

e.   Ask about the interest rate

f.     Ask about the payment schedule

 

Some buyers purchase the solar on interest-only for 2 or 3 years and then the real payment kicks in later. Which could be higher than disclosed, make sure you understand exactly what the terms and payments will look like going forward if you purchase the home.

  

6.   READ, REVIEW, ASK QUESTIONS

a.   Read every fine print

b.   Read every spec

c.   Read every term

d.   Read to understand everything as if your life depended on it.

 

Whatever you do not understand or are uncomfortable with or whatever doesn’t quite add up, ASK! Write down questions as you go through this process and make sure you get the answer you need. You have many sources to help you get the understanding you need. You want to know before you owe!

 

Consider the resources you could use (not inclusive);

Long Infographic Checklist about Solar Panel Due Diligence

·      The solar company

·      The seller

·      The lender

·      An electrical Inspector

·      A home Inspector

·      Internet research on terms you don’t understand

·      Youtube

·      Reviews on the Solar Panels Make Model

·      Reviews on the company that installed it and so many more

 

At the end of the day, you never want to get into a situation where you wish

 you had researched more. It’s your time to dig deep and understand what you are buying.

 

As your real estate agent, of course, I am here to help, but again Realtors are not licensed electricians and are not an authoritative source of assurance regarding solar panels or their efficiency.

 

We can give insight and help facilitate questions and answers between you and the seller. Often many of the questions you have will be personal to the seller and that is part of what your agent is here to help with, negotiate and communicate with the other agent on your behalf. 

 

 

Check out my youtube video below for more information 

 

May 3, 2022

What You Need To Know if You’re Thinking About Building a Home

 

Picture of a Framed Home looking Up from the floor.

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 Americansays 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.

May 1, 2022

Is Las Vegas Real Estate Over Priced?

 

A house inside a bubble on a wand.

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:

Graph Chart Appreciation 1945 to 2022

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.

Graph Charts Comparing Risky Mortgage Products to todays lending standards.

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 Americanreports:

“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. 


source: tradingeconomics.com

 

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.