Let's talk about the current real estate market and address some of the complexities and challenges that we are currently facing in today's economy. Recession, inflation, high-interest rates, layoffs, and a declining housing market; are words you've become all too familiar with in this 2nd half of 2022.
While the real estate market may be unpredictable at times, it's expected. Nothing goes up forever, and nothing stays down forever. Markets change and as we all know, the only thing that remains the same is change. The real estate market has been experiencing wild changes and challenges over the past few years. This year we saw median home prices in Las Vegas reach all-time new highs, peaking in May of this year at $482,000. Low-interest rates and low inventory drove our market higher and higher.
Over the past few months, interest rates have been rising, and inventory has been steadily increasing. High-interest rates make it more expensive for buyers to finance their purchases. More inventory means the homes stay on the market longer, and there are fewer multiple offers for sellers.
On top of that, prices for homes increased so fast that they are still well above the median salary in many cities and areas, which is now making it even more difficult for buyers to afford the homes they are interested in. In turn, Sellers are feeling faced with selling lower than they hoped, or holding to see if the market returns. This makes it difficult for sellers to see a way to retain their equity when there aren't any buyers that can afford the home. Buyers can't pay the high prices with high-interest rates, and sellers aren't ready to slash prices just yet, some sellers and buyers are in a standoff.
There is also a great deal of uncertainty and volatility in the economy right now, with concerns about inflation and the potential for a recession. This is why the Federal Reserve is raising the Fed Funds Rate (interest rates), to stave off inflation and try to avoid a bad recession. This can create additional stress and instability for both buyers and sellers, making it difficult to predict the real estate market's future direction.
Since May of 2022, Las Vegas home values have been trending downward. Here is a snapshot of home values for the entire year. We started higher than where we look to close out the year.
December is tracking at $425K as of December 12th, 2022.
Despite all the doom and gloom, you see on the news every day about the state of our economy, there are still plenty of reasons to feel optimistic. Market uncertainty creates opportunities for both buyers and sellers alike. Some sellers and buyers are working together to compromise and make the best situation for them both.
Buyer's Opportunity: There are more homes available on the market for buyers to purchase. Buyers have more time to look around and figure out what kind of home suits their family's needs. Versus the status quo for the past two years of being forced to write an offer and throw everything they have into a home, they may not be in love with. Buyers are also able to negotiate better deals on price and some are getting closing costs. Builders have been cutting prices, buying down rates, and giving closing costs too.
Seller's Opportunity: The sellers generally are still able to stay flexible in their negotiations, making it a win-win. The sellers that are selling homes in this market successfully understand the May Peak value is a past-time. They are willing to make more concessions such as offering closing costs and lowering prices, whether out of necessity (forced to move) or understanding the times. These sellers are still retaining equity because they aren't overpricing at May's values and then chasing the price to the bottom. The concessions they give, still allow them to keep a large portion of their equity while allowing buyers to enter the market at close to their price point. Buyers can use those funds to either buy down their rate or allow them to put more money down to make their payment more affordable. Sellers also still have demand in a sense, many buyers want to buy, but they just can't afford to right now. Sellers know when rates wane to the downside (below 6%), buyer demand will come back.
Rumor has it that hedge funds and investors are looking to pounce
on home prices sliding, they know buyers will come back to the market
and they want to get ahead of them.
As always I am closely monitoring the Las Vegas Market, in both residential real estate and commercial real estate for new developments. New market conditions emerge quickly and could affect your position in the real estate market. I will always do everything I can to help you navigate the real estate market, no matter what cycle it is going through.
So this holiday season, let's focus on the things that truly matter: spending time with loved ones, creating new memories, and looking forward to a bright future. Uncertainty in the real estate market should not ruin or dampen our holidays. I am wishing you and your loved ones a happy and healthy holiday season.
Please reach out to me if you have any questions or concerns about the real estate market, or if you would like to discuss your specific plans and goals. I am always here to help, and I look forward to continuing to work with you.