Las Vegas’ housing market isn’t being kind to many people these days.
Following last year’s buying binge, house hunters have faced a sharp jump in borrowing costs and big price gains over the past year, and they’ve pumped the brakes on purchasing.
Sellers have increasingly slashed their prices, faced a glut of competition, and dealt with a shrinking pool of people who can afford to buy a place.
Southern Nevada’s market appears to be in a logjam, and there’s no telling when it will break through.
“It’s impossible for people in this market to afford these homes, and so something’s gotta change,” said Nicole Bachaud, senior economist with listing site Zillow.
Bachaud, who spoke with me last week at the National Association of Real Estate Editors conference in Atlanta, said Southern Nevada was once a “very affordable area,” but that’s “not the case anymore.”
Prices rose rapidly during the pandemic as the market became “really inexpensive very quickly,” she said. Sellers also face the prospects of a much more expensive purchase on a new place, which may persuade them to sit tight.
Home values ticked lower in Las Vegas in recent months, helping “soften” the market, but it’s “not really making things more affordable,” Bachaud said.
The median sales price of previously owned single-family homes — the bulk of the market — was $450,000 last month, unchanged from August but up 10.7 percent from September 2021, according to trade association Las Vegas Realtors.
Prices leveled off after sliding for three consecutive months, down from a record-high $482,000 in May.
Buyers picked up 2,030 houses in September, down 36.7 percent from the same month last year, while 8,121 houses were on the market without offers at the end of last month, up 134.5 percent from a year earlier, the association reported.
With buyers pulling back, price cuts have become increasingly common in Southern Nevada. According to Zillow, 42 percent of Las Vegas-area home listings had a price drop in September, up from just 9.3 percent in February.
Of course, Southern Nevada is far from alone in seeing the market cool off. Nationally, the pace of resales fell for the eighth consecutive month in September, with sales down almost 24 percent from September of last year, the National Association of Realtors reported.
On the construction side, U.S. builders’ confidence in the market is half the level it was just six months ago, according to the National Association of Home Builders.
‘Wind out of the sails’
Robert Dietz, chief economist of the builders’ association, declared a “housing recession” this summer. Last week in Atlanta, he told me he still views it that way.
Buyer traffic for new homes has fallen to its lowest level in years, and about half of all builders are now offering incentives such as price cuts or lower-priced, or free, amenities, he said.
Locally and nationally, increased borrowing costs are throwing cold water on the market as the Federal Reserve fights inflation with higher interest rates. The average rate on a 30-year home loan was 6.94 percent this week, up from 3.09 percent a year earlier, mortgage buyer Freddie Mac reported.
“Mortgage rates have increased at the fastest rate in four decades, quickly taking the wind out of the sails of the housing market,” Freddie Mac Chief Economist Sam Khater said Friday.
Housing markets, especially Las Vegas’, are prone to ups, downs and other shifts. Sales and prices will eventually embark on a new direction, as they always do.
But where are they headed, and when will they shift course?
We’ll find out soon enough.