Las Vegas Housing Market Update | 3rd Quarter, 2022

Third quarter ended as a stare down between Sellers not willing to drop prices further and Buyers not willing nor able to offer asking price, even at the reduced asking-price rates. 2022 has been a pendulum swing for home prices and home sales activity. As we reported in our 2^nd quarter market update, the median price for single-family homes peaked in May at $482,000. By August, prices dropped 9.3% to $450,000. Then, August and September prices plateaued at $450,000, however, buyer activity substantially dropped.

As you can see in the graph below, the sales activity for single-family homes in the 3^rd quarter has been between 9,000 and 10,000 homes closed for 4 of the last 5 years. In 3^rd quarter 2022, the market sold less than 6,000 homes. From the previous 4 years average, sales activity decline by 40%. We ended 3^rd quarter with 4 months of inventory and rising. This places us well into a Buyer’s market. The positive light is that year-to-year, median sales price for a single-family homes are still up from September 2021 by 10.7%. Moving into 4^th quarter of 2022, the median sales price declined 2.3% from September to $440,000.

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What needs to happen for the market to level back out?

The Rental Market

Last quarter, we reported that landlords were the ones winning with record high lease rates in both single-family homes and apartments. By the end of the 3^rd quarter, the median lease rate was $2,100 for an approximate 1,836 sq. ft. for a single-family home. However, the tide is starting to shift and lease rates are beginning to drop. We can expect rents to go down in the 4^th quarter.

What now for buyers & sellers?

We are in a time transition. No one likes uncertainty and so we wait and wait for the news to tell us the market has shifted. The problem is the news reports and media over-dramatize and report late. By the time they get the market stats out, the market has already moved. The answers are in this question: When is the right time for you to buy and/or sell? Here are some scenarios you and your family might be in:

1. If the market were to continue to decline and I purchased right now, would I have anxiety? Then it may not be right for you.
2. If the right home were to come on the market, meet all your criteria, and you’re ok with the market dropping. You also expect normal home price appreciation to kick in after the correction is over. You are more concerned about getting the right home at the right location than trying to time the market for the bottom. Then the right time is when you find the right home.
3. You are tight on cash and need Seller assistance on closing costs, or you have other circumstances in which you need a Seller’s assistance. If this is you, you’ll want to enter the market before the fray re-enters the market. While inventory is higher, you have more options, and you have more negotiation power to obtain the items you need to purchase.
4. You are a 1099 or self-employed, or you anticipate your income to drop off and affect your ability to qualify. The 2-year average could hurt your ability to purchase the home you want if your income drops off. However, always purchase within your budget and not overextend yourself.
5. Do not become house poor. Unless you work, live, and entertain in your home and that is where you want to spend all your time, do you over purchase and become tied to your home.

Housing Snapshot • October 2022

Before jumping into our thoughts for the remainder of 2022, let’s review a snapshot of where we are for the 3rd quarter of 2022:

The Graham Team’s Takeaway

What Can We Expect to See in the Remainder of 2022?

1. Sales Prices: Median sales price will drop. We are expecting the year to end around $425,000. We expect the gains of 2022 to be reduced to a range of 0% – 2% appreciation.
2. Interest Rates: If inflation levels out, we feel the market has priced in current conditions and that rates will fluctuate between 6.5% – 7% for the remainder of this year.
3. Inventory: Until Buyer demand returns, even with the limited supply of housing, we expect inventory to remain in the 4-month range.
4. Rental Rates to Drop: We expect to rental rates to drop around $1,850 at year’s end for a single-family home.

Buyers have opportunities they didn’t have 30 days ago

1. More options: Buyers have a lot more homes to choose from today. They are not being rushed or purchased into making a quick decision.
2. Less out-of-pocket expenses to buyers
   1. No more over-appraisal value offers
   1. Sellers willing to contribute to buyer’s closing cost
   1. Sellers willing to accept offers with programs with down payment assistance
3. More favorable buyer terms
   1. Repairs requests will be more evenly considered now
   1. Buyers can really think about the homes they toured and decide on the best one for them
   1. No competing with multiple offers
4. Affordability: With interest rates expected to remain in the in 6% – 7% range through the next year, Buyers may have to reconsider the size home they can afford to purchase, even with prices dropping.
5. Renting will still be expensive; however, rents will drop.
   1. Evaluate the amount you’re willing to pay to your landlord for their equity vs. the potential for future price reductions.

Sellers: become comfortable with today’s market value for your home

1. If you do not have to sell right now, we recommend waiting for the market to settle a little. However, if you do need to sell within a year, consider that prices may continue to move downward. If you are selling and buying, then you get the upside of the Buyer’s market today.
2. Price to market: over-pricing your home will most likely result in a lower price to you in the end. Look at the trends while keeping in mind that the end of May & early June was the height of the market. We are still trending downwards.
3. Marketing of your home will be extremely important. Having a high-quality online presence is crucial.
4. Patience. It will take longer to sell. Plan on 60 to 90 days.