September 2018 Market Update: Bear or Bull Market

by grahamteam-chime-me

Q3 Market Update: Last quarter, we addressed whether June’s slight decline was a market change or coincidence. And the summer answered YES to both. September’s $300,000 average price was a 3.4% increase from June’s $290,000. 2018 year-to-date, the median price is 9% higher and September 2018 over September 2017 (year-over-year) is up 11.7%.

However, the market did shift from that of a crazy multiple offer condition on homes under $300,000. It moved to a more conventional home market with homes that are priced at market value obtaining a couple of offers. On the higher price point homes, the days a home is on the market rose slightly in September.

What is the cause of this condition? Supply. The number of available units for sale that does not have an offer is the definition of Market Supply for home sales. In June, there were 4,335 single-family homes available and 939 condos. While in September there were 6,148 single-family homes available and 1,356 condos. This is a 42% increase in inventory for single-family and 46% for condos from June. In September 2017, there were only 1,356 homes without offers available on the market, that is a 456% increase in inventory.

It is very uncharacteristic in any economic market for supply to increase at this rate. And for pricing to increase, normally these factors run in contrast to one another. If supply continues at this rate of increase, we expect to see pricing flatten or, for short period of time, decrease. What we have seen in the market for those homes that were being listed at a price point above market price, is that list price reductions are occurring in order for the home to sale. This shortens the gap between asking price and sale price on average. However, all indications on a broader range (such as over a year +) suggest that housing prices will continue to increase, just at a more moderate level. Remember list price is not market price, what a Buyer is willing to pay for a Home is Market Value.

As you can see, the playing field is beginning to level off between buyers & sellers.

Interest Rate

According to an article posted on BankRate.com in September. Here are predictions about where the average rate for 30-year fixed mortgages is headed in the near future.

-The Mortgage Bankers Association predicts it will rise to 4.8 percent by the end of 2018.
– Freddie Mac expects it to average 4.6 percent for 2018 and jump to an average of 5.1 percent in 2019.
– Realtor.com says the rate will average 4.6 percent and reach 5 percent by year-end.

In last June’s Market Report, we shared the following PURCHASE POWER OF A BUYER. And how it is affected by just a 0.5% increase in rate. We thought the information was worth repeating since rates are still such a hot topic.

If a Buyer makes an annual income of $75,000, at today’s current FHA 30-year mortgage rate (average is 4.5%) the typical maximum amount they can qualify to purchase is $290,000. If interest rates rise by 50 basis points to 5%, the same Buyer at the same income has their purchasing power reduced to $275,000. This is a 5.1% decrease in the purchase price they can now afford.

Disclaimer: Qualifying for a loan considers many factors, this estimate is based solely on income ratios. We are not a mortgage lender; therefore, we cannot quote payments or rates.

Economic Growth

One of the economic figures that drive housing prices is the average salary increases, which is directly tied to job growth. In June, Nevada grew at 2.8% well above the national average of 1.6%. In addition, unemployment fell to 4.7% which is the lowest it has been since 2007. Wage increases tend to trend higher.

The top five zip codes with the GREATEST percentage of appreciation were:

Zip codes with the HIGHEST average sales prices were:

How does the Las Vegas housing market compare to the national market?

New Home Sales dropped 5.5% in September to a two-year low, according to a CNBC article on October 24th. The reason given was mostly tied to the rise in interest rates and the decline in the Buyer’s Purchasing Power as a consequence to the rising rates. If the new home sales rate were to remain at September’s levels than there would be 7.1 months of inventory. September has been a volatile month for the last few years, so before forming any opinions on the new home market we would like to see how 2018 finishes. However, Builder stocks are at record levels and climbing so that tells us that investors feel the market will be heading in the upward direction.

Nationally, year over year sales has dropped by 11.6%. National Association of Realtors is reporting that one of the leading indicators for the existing home market, newly signed contracts, rose .5% from August. On the national level, we should see these contracts effect closed transactions by the year of the year.

How does the Gross Domestic Product (GDP) affect housing? It is all in consumer confidence. October’s GDP rates were reported at 4.2%, breaking most expectations. When consumers are confident in their financial future, they make more capital purchases and the number one purchase is a home.

Crown Point’s Takeaway for Quarter 3 of 2018

If you have additional questions, give us a call at (702) 930-9551. Curious what your home is worth? Click here to find out! If you would like to look at all current properties, click here. You may check other market update blogs here.