The Highs and Lows of Southern Nevada’s Hot Housing Market
By Bryan Horwath (contact)
Monday, February 14, 2022 - 2 a.m.
When considering the Las Vegas housing market outlook for the rest of 2022, mortgage loan officer Corey Gehlken thought of a client he recently helped.
The client, he said, had made offers on more than two dozen homes during a one-year period, and none were accepted.
“It can be discouraging to deal with that much rejection,” said Gehlken, a senior loan officer with Nova Home Loans in Las Vegas. “She was thrilled when it finally happened, and she’s in a great situation now, but it was a long road.”
The housing market in Las Vegas is expected to remain in rarefied territory for many who want to step into the fray, especially first-time buyers, for the rest of 2022.
In December, according to the Las Vegas Realtors trade group, the median sales price for an existing home in Southern Nevada was $425,000, an all-time record. By contrast, the median price for a home in Las Vegas at one point in 2012 was $118,000 following the housing crash that essentially caused the Great Recession.
Largely because of a steady influx of new residents from states like California, and a limited supply of houses, most experts don’t foresee a significant drop in home prices in Southern Nevada through 2022.
In addition, interest rates, which will affect mortgage rates, are expected to rise this year.
During a December news conference, Federal Reserve Chairman Jerome Powell said the country’s central bank will likely raise rates multiple times over the course of the next three years. He said three interest rate hikes could take place this year alone. The Federal Reserve has kept the benchmark rate near zero percent since the start of the pandemic.
According to a recent news release from the Federal Home Loan Mortgage Corp., the average rate for a fixed 30-year mortgage in the U.S. was 3.55%. At the same point in 2021, it was 2.7%.
“Rates are going back up,” Gehlken said. “Where we are today, if you look at history going back to the 1970s, we’re still really low. But when you compare to the low rates we saw because of the worldwide pandemic, you notice those increases.”
The nearly nonexistent interest rates, of course, weren’t going to last forever, and with the Federal Reserve set to taper its bond-buying program—largely as a result of soaring inflation—first-time homebuyers could find themselves boxed out.
“A lot of people did not take advantage of those crazy low rates,” Gehlken said. “Rates are going up because [the Fed] wants to counteract this horrible inflation situation. During the pandemic, one of the big reasons why rates dropped so low was the government was buying mortgage bonds at billions and trillions of dollars a clip.”
A rise of just half of a percentage point in a mortgage interest rate could mean an additional $30 to $90 on a monthly payment for a loan in the range of $350,000, Gehlken said.
That wouldn’t price everyone out of a qualifying slot, but it would be significant to some, especially given that Americans have been forced to pay more lately for goods and services.
Last year, according to the U.S. Consumer Price Index, prices rose 7%, the largest jump during a 12-month period since 1981-82.
“Even at high threes to mid-fours, we’re still low,” Gehlken said. “Half of a percent won’t throw off people in higher income levels, but a rise in rates can really hurt the first-time homebuyer.”
Zillow, the real estate website known for estimating home values, estimates that Las Vegas-area home values will rise about 18% this year. That’s after an increase of between 25% and 30% last year.
Nationwide, Zillow’s research department, in a memo released in December, expects the housing market to be “anything but slow” through the end of the year.
If those predictions hold, significant barriers will remain for those who hope to enter the housing market or upgrade within it.
In the six-county region in the Los Angeles area, according to real estate data firm DQNews, the median sale price of an existing home hit an all-time high of $697,500 in December. That figure represented a 16% increase from the same month in 2020.
“People are not going to stop moving here, especially since remote work is so popular now,” said Mark Vitner, a Wells Fargo economist. “I think a lot of people are just semi-retired or working remotely. They likely sold a home in a high-priced market and moved here, where houses can be more affordable. In Las Vegas, the housing market is much stronger than the overall economy, which is still recovering from the lack of convention business.”
To make matters worse, there aren’t many homes available for those who can enter or improve their standing within the market.
Last month, Las Vegas Realtors president Brandon Roberts said the area had about a one-month supply of properties available for sale.
That represented, he said, a supply pipeline that “has rarely, if ever, been lower.”
As far as having a new home built, Nat Hodgson, CEO of the Southern Nevada Homebuilders Association, said 2021 was the most difficult year that he’s seen in the homebuilding industry here in the past three decades.
That’s largely due, he said, to worldwide supply chain issues, which have been caused by the pandemic.
Hodgson said he knows of builders who have, in recent months, rented trucks to drive to Arizona in attempts to find commonly needed things like baseboards or appliances at home improvement stores.
He was surprised that builders completed about 14,000 homes and townhomes in Southern Nevada, the highest figure in about 15 years, last year with all the obstacles they had to face.
“You can work with delays—in person or online—but when you can’t get stuff, you can’t get it,” Hodgson said. “I feel so bad for the builders. The supply chain problems won’t change a lot this year. It’ll be another long year.”
This story appeared in Las Vegas Weekly.
The opinions, forecasts, educated comments, and predictions expressed in this article above are a reproduction of the article written by BRIAN HORWATH with contributors as noted, This article was originally posted on `LAS VEGAS SUN / and VEGASINC’ website .
GT/AD Studio makes no claims or assertions about the validity of the same. As an additional closing comment, we previously stated, our 2021 experience indicates that the cost of construction, qualified labor shortage, and material scarcity has had a dramatic impact on project delivery expectations and, ultimately, project go/no go decisions.