Why we don’t see significant priced drops in lower price ranges in Las Vegas housing market in 2019
Our Las Vegas real estate market forecast for 2019 is actually a simple one. If the current trends continue, the severe shortage of homes, condos and townhouses listings in the MLS should end in 2019 and with it, the double-digit price appreciations of recent years. But to what degree? When will you see actual price drops? Will the price drops come by the end of Summer?
We will answer these questions in this video.
Why we don’t see significant priced drops in lower price ranges in Las Vegas housing market in 2019
Las Vegas real estate market is transitioning from about 2 years of very tight listing inventory for residential real estate, which resulted in double digit price gains, which wouldn’t have happened otherwise. However, things started to change in September and our inventory has risen sharply.
- In this video we will talk about how the Las Vegas housing market affects single family homes in different price ranges and the effect is not the same in all price ranges.
- We will discuss Las Vegas real estate market for condos and townhomes separately.
- Warn against irrational exuberance by those who are looking for significant price drops, unless we get an avalanche of new listings.
- And finally make a forecast for 2019.
However, before we continue, we must note that Las Vegas housing market updates are like a snapshot in time and the past 15 years have shown us that things can change very quickly.
And additionally, please note that median sales price shows the median price of what buyers are buying. But it doesn’t account for the square footage. It is the median per square foot that shows bang for the buck and is a much better measure of whether or not home prices are going up or not. As we have shown in our luxury home market report in higher price ranges, while the median price of houses has decreased, the median price per square foot is actually increasing. This means that buyers are buying in lower price ranges while paying higher prices for the same luxury houses year after year.
Las Vegas real estate market forecast for single family houses
As we have always written, pricing is a function of supply, or active listings inventory, and demand, or monthly home sales. In the past 3 years the annual home sales have been hovering in the 32,000-34,000 range, so they have not changed much. An average of 2,667 to 2,833 houses have sold per month in the past 3 years. However, an average of 3300 houses have sold from March to August in 2017 and 3035 houses have sold in 2018 in the same period, which we will come back to later.
This graph shows the active listing inventory of single-family homes versus the monthly sales. In July 2016 we had 9,900 active listings, this number fell to 8,059 listings by January 2017 and fell further to less than 5,500 by February 2018. It stayed in a narrow range until March 2018 and then started to rise very quickly. By November 2018 it rose by 60% to 8,887 before falling in December, which is expected.
Months of active listing inventory of single-family houses
As we explained in our last video, the Las Vegas housing market may be slowing down. The best way to show supply versus demand is the months of active listing inventory, which is calculated by dividing active listings by the unit sales. Just a quick note, these charts don’t have a decimal point and show 2.4 as 2 and 2.6 as 3.
Additionally, in order to prevent saying “months of active listing inventory” repeatedly in this video we will just call it “the inventory”.
The inventory has more than doubled from 1.8 in March 2018 to 4.2 in December 2018. However, seasonally lower sales numbers from September to December have contributed to the raising numbers.
With increasing listings, we predict that the sales numbers will go up as well. In 2019 we should again surpass 3,000 home sales from March to August and in order for the inventory to hit the neutral 6 months, we will need about 18,000 active listings. This means that we have to more than double the number of active listings to get there. If we add 1,000 additional net listings per month, and that is a big if, it is unlikely that we hit 6 months’ worth of inventory until the winter of 2019. So, don’t look for price drops in lower price ranges any time soon.
By January 11th of 2019, the number of active listings is actually down by 250 from December, so it is very unlikely that we add 1,000 net listings in January.
Those buyers who can’t wait for price drops will not like what we are saying and dislike this video, that is just fine and we will appreciate your participation, but please add a comment about what you disagree with.
The median price of Las Vegas homes is at $298,500 and has not changed much since September, which has been normal except for the big listing crunch years of 2017-2018 and has appreciated by 11.4% in 2018.
However, the bigger listing inventory doesn’t affect all price ranges the same.
Las Vegas housing market for houses priced less than FHA loan limit
Those who need a bigger loan need to get a conforming conventional loan with the loan limit of $484,350. 29.8% of all home sales are in this price range.
The inventory in this price range is a month or two higher than those which can be bought with an FHA loan.
The median price of houses that can be purchased with a conventional loan has been hovering between $365,000 and $370,000 for the past 2 years and hasn’t changed much.
4 to 5 months of inventory led to median price per square foot by primary year to raise by $8 and 2 to 3 months led to an increase of $14 per square foot. Now if you multiply these, for example, 3000 square feet then you get about $24,000 to $42,000 price gains for these houses. If price drops are ahead, they will come down in this price range much earlier than those that can be purchased with an FHA loan.
So, home prices are appreciating while the median price is virtually unchanged.
Las Vegas real estate market for houses that are priced at $485,000 to $1,000,000
Only 10.2% of home sales are in this price range or higher. The inventory in this price range has been hovering around 9 months for 2016, and around 7 months for 2017 before falling to around 5 months in 2018 and raising back in the last quarter.
This chart shows the median price of homes sold in this period and it is practically unchanged.
Now let’s take a look at the median price per square foot and it has risen, albeit slowly, while we have had 9 months’ worth of listing inventory in 2016 and 7 in 2017, home prices didn’t actually come down.
Las Vegas housing market for Luxury houses that are priced higher than $1,000,000
Please see our detailed discussion in our Las Vegas luxury home market video, which we will not repeat here in order to save time.
Las Vegas housing market forecast for condos
The active inventory of condo listings stands at about 1,360, save December which is expected. This number has just about doubled from January, 2018. Please note the lower sales numbers after August, which in turn raises the months of listing inventory.
The listing crunch for condos has been more severe than single family houses which in turn led to amazing price gains. Again, decreasing sales numbers after September have contributed to the big gain in the inventory.
The median price of Las Vegas condos has hovered around $150,000 for the past quarter, save December and it is an amazing 51% higher than only 2 years ago.
If the unit sales match last year, we need a net gain of 1,000 units to reach 6 months-worth of listing inventory, so don’t look for price drops for cheaper units until that happens.
Las Vegas real estate market for townhomes
As we have mentioned before, the housing market for townhouses is similar to single family houses. The median price of Las Vegas townhouses is $205,500 and has appreciated by 10.8% for 2018. However, this number is $13,500 less than the high of September.
But the median price per square foot has not decreased at all and the September number is actually $3 less than December. Again, we don’t see any price drops in lower price ranges any time soon.
If you listen to the news or read newspapers, you see many articles about Las Vegas real estate market that are saturated with comments about big increases in listings and lower sale numbers which should drive prices down.
This can lead to the game of chicken, it is possible that buyers decide to wait for price drops and investors become scared enough to try to unload their units while the getting is good.
It is awfully difficult to make a prediction while we are in a transition period because we just don’t know what will happen in the future. All we are doing is making an educated guess. However, the next quarter will decide what will happen to the Las Vegas real estate market. But one thing is certain, we will have small price gains in units that can be purchased by FHA mortgage and possibly conventional mortgage until the months of active listing reaches 6 months, possibly the winter of 2019. But what happens afterwards is unknown at this time.
Lastly, we have about 17 billion dollars in new large commercial projects that are currently under construction here, and billions more in smaller projects. The economy is currently on fire, so unless something drastic happens, demand will be going up unless the game of chicken is afoot.
If you want to buy, sell or invest in Las Vegas homes, condos or townhomes, please call us at 702-478-7800. You can find our contact info and blog with the embedded video and video transcript in the video description. This was just one video, we have a lot more for you, like home buying tutorials that discuss the buying process from A-Z. just check out our web-site.
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On behalf of The Saber Team, this is Karen Saberzadeh of Realty One Group and www.lasvegas4us.com wishing you a great day.