I haven’t written for a while and wanted to do a summary of where the Las Vegas real estate market stands today. Today there are 8,711 single family residences on the market. Over the last 30 days the sales of 2,520 residences closed. Given those numbers, at the current pace of sales it would take about 3.5 months to exhaust the current inventory. This number is called the absorption rate. As a rule of thumb, when the absorption rate is greater than 6 months it is considered a buyer’s market where the buyer has the advantage in negotiating price. When the absorption rate is less than 6 months the advantage goes to the seller and it is considered a seller’s market. Accordingly, the numbers suggest that we are in a fairly strong seller’s market. This has been the case since at least January 2012. Since then price action in the Las Vegas residential real estate market has confirmed its seller’s market status.
During January 2012, 2,930 homes sold at a median price per square foot of $64. Last month 2,863 homes sold at a median price per square foot of a little over $119 per square foot. Accordingly, since January 2012 the median value of homes listed on the Greater Las Vegas MLS have risen an astounding 86%! We are still a long way away from the $191 median price per square foot at which homes sold in May 2006, but unquestionably home values have made a healthy recovery. Many people whose homes were underwater, valued less than the amount owed, are now in the black. The portion of the market represented by short sales, sales where the sales price of the home is insufficient to pay all of the debt secured by the home, has decreased from 47.9% of sales in December 2012 to 6.6% of sales last month.
Of course this begs the question of where the Las Vegas real estate market is going from here. The upward trend, although not quite as steep, still seems to be in place. Much of the 86% increase in Las Vegas home prices was between January 2012 and June 2014 with a 72% increase from $64 to $110 per square foot during that 2 and a half year period. The market then went flat and ended 2014 with homes selling at roughly the same $110 they went for in June. It looked like the party might be over. However, prices again began to rise and went up a little over 8% from December 2014 until last month. The increase over that period was fairly steady. However, in the next few months we may see some seasonal flattening in price increases which often occurs in mid to late summer and continues until early spring.
Although one can never know for sure, I don’t see anything to suggest that the general upward trend is coming to an end. The only significant event on the horizon is an increase in interest rates when the Fed decides it is time to move. Presumably this would have an affect on home demand as buyers who need mortgages to purchase find they are going to have higher monthly payments. It is hard to say how significant that impact will be, but the Fed has suggested that its rate increases will be slow and gradual. If that is the case, those rate increases should not derail the home price recovery.
In the next few days, I will post a chart of the overall trend of Las Vegas home prices that I have discussed above. The price trend, however, although generally similar throughout the Las Vegas valley differs from neighborhood to neighborhood. If you would like to see the change in your neighborhood, send me an email.