Archives

Latest on Las Vegas Home Prices

Las Vegas home prices continue to rise. If anything, the trend seems to have strengthened in recent months. For example, during the first half of last year prices per square foot rose 4.35% from $115 per square foot to $120 per square foot. During the first half of this year prices per square foot rose 7.26% from $124 per square foot to $133 per square foot.

It remains to be seen if this trend will continue, but it has remained intact since January 2012 and we will still need to move up over 40% to reach the home price heights of May and June 2006 when prices were $188 per square foot.

One thing encouraging the home price increases is the steady drop in inventory from November 2014 when there was a 5.3 month supply of homes on the market to the end of last month when the supply had diminished to 2.2 months.

Of course, even if the trend continues upward, there are likely to be some pull backs and not every home or neighborhood will participate with the same vigor. Every neighborhood has its own characteristics. For example, while the overall price per square foot of Las Vegas homes has more than doubled since January 2012, prices in MacDonald Highlands have risen only by 68% and prices in The Ridges only 23%. The reason for this is that homes in those communities are quite expensive and so a relatively small number of homes is sold in any given month. Also, because each of the homes in those communities has unique qualities, the price of any home sold is specific to that home. These factors result in price movement in those communities to appear erratic when looked at on a grand scale.



If you are planning to buy or sell a home in the Las Vegas area, please give me a call. I have broad experience. I have sold a $130,000 townhouse, multi-million dollar custom mansions, a $2.6 million lot, and everything in between. I assure you that I can help you.

Advertisements

Current Las Vegas Real Estate Market

Since hitting its low of $64 per square foot in January of 2012, by last month the median price of homes sold in Las Vegas had risen to $126 per square foot. Although we are not quite there yet, that 97% increase has gone a long way to bring the Las Vegas real estate market back to its pre-recession levels when the median sales price per square foot of Las Vegas homes hit its high of $191 in May 2006.

Although the rate of increase has slowed in recent months, the price increase trend has been fairly steady. (Although there are seasonal dips.) To illustrate this point, I have provided a chart below of the trend from January 2012 to August 2016, and, to focus on more recent data, a chart of sales during the last year.

In the last 30 days, 2,841 homes listed on the Greater Las Vegas Association of Realtors® MLS have sold in the Las Vegas area. Today, there are 8,069 homes on the market. This means that the absorption rate (the number of months that it would take to sell all of the homes on the market at the current pace of sales) is a little under 3. As a rule of thumb, any absorption rate under 6 is considered to be a sellers’ market. When I wrote about the trend of the market in September of last year the absorption rate was 3.5. During that same period prices have increased about 6%. So, if anything, the Las Vegas real estate market has gotten a little stronger over the last year.

Another indicator of the strength of the Las Vegas real estate market is that the median days homes are on the market has dropped from 32 days in September 2015 to 22 days last month.

Although house prices are not likely to rise at the pace of the early years of the recovery when from January 2012 to January 2013 prices rose 27%, with demand remaining strong it appears likely that a generally upward trend will continue.

To some extent this trend is supported by historically low mortgage interest rates and an increase in rates may dampen demand for homes to some extent. However, since its quarter point increase in December of last year, the Fed has again and again put off its next rate increase. The Fed is set to meet again on the 20th and 21st of this month and may make a move at that time. Although, even when they make their next interest rate move, they have indicated that they expect further increases will be slow and deliberate. Interestingly, after the Fed made the move to increase rates last December, rather than increasing in tandem with the increase in short term rates, mortgage interest rates actually declined.

Another factor suggesting at an interest rate increase will not have a dramatic effect on home prices is that 20% of homes purchases in Las Vegas last month were cash. Although this is not as high as the 54% of homes purchased for cash in February 2013, it demonstrates that there are still a lot of buyers in the market who won’t feel the impact of a rate hike.

GLVAR sales since January 2012
Click to Enlarge

GLVAR sales since August 2015
Click to Enlarge

Las Vegas Real Estate Market Trend

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.

Greater Availablity of Mortgage Loans

Bloomberg news reported today that according to a Federal Reserve survey of 98 banks there has been a “continued easing of lending standards and terms for many types of loan categories amid a broad-based pickup in loan demand.” Many potential home buyers have complained that it has been difficult to obtain mortgage financing even in cases where they clearly have the income to repay the loan and have generally good credit. This easing tread should make it possible for objectively qualified buyers to obtain financing.

Fed Says U.S. Banks Eased Loans Amid Broad Pickup in Demand

The article notes that the easing has been predominately with regard to prime residential real estate loans. This is a definite positive, since we don’t want to go back to the times when anyone whose breath could fog a mirror could get a mortgage. In any event, the real estate market clearly will benefit from the greater availability of financing for quality borrowers.

July 2014 Las Vegas Real Estate Market Trend Report

Here is a video that my assistant prepared illustrating how the market for single family homes in Las Vegas has performed since it hit bottom in January 2012. The report cover all of the properties sold through the Greater Las Vegas Association of REALTORS® MLS system, however, most neighborhoods have exhibited similar trends. If you would like information on any particular community, send me a text or email or give me a call.

Will the 3.8% Medicare Tax Apply to the Sale of Your Home?

You may have heard rumors that the Patient Protection and Affordable Care Act (often referred to as Obamacare) imposes a 3.8% transfer tax on all real estate sales and may be concerned that you will incur the 3.8% tax if you sell your home.

The origin of this rumor is the 3.8% tax on some investment income that was added to the legislation at the last minute to help shore up Medicare. Beginning on January 1, 2013, the new tax will apply to certain investment income, e.g. capital gains, dividends, interest payments, and net rental income, received by individuals with adjusted gross income of more than $200,000 and married couples with adjusted gross income of more than $250,000. All of the revenue derived from this new tax will be paid into the Medicare Trust Fund.

In examining the application of this tax to real estate sales, it is important to note that $250,000, in the case of individuals, and $500,000, in the case of married couples, of gain from the sale of a principle residence remains excluded from taxation under the federal income tax law and is excluded from the new 3.8% Medicare tax as well.

If you file your federal income tax return single, the tax will only apply with respect to the sale of your principal residence if both (a) you sell your home for at least $250,000 more than you paid for it (i.e., you have more than $250,000 of gain on the sale of your home), and (b) your adjusted gross income is more than $200,000. If you and your spouse file a joint federal income tax return, the tax will only affect you if (a) you have more than $500,000 of gain on the sale of your home, and (b) your combined adjusted gross income is more than $250,000. (If you are able to sell your house in this market for $500,000 or more than you paid for it, please call me and let me know your secret.) Even then, only that portion of your gain that exceeds the excluded amount of gain will be subject to the tax.

For example, let’s say you and your spouse bought your home for $1,000,000 and sell it for $1,525,000 (after the expenses of the sale) for a $525,000 gain. The maximum amount of gain that could be subject to the 3.8% Medicare tax would be $25,000, the amount by which the total gain exceeds the $500,000 exclusion. In this case the maximum amount of the Medicare tax would be $950. The final determination of the amount of the tax would also take into account the amount and type of additional income that is includable in your adjusted gross income.

Of course, you need to consult your accountant or tax advisor concerning the tax consequences of your real estate dealing. It is clear, however, that the 3.8% tax is not a general transfer tax on real estate. Although the tax may apply to gain on some real estate investment transactions, in today’s real estate market it will apply only to a small portion of the gain on a limited number of sales of principal residences.

The NATIONAL ASSOCIATION OF REALTORS has prepared a brochure that explains how the 3.8% Medicare tax applies to a variety of situations, both those involving gains from real estate sales and those involving gains from other types of investments. If you call or email me I will be happy to email that brochure to you.

The Las Vegas Real Estate Market is Changing

Because of the rapid changes in the Las Vegas real estate market, I have done a detailed analysis of what the market looks like TODAY. The changes are occurring so rapidly that by tomorrow this might be old news, but the trend is clearly in the direction of improvement. If you want to buy or sell a home in the Las Vegas Valley, particularly the area of Henderson around Seven Hills and Green Valley Ranch where I specialize, call me today and if you can’t call me today, call me tomorrow. I keep generally apprised of the Las Vegas real estate market and update my knowledge of the market in my area of specialization almost every day.

Today there are 4,300 single family residences (2,939 equity sales, 383 bank-owned, and 978 short sales) listed on the Greater Las Vegas Association of Realtors MLS as actively on the market.  In the last 30 days, 2,893 single family residences sold.
 
Over that 30 days there has been a slight increase in inventory (a few less than 200 properties). The number of bank-owned and short sale properties has remained relatively stable, so most of that increase has been attributable to additional equity sale properties entering the market replacing properties that sold.
 
Recently, I have been seeing properties moving through the market more and more quickly. Many properties are now receiving multiple offers within a few days of listing.  This is apparent not only in the lower priced properties where the buyers are often investors but also in properties over $200,000 which are more likely being purchased as personal residences.  To statistically examine just how fast properties are moving, I looked through the MLS for properties currently in escrow that had been actively on the market for 2 days or less before getting into escrow.  There are 1,478 of those!  Of those, 214 are properties that were listed for more than $200,000.
 
In the last 60 days 351 single family residence listings closed within 30 days of the listing. Fifty-eight of those closed for more than $200,000.  One of those properties was a property that sold for $2,500,000, received the offer that was accepted 2 days after being listed, and closed 3 days later!
 
Sales are occurring so fast that while I was writing this note 43 more houses showed up as closed! So right this second, the data show that 2,936 sold in the last 30 days.
 
It appears that the Las Vegas real estate market is healing.  I have not done statistical analysis of prices across the entire market, but I have in regions of my focus area and they are beginning to move up. Of the entire number of homes listed on the Las Vegas MLS that sold within the last 30 days, 59% sold for list price or more, 7% sold for 10% or more above list, and 2.5% went for 20% or more above list!
 
Given the supply and demand characteristics of the market that I have outlined above, now might be a good time to move if you have been considering buying a home in the Las Vegas area.  For sellers, it might be a good time to sell because it is clearly a sellers market.  This is particularly true if you have an equity position in your home and plan on moving up to a larger home.  Although you might be able to get a little bit more for your home down the road, by that time there will also be a corresponding increase in the price of the home you want to buy.  For example, say you have a home that you can now sell for $200,000 and you want to buy a home that is now selling for $500,000.  Next year you are able to sell your current home for $220,000. Of course during that time, the $500,000 home likely will have risen by at least the same percentage so you are now looking at buying that $500,000 home for $550,000.  You got $20,000 more for your home, but had to pay $50,000 more for the new one so you lost $30,000 by waiting.  Another thing that you might take into consideration is that more expensive homes have been increasing in price more rapidly than other homes.
 
So now is the time to sell and now is the time to buy.  If you want to sell a current home or investment property or by a new home or investment property or know anyone who does, send me an email at joani.pemberton@gmail.com or give me a call on my cell at 702-235-2869. Calling the cell is better for me, and I am available now. I can make it happen.