Updated September 10, 2022 - 11:31 am
Last year, when buyers were snapping up houses in Las Vegas at a rapid clip, it was anyone’s guess how long the hot streak would last.
Now that it’s come to an end, we’re left with another question: how long will the market keep slowing?
Buyers are pulling back in Southern Nevada as higher mortgage rates wipe out the cheap money that fueled America’s unexpected housing boom after the pandemic hit. Sales totals are tumbling, available inventory has soared, and sellers are increasingly dropping their prices.
Las Vegas is far from alone, as markets around the country are also hitting the brakes. And two housing trackers told me Friday they don’t expect sales to rebound quickly.
Jeff Tucker, senior economist with listing site Zillow, noted it’s difficult to forecast but said the national sales slowdown “could drag on for another year or two,” adding that there seems to be a “standoff” between buyers and sellers.
The flow of new listings has slowed as existing homeowners may be carrying a lower mortgage rate than what they could land on a new purchase. They also probably bought their place for less than what they would pay now, he indicated.
They can wait for market conditions to improve, Tucker said. Meanwhile, people looking to buy a home also face higher mortgage rates, so they could be unwilling to pay what sellers want.
“Until and unless mortgage rates drop substantially, I don’t quite see how that standoff gets resolved,” Tucker said.
Taylor Marr, deputy chief economist with real estate brokerage Redfin, figures the nationwide sales drop has bottomed out. But, he added, it may not rebound for another year or two.
As he sees it, mortgage rates would have to tumble for more buyers to come back.
The average rate on a 30-year home loan last month was 5.22 percent, down from 5.52 percent in June but up from 2.84 percent in August 2021, mortgage buyer Freddie Mac reported.
Falling prices could, in theory, spur more demand. But it doesn’t send a good signal to buyers or sellers about market conditions, Marr indicated.
Heating, then cooling
All told, the months-long housing slowdown, locally and nationally, marks a swift change from the heated market of the not-so-distant-past.
Fueled by rock-bottom mortgage rates that let people stretch their budgets — and by an influx of out-of-state buyers — Southern Nevada’s housing market last year accelerated to its most frenzied pace in years. Prices hit all-time highs practically every month, house hunters flooded properties with offers and homes sold rapidly.
However, the market started hitting the brakes this year as mortgage rates climbed higher.
On the resale side, just over 2,000 single-family homes traded hands in Southern Nevada last month, down almost 38 percent from August 2021. Also, nearly 8,000 houses were on the market without offers at the end of August, up nearly 146 percent year-over-year, trade association Las Vegas Realtors reported.
The median sales price of such homes was $450,000 in August, down 3.2 percent, or $15,000, from July. Prices were still up 11 percent from a year ago, but this marked the third consecutive month that prices fell, after not dropping for more than two years.
Moreover, 42 percent of Las Vegas-area listings had a price drop last month, up from just 9 percent in February, according to Zillow’s Tucker.
So, how long will the market keep slowing? Your guess is as good as mine.
But for now, don’t expect it to shift into overdrive again anytime soon.