Home prices in the majority of metro areas across the country — places such as Nashville, Los Angeles, Austin and Indianapolis — have eclipsed their pre-recession peak.
But not in Las Vegas.
The tourism mecca, surrounded by stucco houses in the sprawling suburban area, was the poster child for the financial crisis that gripped the nation a decade ago. Foreclosed and underwater homes littered the desert expanse after the median sale price for single-family homes peaked at $315,000 in June 2006 and plummeted to $118,000 by January 2012.
Since then, the region’s home prices have soared again, often logging double-digit growth over the prior year and more gradual increases month to month. The steady growth led the Greater Las Vegas Association of Realtors to predict the approach of that coveted milestone — the pre-recession price peak.
“At the rate we’re going, with prices going up by nearly $5,000 per month, it’s possible that local home prices could finally get back to their all-time peak sometime later this year,” said GLVAR President Chris Bishop noted in a June news release.
Then home prices largely stalled over the summer. After reaching $295,000 in May, the median price for single-family homes fell to $290,000 in June. It stayed the same in July but climbed back to $295,000 in August.
So has the plateau shuttered the possibility of Las Vegas hitting that $315,000 median price point again? Probably not, local real-estate leaders say, but it may take a bit longer.
“We still have demand. We have buyers looking for houses,” said Heidi Kasama, president of Nevada Realtors, a statewide association. “I don’t see it signaling any downturn or crash or anything like that. I think it’s just more of a steady market we’re entering.”
If median home prices don’t hit $315,000 by the end of this year, Bishop said he expects it will happen during the first quarter of 2019. He said an uptick in inventory — a welcome change for homebuyers — may have contributed to the flattening of home prices this summer.
The real-estate association reported 5,818 single-family homes for sale, without any offer, by the end of August, which is an increase over the previous month and up 12.8 percent compared to one year ago. July ended with 4,787 single-family homes on the market without offers.
“I’m hopeful for steady appreciation in our marketplace,” Bishop said.
When it comes to the summer months in the housing industry, there are generally two schools of thought: Sales can increase because families want to move before the start of a new school year. Or sales can lag because people take vacations or want to avoid moving during the hottest months.
Brian Gordon, principal at local research firm Applied Analysis, said the leveling off of home prices this summer shouldn’t set off any alarms.
“During the last several years, prices have been escalating at a pretty respectable pace at a year-over-year basis, but seasonally during the summer months, they tended to flatten out a bit,” he said.
During the summer months, Southern Nevada’s median home prices hovered around $200,000 in 2014, $220,000 in 2015, $235,000 in 2016 and $260,000 last year.
Gordon doesn’t expect home prices to nosedive anytime soon, even if they do meet or exceed the pre-recession peak. Unlike the boom days, there’s less speculation in the housing market, he said, and lenders are requiring buyers to have “more skin in the game.”
Even so, real-estate agents acknowledge the seller’s market can be a frustrating experience for first-time homebuyers or those with a more modest budget.
Kasama said some homebuyers were writing “six, eight, 10, 12 offers” and still not landing a house because of the stiff competition. After making multiple offers, some would-be buyers decided to hold off and rent until the market stabilizes, she said.
“It’s completely demoralizing,” she said. “They just give up.”
The situation benefits the rental market, hence the new apartment complexes sprouting across the valley. The apartment vacancy rate has been gradually declining since 2011, despite a few fluctuations more recently. At the end of the second quarter this year, the vacancy rate in the Las Vegas market was 7.2 percent, according to the Lied Institute for Real Estate Studies at UNLV.
Meanwhile, the Lied Institute report shows that apartment rental rates have increased and now average $1,003. The pre-recession peak was $876 in 2008.
Local economist John Restrepo anticipates housing prices will stabilize over the next year, but he said that doesn’t mean residential properties will become “magically more affordable” to buyers.
Interest rates have been creeping upward — now roughly 4.6 percent for a 30-year, fixed-rate mortgage — meaning house payments will be more expensive. Despite an overall healthy economy and low unemployment rate, the escalating home prices and increased interest rates have proven to be too much for some buyers, Restrepo said.
“There are more and more people talking about an affordability issue in Southern Nevada as it relates to homebuying,” he said.
A key indicator to watch, he said, is the Housing Opportunity Index released by the National Association of Home Builders and Wells Fargo. The index takes into account median family income and housing costs to measure affordability.
The Housing Opportunity Index for the Las Vegas area, based on a four-quarter moving average, fell to 56.4 percent during the second quarter this year.
“If it gets below 50 percent, you start getting worried because then less than 50 percent of families earning median income cannot afford (a house),” Restrepo said.
But the flattening median price this summer shouldn’t cause too much concern, Restrepo said. Barring any catastrophic events, Restrepo said he doesn’t foresee dramatic changes to the region’s housing market.
Potential homebuyers, he said, should pay attention to market trends and avoid making emotional decisions.
“Don’t put pressure on yourself that you have to buy,” he said. “Every time that happens, people have a tendency to overpay.”
Disclosure: John Restrepo co-publishes the Stat Pack, a client of the communications consulting firm owned by The Nevada Independent’s managing editor, Elizabeth Thompson.