The Las Vegas Real Estate Market 2018

The following graphic, based on Greater Las Vegas Association of Realtor data, says it all.  The number of sales (in purple) are falling while the average price of a home (in green) is rising.  As I discussed in a previous article this change in market conditions is playing havoc with the market and it has since 2015.  For sellers, they want to increase the sales price of their homes in keeping with the trend.  For buyers they are having to bid higher and higher to purchase the home that they want. 

Appraisers recognize the changes that have been happening but they cannot simply increase their appraised values with the assumption that sales prices will keep on increasing indefinitely.  For an appraiser having recent sales in the same neighborhood, or the sales of "model matches" helps to bring values to the current date but they won’t bring values to where they will be in the short-term future.  Appraisal reports provide a current market value opinion, what a willing seller and a willing buyer will agree to, and market conditions (value changes for time) are part of that determination.   

What’s happening however is that a home with a recent valuation at $ 250,000 is being listed at $ 275,000 and getting multiple offers at $ 295,000.  That offer may be higher than the highest asking price for a similar home or “model match” in the neighborhood.

Home builders cannot keep up with demand and if you visit their models you will find that if you are interested you will end up on a waiting list.  It could be several months before they can build your new home or you may end up on a list just to select the lot.

The Las Vegas housing shortage is generally explained away as being a short-term problem that will evaporate quickly, as predicted by Zillow, in 2018.  They predicted a 5.8% increase in housing prices in Las Vegas through 2018 which will likely be wrong, and people wonder about their valuation models?

Real estate agents and appraisers understand a housing shortage exists, but you have to ask yourself why is it so bad and why does it appear to be getting worse?  Yes, there is an “inventory” problem and I think there are a number of reasons for it, most of which have been talked about, but some reasons are simply glossed over.

Interest rate increases are important, the continued upward movement in rates is a disincentive for those who own homes to sell them and buy another.  Higher prices are great if you are leaving the area but if you sell and have to enter a very competitive housing market that pocket full of money your gains are not that important.  Baby boomers are not selling as many homes as they used to since they are getting older and they are no longer as active in the market. 

The fact that Nevada has no income tax brings people from California, and they are increasingly moving into Las Vegas.  If you watch the license plates you will see many of them in the parking lots of new home builders and their models.  Besides massive tax savings our housing prices are still cheap compared to CA even with our modest increases.

The fact of the matter is that we have a somewhat large influx or in-migration of people into Las Vegas as evidenced by U-Haul statistics.  Las Vegas was noted in 2017 to be the # 6 destination in the U.S., and that kind of data tells you just how strong the migration is.  So, demand for housing is increasing.  It’s not just a supply side issue anymore.

If you are an agent hoping that your appraiser will increase your appraisal by 25% for changes in market conditions over a few months you may be disappointed.  If the data exists to confirm a large increase an appraiser will use it and the results may be what you want.  If there is no hard evidence, just a number of contingent / pending sales, appraisers don’t know what the actual sales prices of those homes will be and are less likely to make a “leap of faith.”  Appraisers are supposed to be making decisions based on closings, which is factual, and not just based on the fact that some specific buyer and seller are willing to contract for an absurdly higher price than has been paid in the past.

Update December, 2018:  Ok, so the market has leveled out, and after six months of a short supply situation with increasing prices we are back to an in-balance situation.  I'm still waiting for the "crash" predicted in California.  If it doesn't happen in the next 6 months then I would say those predicting doom were totally wrong.

For more appraisal information contact Glenn J. Rigdon MA, MRICS, IFAS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or http://www.horizonvillageappraisal.com, or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/

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