May 15, 2020

 

It’s an understatement to say that Las Vegas has been affected by the coronavirus outbreak dramatically.  Job losses are staggering as the tourism, casino, hospitality, convention, and restaurant businesses, pillars of the Las Vegas economy, have all been hugely impacted, resulting in a cloudy future for the city and its inhabitants.  How is all this affecting the real estate market in Vegas?

The Current Picture

The bad news first. The market has definitely been affected by the lock down. However, it isn’t as troublesome as are some other markets or as the news would lead you to believe.  Comparing figures from the multiple listing service of the Las Vegas Realtors, formerly known as the Greater Las Vegas Association of Realtors, March and April 2020 show that Realtors closed 5738 homes sales vs. 6774 for the same period in 2019. That’s a drop of 15.3%, rough, but not surprising, considering that we were all in quarantine.

Vegas, overall, is still considered to be a sellers market as indicated by only a 3.4 month inventory. This means that if no other houses came onto the market, the current inventory would be sold out within 3 and a half months. Most experts say that a 6 month inventory is a normal and balanced market. Fidelity National Title of Nevada assembles an index called the Market Action Index (MAI) which summarizes the previous week’s real estate activities.  Consistent with Las Vegas’ inventory, the index has shown Vegas to be a sellers market.  

This week’s indexes indicate that the market still slightly favors sellers in Las Vegas and Boulder City, a quaint and cute city just a 30-minute drive from Las Vegas, while Henderson and North Las Vegas are still showing to be strong sellers markets.  However, the indexes of all four areas have dropped slightly from last month and are slowly moving away from sellers toward the buyers market. 

Vivek Sah, Director of the Lied Institute for Real Estate Studies at UNLV confirms as much.  He sees a short term picture in which housing prices will dip and warns that sellers will need to adjust their expectations in terms of price, and how many offers they’ll get as he sees the market transitioning from a sellers market to a buyers market. 

Meanwhile, on the rental side, statistics from the MLS show that May’s median rental rates decreased by 4% from March and April 2020, going from $2500 to $2400. However, that fluctuation is seen throughout the year as rental prices ebb and flow due to seasonal demand. Therefore, the drop caused by the COVID-19 shutdown is rather insignificant thus far.  While this decrease is within range of what prices do throughout the year, it hints of things to come, since spring is usually a busy time for real estate activities in which we see rental rates increase, rather than decrease.  With the dismal report that the unemployment rate has gone up considerably in April, it would not be surprising to see rental rates drop a bit more in the next report. 

Reopening

Not all the news is bad, however.  Beginning on May 9, 2020, Phase One of Nevada’s reopening plan began to be implemented by Governor Steve Sisolak, which will mean non-essential businesses such as restaurants, salons, and other service-related businesses can begin to open.  

Since real estate has already been deemed an essential service, therefore, business has continued to be conducted, albeit without open houses.  Although real estate agents could view listings on a one-on-one basis in non-tenant occupied properties, as long as they adopted precautionary measures and adhered to COVID-19 risk mitigation practices, the shutdown has resulted in a significant drop in activities for the last two months.  Yet since the announcement of the reopening on May 9, we have personally seen an uptick in requests to view our properties already.  The next significant milestone to look forward to in the reopening of Phase One, then, will be on June 1, 2020 -- when agents could begin holding open houses again.  I think that we will see even more activity stirred up in the valley.  That’s the hope, in any case. 

The Murky Future With a Silver Lining

While no one can predict the future of the market with certainty, the signs are there that Las Vegas will not experience a meltdown such as the one that made Vegas the poster child for all that went wrong in real estate in the Great Recession a decade ago.  

First, this time around, just up to when the coronavirus hit, home values reached a new all-time high of $319,000 as the median single family home price in March, up 6.5% from March of 2019, according to Las Vegas Realtors.  This was a steady and upward trend that had been going on for some 18 months.  With such a solid foundation, most agents say that they are not seeing the same collapse in the market this time around.  

"Had we been worrying about the housing market prior to this, I think it would’ve had devastating effects," said Tom Blanchard, President of Las Vegas Realtors. "But, due to the fact we had such a great year and a half, almost 2 years of continued increasing stability, and the last six months of a stable market, we are well set to be able to get through this," as he was quoted in a Channel 3 News segment on its April 8, 2020 news report.

Another sign that the effect of the pandemic is hoped to be short-lived is that there is a pent-up demand that will spur a good number of buyers to get out there to purchase the home that will have the features that the shutdown has revealed to be important to them -- a ‘Zoom room’ or a proper office for working at home, a bigger yard for the kids or pets, garage, etc…

Third, with mortgage rates hovering near historic record lows—the average for a 30-year fixed-rate mortgage was just 3.28% the week ending May 14, 2020, MarketWatch reported.  Some lenders are advertising even below 3% in some cases.

“Now is a prime opportunity to lock in a cheap mortgage rate and buy a home,” says Frank Nothaft, chief economist at CoreLogic, as quoted in Money magazine. 

 

So, despite much uncertainty and in uncharted waters, we continue to move on.  We have to.  That’s how we’re built.  As unsettling as it may seem, I have to say that the Las Vegas real estate market will emerge stronger post COVID-19.  We’ve gone through much worse. The city and those of us who live here are a resilient and adaptable bunch that continue to thrive. #vegasstrong