Q2 Market Update: Is the housing market changing directions or was June just a coincidence? In June the median price of a single-family home was $290,000, a 1.7% decreasefrom May. 2018 year-to-date, the median price is still 8.07% higher and June 2018 over June 2017 (year-over-year) is up 12.9%, both still very impressive numbers.
Of course, one month is not a market indicator as many factors impact this figure. One factor to look at for June is the number of smaller homes sold was greater than the normal allocation, which skewed the percentage. So, June in and of itself is not an indication that we have seen a top in the resale home market value in the Las Vegas Valley. What is a trend that we are watching very closely and could indicate future market pricing, is the Supply. The number of available units for sale that do not have an offer is the home market Supply. This number has risen from January and February record lows (supply) to June having 4,335 single-family homes available and 939 condos. This is a 17% increase of inventory for single-family and 47% for condos.
Basic economics tells us more supply, if not equaled with increase in demand, will cause a reduction in price. Nevada, according to the Number Report, is still below the peak median price set in June of 2006. A contradiction in the economic numbers was that while the median price decreases slightly, the number of days a home was on the market for sale substantially decreased. In June 78% of the homes listed sold in less than 30 days. This is a considerably better number than January 2018 at 58.6%.
What other significant factors impact housing prices:
The Federal Reserve has risen rates twice this year, a 50-basis point increase (.5%). They also indicate two more rate increases for the remainder of 2018, another 50-basis point. The Federal Reserve rates do not have a direct impact on the mortgage, but their policy does influence the bond market which is what drives mortgage rates. See the information below on how much buying power a homebuyer loses when rates increase. As a Seller why should the rise of interest rates be a concern for you? First, of course you may be a Buyer as well for your replacement home. Second, indirectly as a Seller you want to see the most qualified Buyers looking and making offers on your home. When Buyer’s lose purchasing power, the price they can afford to offer drops.
If a Buyer makes an annual income of $75,000, at today’s current FHA 30-year mortgage rate (average being 4.5%) the typical maximum amount they can qualify to purchase is $290,000. If interest rates rise by 50 basis points to 5%, the same Buyer at the same income has their purchasing power reduced to $275,000. This is a 5.1% decrease in the purchase price they can now afford.
Disclaimer: Qualifying for a loan considers many factors, this estimate is based solely on income ratios. We are not a mortgage lender; therefore, we cannot quote payments or rates.
Obviously the interest rate rise can move a percentage of people out of a certain price point, decreasing demand at that price point. We have also seen a large influx from California buyers this year, due to the state increase in income tax and gasoline tax, increasing demand.
One of the economic figures that drives housing prices is average salary increases, which is directly tied to job growth. In June, Nevada grew at 2.8% well above the national average of 1.6%. In addition, unemployment fell to 4.7% which is the lowest it has been since 2007. Wage increases tend to trend higher after these two trends. So, the future of Nevada employees is looking bright and they should see more on their checks in the upcoming year, increasing their purchasing power on a home purchase.
The top 5 zip codes with the GREATEST percentage of appreciation were:
Zip codes with the HIGHEST average sales prices were:
Las Vegas housing market vs national market
In June the national housing market reported similar numbers to Nevada. One of the most surprises numbers was that June’s new housing starts nationally were down 12.3% from May. However, May had the highest number of starts since the height of the market in 2007. So, this may be a slight market correction from the May high. Realtor.com reported that national inventory has declined by 4% year-over-year in June. And that transactions moved at a more rapid pace with 10% closing more quickly than in June 2017. The national average sales price was reported to be at a 9% increase year-over-year. Nevada was at a 12.7% increase, well above the national average.
Fannie Mae released their June data indicating that The Home Purchase Sentiment (tracking peoples intentions, attitude, and perceptions about housing), fell slightly from 91.3% to 90.7%. It is still an indication that over 90% of potential Buyers and Sellers feel it is a Good Time to Buyer or Sell. 19% reported higher incomes this year. Some of hottest markets in the U.S. such as Seattle, Silicon Valley, and Austin, Texas appear to be headed for a cool down in home prices. Nationally, existing home sales dropped in June for a third straight month and national inventory has risen. California saw inventory rise 12%.
Crown Point’s Take Away
For this market update, our Buyers who have been experiencing a tough time finding that perfect home, relief is around the corner. We expect to see inventory housing levels rise in Las Vegas, giving more options to Buyers. There may be a couple of months of a “sweet spot” where inventory is up, giving you more options, before interest rates rise, reducing your purchasing power.
For our Seller’s, the intense Crown Point marketing of your home with a WOW & Sizzle 1stimpression is going to be even more important. We always feel it is critical to obtain maximum value. But with the increase of supply your home really needs to stand out in the market to achieve the best price possible. We do not foresee a significant change in Median Price for 2018. Do expect to see, however, the amount of multiple offers per home reduced, trending towards a more traditional market. It will be healthy for the market to stabilize at a more sustainable growth rate. Nevada economic factors are certainly looking strong for the second half of 2018 and into 2019.