Las Vegas housing market was affordable; ‘that’s not the case anymore’

After last year’s buying spree, Southern Nevada’s housing market has been pumping the brakes for months.

Sales totals have plunged from 2021 levels, sellers have increasingly cut their prices, inventory has soared, and homebuilders have pulled fewer construction permits.

Las Vegas is far from alone in seeing buyers pull back amid a sharp jump in mortgage rates. Across the U.S., the pace of resales fell for the eighth consecutive month in September, the National Association of Realtors reported.

Nicole Bachaud, senior economist with listing site Zillow, noted that Las Vegas home values have ticked lower in recent months, helping to “soften” the market, but that’s “not really making things more affordable.”

Bachaud sat down with the Review-Journal at this month’s National Association of Real Estate Editors conference in Atlanta to talk about how the market has changed. The interview has been edited for length and clarity.

Review-Journal: In Las Vegas, it seems the housing market hasn’t been doing many favors to buyers or sellers lately. How does the situation in Las Vegas compare to other metro areas?

Bachaud: Definitely the market in Las Vegas has been really challenging because prices rose so quickly over the course of the pandemic. It got really, really expensive very quickly. Las Vegas used to be kind of a cheaper area, and a very affordable area, and that’s not the case anymore. A lot of sellers are going to be feeling those same effects of affordability. If you’re going to sell your home and then buy another home — whether you’re upsizing, downsizing, moving across town — that is now a lot more expensive. However, it’s not bad for everybody. If you are an all-cash buyer, or you’re a buyer with high enough income that you’re not really sensitive to the price changes and interest rate changes, you have a really good opportunity because demand is pulling back so much. That’s giving buyers a lot of extra time to make decisions to make sure they’re seeing all their options, versus just jumping on the first one they can because otherwise it’ll be gone.

Just taking stock of everything that’s going on right now, how dramatically has the market changed over the last year?

It’s very different. When we look at just how expensive it’s gotten, how unaffordable it’s gotten — Las Vegas had a really high high in the lead-up to the Great Recession. Home values were extremely high, affordability was terrible, it’s as bad as it is now, and then all of a sudden you saw prices falling very far, very fast. Affordability stayed pretty favorable up until the pandemic. Prices were growing, but incomes were also growing; it was a really affordable market, there wasn’t a ton of excess demand. Then all of a sudden we get to the pandemic, the frenzy in the market with interest rates being really low, a lot of demographic factors pushing people to buy, people from other markets looking for affordability in the Sunbelt region. And that’s when we started to see prices climbing extremely fast, and that’s when affordability got really, really bad. It’s impossible for people in this market to afford these homes, and so something’s gotta change.

What, if anything, is working in buyers’ and sellers’ favor right now, especially in Southern Nevada?

For buyers, it’s that extra time on market, the time to make decisions. Inventory has been growing. You don’t have to waive your inspection, you don’t have to waive your contingencies. You can really have a less stressful and smoother process of buying.

What about for sellers?

Home-selling in a month is not a terrible thing; that’s fairly normal when we look at what the historic trends have been. Things are in this rebalancing moment. It’s not necessarily that sellers don’t have any power; it’s just that they don’t have all the power anymore. For a lot of sellers, it’s just remembering you don’t need 20 offers on a home, and you don’t need to sell your home in one day. If it takes a month and you only get one offer, that’s all you need to sell the house.

One thing that’s caught my attention is how fast the market has turned. Is that something you’ve observed as well?

Absolutely. The turning point in the market was interest rates rising. There was a lot of that feeling, especially early on this spring, of sellers wanting to sell because interest rates were going to go up. We saw buyers jumping in the market saying interest rates were going to go up. The share of homes selling above list price was extremely high even throughout this spring. Bidding wars were happening quite a bit. Home price acceleration hit its peak. The market was very hot, and then all of a sudden, rates jumped up overnight essentially and kept jumping up. Now we’re in a different phase of the market. We’re no longer in this pandemic frenzy that’s induced by a ton of demand and limited supply. Now we’re seeing an affordability crisis is taking place; the market power balance is shifting, and that’s going to lead to a slower market.

Contact Eli Segall at esegall@reviewjournal.com or 702-383-0342. Follow @eli_segall on Twitter.