New report predicts rough 2025 for Las Vegas Valley residential real estate

Mortgage rates, which currently sit at 7 percent, will most likely hold the housing market back as many would-be sellers and buyers will remain on the sidelines, said Jackie Benson, a vice president and economist for Wells Fargo.

“Mortgage rates probably aren’t going to come down too much, and we think the Feds are going to end up at 3.75 percent for interest rates, so that’s elevated far above where we were before the pandemic when rates were zero percent and because of that economywide interest rates are expected to remain elevated, so we don’t expect mortgage rates to get below 6 percent frankly,” she said.

Home price appreciation softens

Wells Fargo data for the Las Vegas Valley shows that price appreciation has softened lately but home prices are still rising faster than the national average. Home prices were up nearly 5 percent year over year in November, according to CoreLogic, which is higher than the U.S. average rate of 3.4 percent.

Home inventory improved alongside the slower sales pace, but housing supply remains constrained by high mortgage rates. Realtor.com shows active listings in the Las Vegas metro increased 42 percent over the past year as of December 2024 but are still 17 percent under prepandemic levels.

Wells Fargo said however that “builders appear bullish” on the Las Vegas metro and home building permits increased 23 percent year to date through November of last year, which was better than the 8 percent national uptick.

Wells Fargo’s report said a “slowing labor market is the latest housing market headwind” as Las Vegas employers have reduced headcounts for six consecutive months as of November 2024, coinciding with rising unemployment.

Home prices near record highs

Southern Nevada home sales finished the year ahead of 2022 — which was the worst year for sales since 2008 — however sales are still down from prepandemic levels, and home prices are close to record highs again. The local industry also faces significant headwinds in a number of categories including a lack of land to develop as the Bureau of Land Management controls the vast majority of available land left in the valley and has been slow to release it, along with a slowdown in building due to heightened construction costs and labor shortages.

Matt Hennessy, a Las Vegas-based mortgage advisor said elevated mortgage rates are a double-edged sword given the last jobs report which was stronger than expected.

“Rates got nervous and spiked to their highest level in seven months. When the economy is doing really well, rates tend to rise because people expect the Fed to hold off on cutting rates,” he said. “Inflation is like the price tag for everything we buy, and the Fed is laser-focused on getting it under control. Until then we probably won’t see mortgage rates fall much. Most economists are predicting elevated rates for a lot longer.”

Las Vegas Re/Max Central broker and owner Lori Galarza said she thinks 2025 could actually be a good year for real estate in the valley given the country has gone through a healthy rate cut cycle and ushered in a new president who appears to be more business friendly. Galarza added local home prices are continuing to trend upwards which is in line with average historical data.

“The trend every year in real estate is usually an increase of 4 percent (in home prices) played out over a 10-year average and the estimate is even over the 10-year average so I kind of think that’s not too bad for Vegas, “she said. “From November of last year to this year the median home price increased 6.7 percent, so we’re obviously above the national average.”

Contact Patrick Blennerhassett at pblennerhassett@reviewjournal.com.