Las Vegas Faces Housing Slump After Comeback From Recession
A Wall Street Journal headline blares, “Las Vegas Housing Weakness Signals the Slowdown Is Spreading.”
And that story comes from this month, not 2007.
With rising interest rates, slowing sales, and some owners cutting prices, the Southern Nevada housing market is showing the first signs of weakness since its comeback from the Great Recession.
But Heidi Kasama, president of Nevada Realtors Association, believes we’re not seeing the beginnings of another housing crisis. Instead, she calls it a slow down.
"A slow down is frankly warranted at this point," she said, "We can’t continue with 6 and 7 percent price appreciation every month."
In addition, Kasama said the softness going on in the market right now is part of what’s been going on over the past few months. She thinks Southern Nevada will continue to see a drop in prices but not a dramatic bubble burst as we experienced in the Great Recession.
Vivek Sah is the director of UNLV’s Lied Institute of Real Estate Studies. He said he is interested to see what happens in the spring and summer because the fall and winter are traditionally a slow time for the housing market.
"Between now and summer, when there is going to be more expected interest rate hikes, because of the way the economy is going, that’s when we will feel the pulse of the market as to what home buyers are doing," he said.
And while some people might be concerned about the price of homes, Nat Hodgson, the CEO of the Southern Nevada Home Builders Association, said the dip in prices over the past few months can’t really be compared with the massive drop in prices the region experienced 10 years ago.
"You look in the mid-90s to 2002… that was 22,000 to 24,000 homes a year," he said, "We’re up on the second or third rung of the ladder. We were on the 12th rung in 2006. That’s a long way to fall. We’re not that far off the ground."
He said this year homebuilders might hit the 11,000 permits for new homes. So, if there is a softening of a couple of percentage points that is not necessarily a bad thing.
One of the biggest problems facing Southern Nevada and Northern Nevada is the lack of affordable housing.
Hodgson said most of the builders are not going after the lower or entry level market because it costs too much to build homes in Nevada. He said land prices have gone up, along with prices for materials and for labor.
However, the builders’ association along with lawmakers and nonprofit groups are talking about ways to solve the problem and provide more affordable housing.
While people looking for a home under the $300,000 range find it difficult to find something in Nevada, people moving to the state from California see the house prices as a real bargain.
"They see us as an absolute steal," Uri Vaknin, whose company bought several condominium developers when the market hit bottom a few years ago.
Vaknin said 30 percent of the people buying into his buildings are from California. He said they are usually retired or about to go into retirement.
"Californias who are living a middle-class lifestyle in California they are able to come to Las Vegas and actually have this upper-middle-class lifestyle," he said.
Northern Nevada is seeing the same influx of people from the Bay Area.
"The tax reform law on the federal level pushed a lot of people off their fence and so, we’re seeing a lot that stuff… is getting picked off quickly by those investors," said Brian Bonnenfant, project manager for the Center for Regional Studies at the University of Nevada, Reno.
Bonnenfant said the cash buyers are backing off a bit but that is common during the winter months.
While there is concern about the price of houses and some buyers and sellers are still jittery about doing anything because of what happened during the recession, Kasama said it is important not to look at buying a home in that context.
"There is so much talk about is it a right time to buy or sell," she said, "I just want us to come back to you’re home is your castle and if you’ve got a job right now and you can qualify for a loan and you can make the payments… this is the time to buy a home.’
Vivek Sah, director, UNLV’s Lied Institute of Real Estate Studies; Heidi Kasama, president, Nevada Realtors; Nat Hodgson, CEO, Southern Nevada Home Builders Association; Uri Vaknin, real estate investor; Brian Bonnenfant, project manager, Center for Regional Studies at UNR