The market in Las Vegas is changing and prices will most likely be coming down by 10%-20% next year. The inventory of available homes in Las Vegas has doubled in just the past 3 months. This is an indicator that many of the investors that purchased in 2011/2012 and the beginning of 2013 are now taking profits and moving to greener pastures or are banking their money to buy again late next year or 2015. For the most part, returns of 8-10% are gone and that's another reason investors are selling.
Also, the profile of buyers and the demand for homes in Vegas has changed. Again, many if not most investors have stopped buying. The days of 20 offers within a couple of days of a new listing are gone. Owner occupants have filled in for the lost investor demand and are willing to pay the current market prices even though they are over inflated because it is still cheaper to pay for a mortgage than to pay rent, if they can qualify for a loan. Resale homes are also overpriced for investors, but still offer a good alternative to renting for the owner occupants.
The average wage in Las Vegas remains below the wages from the early and mid 2000s and unemployment is still high. Underemployment is also very high. Why are these important? Because the majority of sales over the past few years have been to investors and the prices have been driven up by the cash buyer frenzy over the past 6 months. In fact, new home builders that just a few months ago had waiting lists are now offering $10,000 or more concessions to buyers. New home prices are way over market valued up to 20% or more over the resale market.
The Vegas area still has over 80,000 mortgages that are delinquent that will go through the foreclosure or short sale process. These homes are not a significant part of the growth of available homes in the Vegas Valley. These homes will add to the growth of inventory available homes by the middle to end of next year.
Institutional investors have begun to sell as they see that the Vegas market has hit an inflection point. Prices have plateaued and will begin to experience downward pressure as buyers and sellers begin to feel the effects of a higher supply of homes on the market. Again, at one time Vegas was down to around 3200 single family homes on the market. Today we are over 6400 and will likely be close 10,000 by the end of this year. The demand continues to remain at around 3000 homes/month.
The law of supply and demand, along with rising interest rates, will put downward pressure on home prices.
I know I have tossed out a lot of info, but it is all supported by the numbers, though not by the media...yet.
All said and done the best time to buy for investors will likely be later next year and 2015. By mid next year we should be in a better market for investors looking for a reasonable ROI, though 10% may still be out of reach in most cases. I will also state that there are some areas in Las Vegas that can achieve higher ROIs, but these tend to be difficult areas to manage from afar. The key is to know your niche and to understand the real market conditions.
If you have any questions or concerns, please feel free to contact me Brett Gordon at brettgordon@LVReNow.com or call me at (702) 283-1960