Las Vegas, like much of the country, had a wild real estate boom last decade and a big bust with the recession.
But things were more extreme in the valley, in good times and bad, and today, other big differences between Southern Nevada and the rest of the United States remain.
Home prices bounced back in Las Vegas at one of the fastest rates nationally, raising fears of another bubble as investors bought cheap homes in bulk to turn into rentals. Price jumps have slowed considerably across the country this past year, including in Las Vegas, but still are rising faster here than in most major cities.
Locally, with investors pulling back amid higher prices and a crowded, not-so-robust rental market, home listings increasingly are being ignored. Meanwhile, sellers hoping to cash in on the investor-fueled upswing have been overpricing and getting ignored by the shrinking number of buyers, real estate agents say.
Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors.
As a result, used-home sales are slowing, and at a much faster rate than nationally.
Owners sold about 28,900 single-family homes in Southern Nevada last year, down 12 percent from 2013, according to data from the Greater Las Vegas Association of Realtors’ listing service, which mostly comprises previously owned homes.
Nationally, owners sold 4.34 million used single-family homes last year, down 3 percent, according to the National Association of Realtors.
Lawrence Yun, chief economist and senior vice president of research for the national group, is scheduled to speak today at the Palms, as part of a Rocky Mountain region-focused housing conference sponsored by his organization.
He spoke with VEGAS INC on Tuesday. Edited excerpts:
How is the national housing market, and what are some trends right now?
We are in a recovery phase. Prices are up 25 percent nationwide from the bottom but still well below the bubble peak level. It’s a recovery phase, not an expansion phase, and there’s still more healing that needs to be done. The number of foreclosures in the pipeline, there was a tremendous amount four or five years ago, and that has steadily diminished, but they’re still above normal. We need a new set of buyers to buy these empty homes. The improving economy and job creation, and still exceptionally low mortgage rates, provide the right foundation for this healing process.
Investors bought a lot of homes in Las Vegas but have cut back the past year. Are they buying fewer homes nationally?
The institutional investors were heavy hitters two to three years ago, but they’re much less active now. They’re not buying as much. But if there is one nationwide trend with housing that’s concerning, it’s the low inventory levels. We have far fewer homes for sale. If the demand comes back strongly in, say, the spring buying season, we could have a supply shortage and an acceleration of home values. That’s good for owners but hinders affordability for renters who want to go into ownership.
After the bubble burst, did investors go all over the United States or just to places that got hit especially hard, like Las Vegas and Phoenix?
They wanted big discounts, and those were primarily with foreclosed properties. Since ground zero for foreclosure activity was Nevada, Arizona, Florida and Southern California’s Inland Empire, those were the areas the investors were going. Once prices began to rise, they looked elsewhere, places like Atlanta, Memphis, Indianapolis. But the degree of investor-presence in those markets was smaller. Foreclosures were there but not to the degree of what was available in, say, Vegas.
Did home values in other hard-hit markets also rise fast the past few years?
Yes. The areas where there were large foreclosures all had similar experiences — investors came in, scooped up the properties, and the price increases were eye-popping, 20-30 percent. Vegas is still rising at 10-11 percent. That’s still high by any historical standards. Normally, it’s 3-4 percent a year.
With investors pulling back in Las Vegas, the number of homes without offers has climbed fast the past few years.
Vegas is similar to places like Phoenix and the Inland Empire. The rest of the country is still holding on in home sales. It sounds like Las Vegas, given the heavy presence of investors, now that they’re out of the game, the city has to go back to normal, organic growth — retirees, people moving here.
Why is price growth slowing nationally?
Homebuilders are ramping up production. We do expect a marginal increase in demand, but there’s additional supply. Banks are healthier, so financing for homebuilders will steadily improve. There could be 20 percent increase in housing starts this year and 15 percent the following year. Any additional competition brings more choices, and I think the dampening down in price growth is a positive development for the country. Income growth is only 2 percent a year. We can’t have home prices outpacing income growth by large amounts. That’s just unsustainable.
During the recession, people throughout Las Vegas went bankrupt, lost their homes to foreclosure or completed a short sale, and many of them still can’t get a mortgage because of it. Is that happening nationally, too?
Yes, that is an issue. For people who went through foreclosures, they usually have to wait seven years before they can get a loan, and for short sales, it’s four to five years. But some of these people can come out of the penalty box. There will be more return buyers in the upcoming years, so that’s another source of housing demand.