Cooling Off Again?: Analyzing the Las Vegas Real Estate Market in 2023

By: Kristen Riffle July 25, 2023

• The Influence of Inflation: One significant factor affecting the Las Vegas real estate market is the surging inflation. With the Consumer Price Index (CPI) reaching its highest levels since 1981, homebuyers are feeling the pinch. As the cost of living increases, one would think buyers may become more hesitant to invest in real estate, leading to a decrease in demand and putting downward pressure on home prices, but due to a major drop In supply, Las Vegas leading the nation In least amount of active listings, we find ourselves In a place we didn't expect.  We have demand, multiple offer situations, and a jump In the median home price, 

• Rising Interest Rates: The Federal Reserve's decision to raise interest rates multiple times in 2023 is impacting the housing market as well. Higher interest rates make borrowing money more expensive, which can dampen home sales activity. We'll explore how this increase affects mortgage rates and affordability, influencing buyers' purchasing power and sellers' pricing strategies.  It Is Important to note the market has already priced in two to three more rate hikes coming up.  This leads me to the question.  Will we see another cool down In the real estate market In Las Vegas?  Will we see a rise In supply If rates reach the 8's.

• Cautious Investor Sentiment: Real estate investors, who have played a significant role in driving the Las Vegas housing market, are becoming more cautious. Worries about inflation and rising interest rates are causing them to rethink their investment strategies. A decrease in investor activity may contribute to a decline in demand, potentially leading to a cooling off in certain segments of the market.  There Is a strong sentiment of 'hold on to your cash' being thrown around, unless it is in a regional bank of course (wink wink).

• Local Market Sensitivity: Not all real estate markets respond equally to inflation and rising interest rates. We'll discuss how some areas in Las Vegas may be more sensitive to these factors, particularly those that rely heavily on investor activity or speculative buying. Understanding local market dynamics is crucial for both buyers and sellers to navigate these changing conditions.  Year over year, Henderson saw an over 12% drop, where Summerlin was positive 8%.  Also companies like Opendoor had a major shift.  One year ago Opendoor had 347 units In the city of Sacramento, now they own an estimated 37 units.  iBuyers like Offerpad and Opendoor don't appear to be raising capital and are moving any product they have, In some cases at signigantly lower cost.  Especially in markets like Las Vegas and Pheonix,

• Individual Buyer and Seller Considerations: Each buyer and seller in the Las Vegas real estate market will be impacted differently by inflation and rising interest rates. Affordability, income levels, and financial stability play a crucial role in determining how these factors affect an individual's decision to buy or sell a home. We'll provide insights into how potential buyers and sellers can assess their own situations and make informed choices.  Interest rates have made It Increasingly difficult for the first time home buyer.  Affordability and debt to Income ratio has been a challenge for a buyer looking below $550,000.  The luxury market has not been affected as much.  Out of state cash buyers are still very prevalent.

• The Role of Inventory: Las Vegas is currently experiencing historically low inventory levels. We'll explore how this scarcity is affecting the market and contributing to price stabilization. Understanding inventory dynamics is vital for gauging the market's future direction.  Las Vegas Takes the Lead: A 47.5 Percent Drop in New Home Listings Redfin's report highlights Las Vegas as the frontrunner in the reduction of new home listings, surpassing other major metros across the country.  As Las Vegas leads the way with a substantial decrease in new home listings, the local real estate landscape undergoes notable changes. Buyers face a more competitive market, while sellers may find opportunities in a low-inventory environment. 

• Analyzing 2023 National House Prices: Taking a broader perspective, we'll examine the overall national house price trends in 2023. By comparing Las Vegas with the national average, we can gain further insights into the city's performance amid the cooling real estate market.  Las Vegas Is currently up 37.19% since March 2020 and the national levels tell a similar story.  There Is still a large amount of equity In homes purchased pre pandemic across the board.  

As we wait on the Federal Reserves decision and we analyze the current state of the Las Vegas real estate market, one question looms large: Are we truly about to experience a cooling off period, and what direction will it take in the future? While the indicators suggest a slowdown with decreased home sales, rising interest rates, and cautious investor sentiment, it remains uncertain if this is a temporary correction or a more prolonged trend. Factors such as inflation rates, inventory levels, and the broader economic landscape will all play pivotal roles in shaping the market's trajectory. Only time will reveal whether the cool down will continue, stabilize, or potentially reverse. As we venture into the future, prospective buyers, sellers, and investors must tread cautiously and stay vigilant to make informed decisions in this ever-evolving Las Vegas real estate landscape.