By Tabitha Muller
The Nevada Independent
As Samantha Christy searched for an alternative to the cramped, dilapidated house she and her family were renting in Winnemucca, she saw rental prices rise and her options shrink.
An area supervisor for a property management company, Christy said she and her husband, a welder, finally decided they would try to buy a house through the Home at Last down payment assistance scheme. of the Nevada Rural Housing Authority.
“We started pinching every penny. We started paying the minimum we owed for our bills just to keep them up to date and keep ourselves afloat,” she said. “We didn’t buy extra socks. We didn’t buy any extra toothbrushes.
But even with down payment assistance and savings in hand, Christy’s home buying process has been an emotional roller coaster ride. She passed through more than six houses, but sometimes offers were already in place and accepted by the time she finished a visit.
After finally finding an available home that she liked, she immediately made an offer, crossed her fingers, and prayed the deal didn’t fall through.
“I was at this point to just say ‘forget it,'” Christy said. “When they accepted the offer and my real estate agent told me they had accepted it, it was like a huge weight had been lifted off my shoulders. I was so happy that I couldn’t even not express myself correctly.
Christy’s relief at securing a home is far from unique.
Boosted by supply chain constraints, historically low interest rates, housing shortages and pandemic-influenced migration shifts, Nevada housing prices have soared to record highs in 2021, reaching double-digit increases for the second consecutive year.
Gary MacDonald, 2021 president of the RenoSparks Association of Realtors, described the price spike as a “seller’s market” because there are often many offers available for someone selling a home.
“When COVID first hit the market, we all thought it wasn’t going to be good, it was going to hurt our business…and in essence, it did anything but hurt us,” said Mac Donald. “Everyone in the country has seen a recovery in business. Areas where the real estate market was simply dead, all of a sudden it came back to life.
While home prices in Nevada’s two largest metropolitan areas have risen more than 23% in Las Vegas and about 22% in the Reno-Sparks area over the past year, home prices also increased across the country. In nearly every market tracked by the National Association of Realtors, the median price of existing single-family homes increased during the third quarter, with 78% of those markets seeing double-digit price increases during the same period.
The state has also seen an increase in sales of luxury homes – homes that cost more than $1 million.
Data from the Las Vegas Realtors Association revealed that luxury home sales in 2021 hit a record 1,560 sales at the end of December, representing just over 3% of the association’s property sales for the year. The association recorded more than 50,000 real estate sales in 2021, surpassing the previous record set in 2011 by nearly 2,000 sales.
Aldo Martinez, 2021 president of the Las Vegas Realtors Association, said part of the increase in luxury home sales came from rising prices. He said homes that might have sold for $800,000 a few years ago can now sell for over $1 million, putting them in the luxury home category.
“The median price of all luxury homes sold was $1.4 million,” Martinez said. “For our luxury market to be $1.4 million, that’s still extremely affordable when you look at other markets and what their median price is in the luxury market.”
MacDonald described the rise in sales of luxury homes in northern Nevada over the past year as “dramatic.” In areas around Lake Tahoe and Incline Village, he said shoppers are experiencing a lack of inventory. Many have bid above the original asking price to score a home.
Although Nevada real estate prices seemed exaggeratedly high to longtime residents of the state, MacDonald called them a “bargain” compared to other parts of the country such as New York, San Francisco and Honolulu.
Affordable housing and the rental market
Although Nevada’s housing market may be cheaper than other places, rising housing prices and supply shortages have made home buying more difficult for those in a lower bracket. median or lower income.
Part of the problem stemmed from the demand for high-end luxury homes.
“If you’re a national builder and you’re in the stock market, you’re going to build the homes that people are willing to buy and if they’re willing to buy a $700,000 home versus a $200,000 home, you’re going to build the $700,000 house,” MacDonald said. “If you’re a builder looking to feed a family and get them through education and everything, you’re going to do the exact same thing.
Martinez added that those looking to buy homes in 2021 need to adjust their preferences and decide what they can do without.
“People have to make big sacrifices. Not living in the areas they want, not having the size of house they want,” Martinez said. “For those who are not ready to make these sacrifices, they will rent.”
In Las Vegas and other markets, Martinez said some companies bought homes to enter the rental market because they realized wages hadn’t kept up with escalating real estate prices, and that it was to their advantage.
Overpriced buyers, individuals waiting for the market and increased demand for rental housing contributed to a double-digit increase in rental prices.
The average asking rent for apartments in Southern Nevada reached approximately $1,400 per month during the third quarter of 2021, an increase of 30% since 2020. In the RenoSparks area, rents increased by nearly 22% and hovered around $1,500 per month over the same period. .
The shortage of affordable housing also applies to rental units, MacDonald added. As prices rose, affordable rental housing remained scarce, and there was a gap between the cost of constructing and maintaining buildings and what tenants could afford.
Unless the government can help subsidize the creation of affordable housing or find a way to keep rents artificially low, the market is unlikely to meet the need for affordable rental housing in the near future, MacDonald said.
Low interest rates and dwindling inventory.
Historically low interest rates, hovering around 3%, also boosted home buying last year.
Although the posted price on a home may have scared off many potential buyers, low interest rates have acted as a counterweight to rising prices, Martinez said.
Many savvy buyers may also have had the money to pay cash for a home, MacDonald said, but instead opted to finance a home purchase with a loan because of low interest rates. The challenge, of course, was the housing shortage.
Families looking to sell homes in 2021 had limited buying options, and one of the trends MacDonald noticed as the market stabilized in the Reno-Sparks area was an increase in emergency sales protecting families. buyers who wanted to sell a house before buying another.
Real estate agents also saw an increase in cash sales as buyers used cash offers to entice sellers to speed up the closing.
In November, the Las Vegas Realtors Association reported that 30.1% of all local real estate sales were purchased with cash, up from 18.9% a year earlier. Although the region saw significant increases in cash sales, it was still below the cash buyers peak of 59.5% in March 2013.
MacDonald said that whenever the market “goes haywire”, it will generally regain its balance.
Over the past four to five months, the Reno-Sparks market has stabilized, which means prices have stabilized somewhat and are not rising month-over-month like they did l ‘last year.
“I think we’re seeing a bit of a plateau and I think every market has a self-imposed price limit,” MacDonald said.
In southern Nevada, Martinez said he expects the housing market to eventually correct as buyers become skeptical of paying high prices. Yet he does not anticipate the sharp fall in prices experienced during and after the Great Recession.
But due to supply issues, he warned a price plateau was unlikely to occur for three to five years.
“I would expect more stable growth, maybe 4-7% this year, at least until wages can follow,” Martinez said.
Although about 35% of Southern Nevada shoppers came from out of state in 2021, the market still has to meet the needs of 65% of consumers coming from Nevada, Martinez added. If housing is not affordable for residents, sales and prices cannot increase as they have in 2021.
High house prices are reminiscent of the housing bubble of the early to mid-2000s. But Nevada’s high house prices aren’t fueled by predatory lending, a lack of sufficient regulation, or negative equity. Low supply, high demand and an imbalanced housing market drove the price increases.
“Even during the preparatory period from 2002 to 2007, the dynamic was different. In those days, people could get a loan without having to qualify,” MacDonald said. “Now you really have to step in and say to the lender, ‘OK, I can afford this place. “”