Should You Bet on the Las Vegas Housing Market in 2014?

By Brandon Cornett | November 7, 2013 | © 2014, all rights reserved | Duplication prohibited

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It’s November, and that means “prediction season” for the Home Buying Institute. We are analyzing conditions in metro-level housing markets across the country, and offering a few predictions for 2014.

Today, we turn our attention to the Las Vegas real estate market, which could be one of the strongest in the country next year. Here is our forecast and outlook for the Las Vegas housing scene in 2014.

Prediction: Las Vegas Real Estate Prices to Rise Through 2014

Let’s start with the obvious. Las Vegas home prices will almost certainly continue rising through 2014. It doesn’t take a Ph.D. in economics to make such a prediction. A review of previous trends and current conditions is all that’s needed. The Las Vegas real estate market was one of the fastest movers of 2013, and it will likely be a standout in 2014 as well.

Our forecast? We expect to see double-digit price gains across this metro area next year. It wouldn’t be surprising to see annual returns of around 10% – 13% by the end of next year. That’s not as steep as the gains of the last 12 months, but it’s still significant. In fact, Las Vegas could be one of the highest-performing metros in 2014, where home prices are concerned.

There are various indicators that support this forecast. Take the S&P/Case-Shiller Home Price Index, for example. This often-cited index measures pricing trends across the United States. It also provides a 20-city composite that includes 20 major metro areas across the country, including Las Vegas. The latest Case-Shiller report (at the time this article was published) was issued on October 29 and contained data through the end of August.

According to the report, home prices within the Las Vegas housing market rose by a whopping 29.2% during the last 12 months of monitoring. That was the largest annual gain of all metros in the 20-city index, and one of the largest gains of any city in the U.S. for the same period. It also marked 20 consecutive months of year-over-year price gains for the Las Vegas metro area. This city also posted the largest monthly increase in home prices (2.9%) from July to August of this year.

These are significant trends, and they are partly why we are so confident in our 2014 predictions for this real estate market.

Each month, Realtor.com publishes a housing summary with data for 146 metro areas across the U.S. The latest report was published on October and showed year-over-year trends from September 2012 to September 2013. According to Realtor.com’s data, the median list price for Las Vegas (the midpoint at which homes are listed for sale) rose 30.69% over the last year or so. That puts Las Vegas among the top five U.S. metros, in terms of year-over-year list price increases.

Outlook: Las Vegas May Not “Plateau” Like Other Hot Markets

There has been much talk lately about the hottest housing markets leveling off. It’s true. In many California cities, for example, home prices are rising more slowly today than they were six months to a year ago.

Some studies have shown a similar “cooling” trend within the Las Vegas real estate market. The difference is that home prices in Vegas are not expected to plateau over the coming months, as they are in some of the other hot markets.

Will Frank, a senior finance manager at John Burns Real Estate Consulting, recently told Bloomberg Businessweek that prices could soon level off in some of the fastest-moving metros. He predicted that cities like Phoenix, Dallas and Orlando could experience price plateaus within the next year or so. In contrast, he said that “we still have Las Vegas [home prices] going up a while.”

In short, the Las Vegas housing housing market is not “cooling” like some of the other hot markets of the Southwest and California. To understand why, we must look at the inventory situation. Let’s revisit the Realtor.com housing summary mentioned earlier.

Mr. Frank made a prediction that the Orlando and Phoenix real estate markets could soon level off, where home prices are concerned. Inventory has a lot to do with this forecast. At the beginning of this year, the total number of homes for sale in both of these markets was dropping steadily, largely the result of investors. But this trend has changed. Realtor.com’s latest housing summary shows that inventory has now risen in Orlando and Phoenix, year over year.

Las Vegas, on the other hand, has experienced a 15% reduction in total listings over the last year or so. And it will likely carry this trend into 2014. This means more home buyers could be competing for fewer properties next year — a classic scenario for rising prices.

Home prices in Las Vegas still have a lot of room to move. They are still well below their pre-crisis peak levels (a pie-in-the-sky metric, admittedly), and even below “normal” historical levels.

Back in June, Fitch Ratings ranked this city as one of the five most undervalued housing markets in the U.S. Suzanne Mistretta, senior director of Fitch’s U.S. residential mortgage-backed securities group, told Forbes columnist Morgan Brennan: “In places like Las Vegas, prices fell so far below their historical levels, that the [recent] price increases are appropriate.”

Disclaimer: This story contains price predictions, forecasts, and other forward-looking statements relating to the Las Vegas housing market in 2014. Such statements are the sole opinions of the author and constitute an educated guess. We make no claims, assertions or guarantees about future economic conditions within this or any other U.S. city.