According to the latest Case-Shiller Home Price Index report, house values in Las Vegas rose 18.8% from April 2013 to April 2014. That put it ahead of all other cities in the “20-City Index,” which is used to track prices nationally.
We probably won’t see this level of appreciation in 2015 — price growth is currently decelerating in this market. But experts are still predicting solid gains for the Las Vegas housing market in 2014. So let’s get to one of those predictions.
Prediction: Las Vegas Home Prices Up by 8.4% Through June 2015
While home prices in the Las Vegas real estate market are still well below their bubble peaks, they have risen steadily over the last couple of years. They will likely continue to rise for the foreseeable future, due to current supply and demand trends. A recent prediction for this metro area called for additional gains through 2015.
The economists and real estate analysts at Zillow recently predicted that home prices in the Las Vegas metro area would rise 8.4% within the next year or so (through June 2015). They also reported a gain of 22% over the last 12 months, nearly matching the Case-Shiller numbers mentioned earlier.
This forecast is based on the company’s proprietary Zillow Home Value Index, or ZHVI, a tracking model that shows the “median valuation for a given geographic area on a given day.”
The Ongoing Normalization of a Housing Market?
The Las Vegas housing market went from being wildly overinflated in the early 2000s, to a state of free-fall in the second half of that decade. Then came a period of rapid price growth that largely resulted from investor purchases. Now, according to recent reports, the Las Vegas real estate market is getting back to normal.
Early in 2013, all-cash buyers (mostly investors) accounted for more than 60% of all home sales across the metro area. That number fell below 35% in June of this year. These and other signs point to an investor pullout. With home prices still rising, investors and “flippers” are not getting the same returns they enjoyed a couple of years ago. So they are buying fewer properties, leaving regular buyers to fill the void.
Call it the ongoing normalization of a housing market. The housing economists at Zillow have likely considered these trends when making their Las Vegas real estate predictions for 2015.
According to Heidi Kasama, head of the Greater Las Vegas Association of Realtors: “While real estate investors have played a key role in helping our housing market recover in recent years, it’s also good to see more traditional buyers entering the market.”
Getting back to the Zillow forecast. If investors have largely left this market (and continue to do so), why is the company predicting an 8.4% increase in home prices through next year? Three words: supply and demand. The slowly recovering economy has put more buyers into the local market, at a time when inventory is still declining in the Las Vegas area. This should drive additional price gains through 2015.
Supply of Homes Still Shrinking in Las Vegas Market
Each month, Realtor.com publishes a high-level housing summary with data for 146 metro areas across the U.S. According to their latest summary, the total number of real estate listings in the Las Vegas area dropped by 28% over the last year or so. The company reports an inventory decline of 13.7% in the last month alone (April – May 2014). That’s a significant reduction in the number of homes listed for sale on Realtor.com, and it represents a broader contraction in this housing market.
Inventory has been shrinking for some time in this metro area, and it continues to do so. This makes home buyers compete more fiercely for a limited number of properties, pushing both list and sale prices north. This partly accounts for Zillow’s positive 2015 prediction for the Las Vegas real estate market.
Demand Fueled by Job Growth, Low Mortgage Rates
Mortgage rates, meanwhile, have been hovering just above 4% for months now. This helps to fuel housing demand. According to Freddie Mac, which conducts a weekly survey of lending rates nationwide: “average fixed mortgage rates [are] remaining just above their lows for 2014 and helping to support homebuyer affordability.”
Job growth is also helping real estate markets across the country, and in Las Vegas specifically. The national unemployment rate fell to 6.1% in June, according to the Bureau of Labor Statistics — its lowest point since before the recession.
Measured at 7.9% in June, the Las Vegas metro-area jobless rate is slightly higher than the national average. But it too has declined significantly since its 2010 highpoint of 14.5%. Slowly but surely, the local job market is healing.
These trends bolster the supply side of the local housing market, at a time when inventory is still limited. Home prices tend to rise under such conditions.
Disclaimer: This story contains forward-looking statements (predictions, forecasts) for the Las Vegas housing market in 2014 and 2015. Such statements are based on dynamic conditions and may therefore prove to be inaccurate over time. They should be viewed as opinions, not as facts. We make no claims, guarantees or assertions about future house values in this or any other real estate market in the U.S.