As We Enter The Hot Season, The Las Vegas Valley Real Estate Market Cools

The resale market in the valley has cooled off. Inventory levels continue to climb and the number of resale closings is dropping. Since the first of the year, the number of homes for sale in the valley has risen over 50%, with closed sales decreasing by 20%. We currently have over 15,500 single family resale homes for sale.

Resale Homes Versus New Home Builders: The Fight For Buyers

The new home market significantly impacts the resale market. Things have changed dramatically for new home builders from the days of buyer’s wait lists and lotteries. We now have over 500 new home developments in the valley, whereas in 2004 there were only 300.

Larry Murphy with SalesTraq, the MLS equivalent for new construction, estimates there are 28,000 unsold new homes. KB Homes, one of the valley’s largest builders, recently dropped prices $8000 to $45,000 in 16 developments.

Sellers in the resale market are not only competing with each other in record numbers, but are going toe to toe with the new home builders, who dangle huge incentives in front of the diminishing number of buyers.

As a result of the swelling inventory in both the resale and new home markets, prices have been flat to declining for the past 9 months. Many experts are predicting a continued correction for the Las Vegas market. This is being felt more in some neighborhoods than others.

The Interest Rate Impact

Another factor affecting the number of buyers has been a steady rise in interest rates. On May 10, 2006, the Federal Reserve again raised the discount rate another ¼ point. This means the upward pressure on mortgage rates continues in the housing market. Buyers need to purchase lower priced homes to keep the same payment amount. Financial markets are anticipating another rate increase at the end of June.
We are witnessing buyers and sellers negotiating more than ever. Offers to sellers are coming in considerably under the listing price. Whether you are buying or selling right now, it makes sense to have an experienced negotiator on your side.

What To Do...

Sellers — Do you sell now or wait? Waiting has its risks. If prices decline, it may take some time for you to get back to the current price. Combine this with rising interest rates and the number of buyers who can afford your property will diminish. If the experts who are predicting a decline in values for the Las Vegas area are correct, it could take a few years before prices return to our current levels.

Buyers — Do you wait to buy? The main risk in waiting lies with interest rates. If rates continue to increase, any savings you might get by purchasing a house for less (assuming prices fall), could be offset by the extra money you have to pay for the loan. For example, on a $350,000 mortgage, the difference between a 6.75% and 7.75% mortgage rate is approximately $250 per month. If you hold the property for 10 years, that comes to $30,000 more interest you have paid.

While the short term outlook for the valley’s real estate market is uncertain, the long term outlook remains positive. We are using up our available land and our valley continues to see job creation and population growth.

One thing remains clear, buyers and sellers need an experienced agent who understands the current market conditions and is a strong negotiator in order to realize the best possible prices today.

The team of Bill & Stacy Loucks is ranked in the top 1% of agents in Southern Nevada. We specialize in listing and selling homes, and our track record proves it. For more information and a complimentary report on the trends in your neighborhood, call us at 702-286-3608 or 702-278-2100 today!