The combination of increased interest rates and record-breaking home prices is making it incredibly difficult for investors and first-time home buyers to buy homes in the Las Vegas Valley. According to the Las Vegas Realtors, sales volume is down 8.8% for single-family residences and 6.6% for condos and townhomes from one year ago. By the end of May 2022, there were over 3500 listings that did not have a single offer, more than a 75% increase from a year ago.
What do these numbers mean?
The market is starting to cool off. When the Federal Reserve increases interest rates it makes borrowing money more expensive. This is meant to combat inflation but also pushes people out of the market and makes margins difficult for investors to make moves on investment properties. This will put a temporary halt in the housing market as people are hesitant to buy since their mortgage rates will be too expensive.
What does this mean for investors?
There will always be deals out in the market for investors if they know where to look. The time of finding sure-fire deals is dwindling. Record-breaking interest rate hikes and home prices make it difficult for investors to find deals that will produce cash flow. Even with increased rental rates the margins compared to their mortgages often do not make sense for investors to put their money into an investment property for the long term. Fix and flips could also pose some risks considering the numbers produced by LVR from May 2022 and what was described above. 3500 plus properties listed did not have any sort of offer is concerning and could be a risky investment.
So, is it a good time to buy property?
Historically, real estate will eventually appreciate in value over longer periods of time. When was the last time you heard someone that was upset about a property they purchased 30 years ago? Depending on you situation it may or may not be a good time to buy. Sellers may start to get antsy and drop their prices just to get it sold before prices start to drop. Overall, no one truly knows where the market is going.
Thoughts to take with you.
Whether you are an investor with plenty of capital to deploy or you are a first-time homebuyer with a budget, work out the numbers. If the numbers make sense and you can create cash flow or you can afford the mortgage, make the move forward. If you cannot make the numbers work, stay put and hope the market shifts more favorably for your situation.
https://www.fox5vegas.com/2022/06/07/despite-record-prices-las-vegas-housing-market-starting-see-shift/?fbclid=IwAR0YH_F9XlONgH1CckJz9hWvjAqAgpz5B1P7IdhPU1FHBAPmuEkanCUZlpk