Small Decreases In Home Values Anticipated

I was completely wrong in my earlier assessments of the housing market. I had predicted a sharp decline in prices after the 2022 peak. I didn’t see Wall Street snapping up all those single family homes. Consequently, the market has stabilized with very little inventory available for the average investor. There was a small decrease in January numbers and my revised prediction is we will see a small bump in July when we get flooded with buyers but over the year, prices will drop just a little. The housing market is still much less affordable to new home buyers.  Prices have gone up by over 40% in the past three years.

Median Sold Price By Bedroom Count
Beds	Jan 2023	Jan 2024	CHANGE
1	$205K	$199.8K	-2.50%
2	$290K	$284.3K	-2.00%
3	$411.1K	$395K	-3.90%
4	$512.3K	$498K	-2.80%
5	$680.8K	$664.6K	-2.40%

Many of the real estate agents in Las Vegas have been praying for lower interest rates to stimulate buying activity. They will have to wait longer as   the latest inflation report showed inflation rising 3.1% year over year. Inflation is moving in the wrong direction. This means interest rate cuts that appeared imminent a few months ago will be delayed until later in 2024.  Mortgage rates will remain steady with no sign of change. Toward the end of 2023, inflation was dwindling and hope was high that interest rate cuts could come as soon as March 2024.  Not going to happen.

 

 

 

 

Sellers continue to be completely unrealistic about the value of their homes. Even though there is a shortage of inventory, there is a shortage of buyers.  First time home buyers find it cheaper to rent and smart investors can’t find a reason to risk hundreds of thousands of dollars on an asset that may squeak out a 4% return on a good day. We still get a call every week from a “wannabee investor” who purchase a property recently only to discover they are going to be losing their shirt every month. The rent doesn’t support their mortgage, taxes, hoa, insurance etc.

Rental Market – By Bob Kinniburgh

We’ve closed the books in our first month of 2024. According to Zillow, although we are below year over year with our median rental prices, we saw an increase in median rents over December 2023. This includes Las Vegas, North Las Vegas, and Henderson, all looking better than in December. Read more by clicking here.

 

 

 

 

 

 

 

 

Redfin further breaks down our valley rental market by offering median rents for various neighborhoods. Redfin also tracks Las Vegas migration and relocation. Here is a graphic that shows where people are moving from to live in Vegas.  You can get lost in the details of the full report by clicking here. Keep in mind Redfin’s data was posted on January 2, 2024, so they are a month behind.

5 Reasons Why Pricing A Rental Over Market Works Against You

1. Tenant Quality Decreases. This is a numbers game. Because there will be fewer prospects looking at the property, we will get fewer tenants to select from. A smaller selection of prospects translates to fewer choices and lowered standards.  In many cases, owners get so desperate for a tenant they will make exceptions like allowing pets, smokers or tenants with marginal credit. Conversely, when there is a choice among tenant prospects, we get to pick and choose better tenants.
2. Search Engines Filter And Sort Your Property Out.  When tenants search for a rental, they plug in price, bedrooms, bathrooms and location in pretty much that order. This means if your property is priced above market, they don’t even see your property unless there is nothing else available in that area. The chances your property is the only one available for rent in a particular school district are astronomically remote.
3. Time is not on on your side. Fewer tenants will be looking at a property priced too high. This means it will take much longer to find a tenant. Every day a property sits vacant costs you money. The more a property is priced over market, the longer it takes. Generally speaking, a property that is listed 5% over market will take 4 weeks longer to find a tenant. If you do the math, there is a good chance your price increase is eaten by vacancy cost.
4. Your tenants will not stay long. Typically, the tenant who was willing to pay over market rent came from California where rents are ridiculous. About 2 months into the lease, they will discover they have been taken for a ride and will start looking for another place before their lease expires. This will translate into another few months of vacancy. Tenants who are paying market rent or just below, are less likely to move because it costs a lot of money and is a headache.  Tenants paying a lot less than market rent will stay for years!
5. Vacant properties are prone to vandalism. Tweakers are always looking out for vacant properties and tell tale signs of a property that has not been occupied in some time. The cost of a broken window, door or stolen appliances costs a lot of money. Not to mention the mental burden these vacant properties create. About 25% of properties that are vacant for more than 30 days are vandalized.

Rental income is significantly lower than what some agent promised them. We have actually lost some management business because competing management companies will whisper sweet nothings about how they will be able to fill a vacant property at above market rental prices. Investors who recently purchased a property with high rental rates typical “come to Jesus” 8 weeks later.