The 2021 Las Vegas real estate market has created the expectation of record-breaking prices every month. Total closed single-family residential sales for 2021 could potentially break an all-time record, should December produce at least 2,449 single-family residential closings.
That is quite different from where we were in 2007 when there was a total of 879 closings for the entire month of December. Recessions and pandemics fail to impede the amazing growth in most sectors of the greater Las Vegas economy.
November set a record high median price of $420,000 for single-family residential closings; the high at the 2006 market peak was $314,950. In November 2018, 39 percent of the closed units were under $250,000, compared to 14 percent, today. Similarly, only 15 percent of November 2018 closings were above $400,000, while today, 47 percent of all closings are above $400,000. Home sales at prices below $250,000 are the hardest hit by scarce inventory, super strong demand and a willingness on the part of buyers to pay market and appraised values for these homes. In turn, cash and conventional financing accounted for 82 percent of the closings in this price point.
Just one year ago 28 percent of these closings were from Federal Housing Administration financing and only 28 percent were cash. This past month, only 12 percent of closings at these price points were due to FHA financing with 42 percent more attributable to cash transactions.
How can buyers best navigate these market conditions? First, be optimistic and ignore references to a sellers’ market. Every closing has a buyer and a seller, so it is more a matter of assessing the buyer’s negotiating leverage or advantage. This could change based on the specific community, local supply and demand and even the seller’s motivation. The absolute best thing a buyer can do is to work with their real estate professional and their lender to determine what is possible and viable financially.
Buyers can accomplish this by having their lender assist them in obtaining underwritten pre-approval before getting too far along in property viewings. Underwritten pre-approval entails the buyer providing all required documentation to the underwriter for evaluation. This would include documents such as W-2s, 1099s, tax returns and employment verifications. Once completed, the underwriter only needs a property address, appraisal and inspection to complete the loan. Buyers with underwritten pre-approval can submit stronger offers and potentially close sooner.
What about 2022? The Las Vegas market enjoys superior economic diversification thanks to sports and entertainment growth and acceptance by locals and fans. That, along with families migrating from outside Nevada have contributed to demand and the strong luxury market performance.
One would expect the luxury end of the market to grow while shrinkage at the lower price points continue. Resale closings will remain strong in 2022 despite a slight downturn in new listings. Prices should rise but around 6 percent rather than the 20 percent-plus pace. Interest rates could be the wild card should they rise much above 3.5 percent.
Las Vegas showcases its resilient, robust nature while consumer confidence abounds. Now, let us see if we break the real estate closings record!
Forrest L. Barbee is the corporate broker for Berkshire Hathaway HomeServices Nevada Propertes.