It’s no secret that Southern Nevada’s real estate market in 2022 was a tale of two markets. The year started on a tear that was a powerful continuation of the pandemic-crazed market. Then, and not unexpectedly, the shift hit in late April, early May, and our market quickly became a balanced-to-buyer’s market from a strong seller’s market.
Why not unexpectedly? Well, Fed Chair, Jerome Powell, determined that inflation was not transitory and set out to get it under control. And how do you do that? Raise interest rates.
There is no single industry more susceptible to the impact of interest rates than real estate, which is most Americans’ largest and most long-term, financed investment.
When mortgage rates more than doubled while housing prices were at all-time highs, that was a potent cocktail for a market slowdown. And slow down it did. For-sale inventory quadrupled while sales pace halved, ultimately impacting home prices and giving back the entire 11 percent appreciation realized through April. This is exactly what Mr. Powell wanted.
And against all that volatility, I’m regularly being asked my predictions for 2023. HA, HA, HA! When some of the most respected local economists and market prognosticators hedge their opinions with the “but who really knows” caveat, it gives me great pause sharing my thoughts. But here it goes:
1. Most seem to believe that inflation is slowly getting under control. Me, too!
2. Most also believe that interest rates have peaked and probably will retreat a little this year. Me, too!
3. Most further believe that price declines will continue, albeit at a much slower pace before leveling off. Me, too!
4. The consensus is much more mixed on whether we will have a soft landing or if efforts to control inflation will place our country in a recession.
5. Most believe that if we do enter a recession, it will be a short one. Me, too!
And here’s the rest of the story: No better example exists of human beings’ adaptability and short memories than the pandemic! Seriously, am I alone in my initial thinking that Las Vegas, the capital of squeezing a lot of people in very small spaces, was toast post-pandemic?
Instead, our casino industry has not experienced a less-then-billion-dollar month since reopening (a previous very sporadic achievement). How did that happen? Well, for sure, we must credit the gaming industry for quickly responding and adapting to pandemic safety concerns — a yeoman’s job.
And let’s also attribute some credit to the fact that people were forced to balance their insatiable attraction to the experiential entertainment opportunities our community offers against their safety concerns, and the former won, proving our short memories.
The same exists today in the housing market. Artificially low interest rates caused a boom in home sales, and their sharp increase caused a definite stall. Our market’s resilience will prove powerful once again, as stories of those who bought homes in the 1980s at 13 percent rates help to add relativity to our current situation. We are already experiencing this today as buyers have come to accept higher (but still low) rates and sellers are recognizing the gravy train has stopped and the need for realistic pricing has taken its place.
Over 40 years in this industry in Las Vegas has caused me to appreciate the highs and lows and recognize that moderation is preferred, but we can’t control that. So instead, we probably will continue to experience highs and lows. Yet, when we look at the long-term trend line, Las Vegas is always up and to the right.
Add to that the tremendous positive momentum we are enjoying in the symbiotic gaming, hospitality and sports industries, and it seems obvious that our community will be experiencing continued all-time highs. And historically, apart from the Great Recession, Southern Nevada’s resilience has always caused us to be last-in, first-out of recessions and downturns.
But who really knows.
Make it a great 2023.
Bob Hamrick is the chairman and CEO of Coldwell Banker Premier Realty.