As we enter the fall season, it’s time to take a look at the Las Vegas luxury real estate market. With home prices still inflated and interest rates at a 20-year high, the market has been slowing down significantly, a fact bolstered by third quarter sales numbers.
For properties priced at $1 million and above, closed sales decreased 41.2 percent last quarter — from 536 in the this year’s second quarter to 315 in the third quarter.
This decline in sales might seem normal at first glance. Following the usual rush of homebuyers in the spring and early summer, seasonal slowdowns are typical as fall approaches.
But how does this year compare to the last few years? To answer that question, here are the second quarter and third quarter sales numbers for $1 million-plus properties, sourced from the Multiple Listing Service.
■ 2019: 171 sales in Q2, 146 in Q3 (down 14.6 percent)
■ 2020: 109 sales in Q2, 232 in Q3 (up 112.8 percent)
■ 2021: 483 sales in Q2, 412 in Q3 (down 14.7 percent)
■ 2022: 536 sales in Q2, 315 in Q3 (down 41.2 percent)
Due to the COVID-19 pandemic, 2020 was an anomaly of a year. Lockdowns began in March, which drastically reduced home sales throughout the second quarter. Then the floodgates opened, especially in the guard-gated market that my team specializes in, leading to a staggering 112.8 percent increase in sales volume in this year’s third quarter.
The years, 2019 and 2021, had more “normal” seasonal slowdowns compared to 2020. The third quarter in 2019 and third quarter in 2021 saw quarter-over-quarter decreases of 14.6 percent and 14.7 percent, respectively. In light of these numbers, last quarter’s 41.2 percent decrease suggests there’s more to the story than a seasonal lull.
To better understand this drastic dip in sales, look at how hot the market got over the last couple of years. There was a 58 percent increase in sales activity from the third quarter of 2019 to the same time of the year in 2020, which marked the beginning of a 21-month bull run for Las Vegas real estate. As the market heated up, sales volume continued to rise — with a 78 percent increase in sales from the third quarter in 2020 to the third quarter in 2021. Fueled by incredible demand, prices climbed to all-time highs, which pushed more and more homes into the $1 million-plus market.
Coupled with high interest rates, these record-high prices are forcing many buyers to sit on the sidelines, which explains last quarter’s significant decrease in sales. The Federal Reserve started approving interest rate hikes in March, and the market is finally feeling the effects. It doesn’t help that the stock market is in flux, consumer confidence is down, and there are talks of a looming recession.
Many sellers have been making price adjustments, which is bringing buyers back to the table despite these adverse market conditions. Cash buyers may be able to find some great deals in the coming months, but buyers getting a loan still have options. A popular choice for anyone getting a jumbo loan is a 5, 7, or 10/1 adjustable-rate mortgage (ARM) with regular principal and interest payments amortized over 30 years. These loans typically offer about a 1 percent lower interest rate. Many of these borrowers figure they will either move by the time the rate adjusts or refinance if rates drop.
As far as the future goes, the most recent Consumer Price Index report states that inflation is still on the rise, so the Federal Reserve is likely to continue its rate hikes to cool off the economy. I suspect this will continue to cool the housing market as well, especially if it leads to job layoffs. Whether you plan on buying or selling in the near future, it’s more important than ever to hire a real estate agent with experience navigating difficult market conditions — or better yet, a team with a proven track record.
A certified Realtor with almost 20 years of experience, Rob Jensen is the broker/owner of the Rob Jensen Co., a team of full-time, salaried professionals. The real estate brokerage focuses exclusively on guard-gated communities.