The Las Vegas single family and multifamily housing market could be on a path to growth in new product, according to industry experts.
Rick Sharga, chief marketing officer at Ten-X, a research firm and online platform where users can sell and acquire residential and commercial property, said Las Vegas has had vacancy issues in multifamily, with many parts of the city being overbuilt and little need for construction compared to other markets.
“Gradually those vacant properties are being populated,” said Sharga. “At some point, again with the population influx, you’re going to start to see construction.”
Economically, Las Vegas has kept up a strong pace on factors such as job growth, which Sharga said has been on the rise despite a slowdown in the city’s largest sector, hospitality, according to Ten-X’s first quarter report on the multifamily sector.
The jobs report is still positive in the first quarter report with the number of people at work surpassing prerecession peak and employment rates in Las Vegas growing by 2.6 percent in a year-over-year analysis. The number of jobs in the hospitality sector, which accounts for 30 percent of the city’s employment, fell 0.3 percent during the same period.
Other sectors like retail balanced the loss, posting a 3.6 percent growth in a year-over-year analysis in the first quarter report by Ten-X.
The forecast for hospitality is difficult because of volatility in the segment, said Sharga.
One of the biggest problems for Las Vegas and the U.S. in general is the slowdown in the world economies, in Japan and China. A fair amount of business comes to the city from those nations’ travelers, Sharga added.
“I don’t believe that we’re calling for a forecast of a significant loss of jobs, or anything like that,” said Sharga. “It’s just going to slow down a little bit for the time being.”
On a positive side for the local multifamily and housing markets, accelerated population growth has been occurring in the city.
Sharga said population grew by 2.2 percent, which is more than twice the national average of 0.8 percent. In total, Sharga said there was an increase of 46,000 residents heading to the valley in 2015.
“The increased number of people leads to increased number of households,” said Sharga. “That leads to demand for both rentals and single-family homes.”
Sharga said rental rates are going to see a rise of about 4.1 percent through the end of 2018. He also said vacancy rates will drop from almost 5 percent and head down to 3.3 percent in 2018.
“In the Las Vegas market, we’re not seeing a lot of new construction in multifamily at the moment, so demand will continue to outstrip supply through 2018 before it balances out a little bit again.”
Las Vegas’ single-family market also has its strengths.
“We do believe right now that it’s a little bit more affordable for people to buy a house than it is to rent,” said Sharga. “That’s not true in every market.”
Las Vegas, however, is following a pattern across the U.S. with slowing growth in home values.
“Typically, it’s in markets where prices have accelerated in the last few years,” said Sharga.
Sharga said Las Vegas has seen growth by about six percent in home values, which stood at about a $213,000 average sale price at the end of 2015, in a year-over-year analysis. The average price once stood closer to $325,000, before the crash.
The housing market could see more product soon.
“There may be indications that home builders are going to start building again, which typically is a good sign for the local marketplace,” said Sharga.
Sharga said Las Vegas has a very low level of home ownership, which could also be a positive.
The Las Vegas homeownership number sits at 54 percent while the national level is at 64 percent, said Sharga.
“The positive way of looking at that is the metro area has some room to grow in home ownership, as it’s trying to catch up with the rest of the country,” said Sharga. “So there could be some opportunities there for improvements in the housing market.”