Market Pulse - House prices drop for first time in over 2 years

For the week of July 4, 2022

Pending home sales rebound &
Las Vegas house prices drop for first time in over 2 years

“Much effort, much prosperity.”—Euripides, ancient Greek dramatist

Local Las Vegas Statistics based on the past week moving averages

After heading south six months straight, Pending Home Sales logged a 0.7% gain in May. This measure of contract signings is still down 13.6% year-over-year, blamed mostly on higher mortgage rates.

Stubbornly growing home prices finally slowed, as the Case-Shiller National Home Price Index booked a smaller gain in April than it did in March, reversing four straight months of increased gains.

Realtor.com reports housing inventory improved again in June, up 18.7% over last year, the largest increase in the data's history, driven by the combination of more sellers listing and moderating buyer demand.

The Federal Reserve has been raising interest rates lately in an effort to cool inflation. In the housing market, the average rate on a 30-year home loan in May was 5.23 percent, up from 2.96 percent the same month last year, mortgage-finance giant Freddie Mac reported.

Across the U.S., the pace of resales dropped for the fourth consecutive month in May and was expected to keep sliding, the National Association of Realtors reported.

Nationally, “sales volume is dropping in response to affordability constraints,” and more buyers will “take a step to the sidelines in the coming months,” Nicole Bachaud, economist with listing site Zillow, said in a recent statement.

(Growth rates are compared to the prior year. Availability reflects inventory excluding those with offers)

"Southern Nevada house prices fell last month for the first time in more than two years as increased borrowing costs threw cold water on the once-sizzling market.

The median sales price of previously owned single-family homes — the bulk of the market — was $480,000 in June, down 0.4 percent, or $2,000, from the record-high set in May, trade association Las Vegas Realtors reported.

Home values are still much higher than they were a year ago, as the median sales price last month was up 21.5 percent, or $85,000, from June 2021.

Last month’s dip was by no means a dramatic one, but it was the first time that Southern Nevada’s median house price fell month-to-month since April 2020 amid the early chaos of the pandemic, the association confirmed.

Sales totals also dropped last month, as buyers picked up 2,668 single-family homes, down 8.2 percent from May and 24.7 percent from June 2021.”

At the same time, the tally of available listings shot higher, as 5,746 houses were on the market without offers at the end of June, up 61 percent from May and more than double from June of 2021, according to LVR.

The association reports data from its resale-heavy listing service.

Locally and nationally, homebuyers have been pulling back lately as higher mortgage rates wipe out the cheap money that fueled America’s unexpected housing boom after the pandemic hit.

‘Some relief for potential buyers’

In recent months, Southern Nevada has seen fewer home sales, a rising share of price cuts, and growing inventory as increased borrowing costs make it all the more expensive to buy a place following a year of huge price gains and as people pay more for gas and other goods.

As Las Vegas Realtors sees it, the housing shifts are offering some “relief” to prospective buyers following a prolonged hot streak marked by rapid sales, buyers showering homes with offers, and median sales prices hitting new all-time highs practically every month.

“Rising mortgage interest rates sparked a slowdown that was bound to happen at some point,” LVR President Brandon Roberts said in a news release. “Local home prices can’t keep going up at the rate they have been the past few years. More stable prices, along with the increasing number of homes on the market and decreasing number of homes being sold, are providing some relief for potential buyers.”

Southern Nevada house prices fell in June after climbing almost nonstop for two years.

But as buyers pull back, this will help inventory recover and price growth slow from its peak, “leading the market back to a more balanced” state in the long run and providing more homeownership opportunities “for those priced out today,” she added.” - LVRJ Eli Segall

The past 16 weeks have seen consistent growth of properties coming on the resale market. 

As of July 4, 2022, there are currently active (%’s compared to 1 weeks ago):

• 6,220 Single Family Homes +11.67% 

• 860 Condos +11.98%

• 575 Townhouses +6.88%

• 246 Manufactured Homes +10.81%

• 421 High Rise Units +2.18%

• 97 Multiple Dwellings +1.42%

• 2,256 Parcels of Land +1.85%

• 2,410 Rentals On Market +5.01%

Past Seven Days Market Watch (%’s compared to 1 week ago):

• 1,337 New Listings -10.03%

• 253 Back On Market -9.32%

• 88  Price Increases +3.41%

• 1,286 Price Decreases +2.47

• 712 Accepted an Offer -21.48%

• 851 Sold +17.38% 
  

• 168 Expired +290.70%
  

• 351  Taken Off Market +5.57% 

• 124*  properties are coming soon -15.65% 

As of July 4, 2022 there are 813 more active residential resale properties on the market compared to one week ago, an increase of 10.69%. 

*Properties coming soon do not indicate all of the upcoming properties.  These are listing that are entered into the MLS prior to list date.

• Las Vegas house prices drop for first time in over 2 years

• Clark County assessor seeks to learn up ‘misinformation’ about property taxes

• Summerlin mansion sells for $19M, one of the most expensive ever

• Wells’ Don Fandetti on how Fed tightening could affect mortgage lending

• The big risks in buying a house sight unseen

DOWN AGAIN... Stocks booked the worst first half of a year for the S&P 500 since 1970 in another losing week driven by concerns about the economy, inflation, corporate earnings, and rate hikes.

We had weaker-than-expected Consumer Confidence, another hike in PCE inflation (the Fed's favorite measure), a slower growing ISM Manufacturing Index, and Q1 GDP showing the economy contracting at a 1.6% annual rate.

Hope could be found in increased Personal Consumption, though inflation has consumers spending more and getting less. Good signs: initial jobless claims fell to 231,000, while continuing claims dropped to 1.328 million.

The week ended with the Dow down 1.3%, to 31,097; the S&P 500 down 2.2%, to 3,825; and the Nasdaq down 4.1%, to 11,128.

Bonds gained strongly, the 30-year UMBS 4.5% UP 0.96, to $100.25. The national average 30-year fixed mortgage rate retreated in Freddie Mac's Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW… While rates have climbed, it should be noted that mortgage rates are still near historical lows and well under historical averages.

SERVICES SLOW, JOBS GAIN, FED MINUTES RELEASED... The services sector should show slower expansion by the June ISM Non-Manufacturing Index. The June jobs report is expected to deliver a modest gain in Nonfarm Payrolls, with Hourly Earnings still trailing inflation by a lot. FOMC Minutes from the Fed's June confab may give us useful insights on rates and the economy.

Earnings season starts next week, and we should see how companies are holding up with a strong USD.

U.S. financial markets were closed Monday, July 4, in observance of Independence Day.

Forecasting Federal Reserve policy changes in coming months. No one thinks the Fed will stop raising rates the next three meetings, with a 0.75% hike forecast for July. Note: In the lower chart a 95.1% probability of change is a 95.1% probability the rate will rise.

AFTER FOMC MEETING ON:     CONSENSUS
Jul 27                                              2.25%-2.50%
Sep 21                                             2.75%-3.00%
Nov 2                                              3.00%-3.25%

Probability of change from current policy:

AFTER FOMC MEETING ON:      CONSENSUS
Jul 27                                                95.1%
Sep 21                                               95.8%
Nov 2                                                97.2%