Housing market predictions 2023 introduction
In recent years, the housing market has experienced significant fluctuations, thanks to the pandemic. This volatility has left many potential homebuyers and investors wondering if home prices will stabilize and become more affordable.
As the market continues to evolve, this concern is worth addressing, and it is crucial to analyze factors such as median home prices, mortgage rates, and housing supply and demand to make a determination.
Hopefully, this guide will provide some clarity for you. It is a broad overview of the current state of the Nevada and Las Vegas housing markets.
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Are home prices getting more affordable?
In February, home sales prices fell year-over-year for the first time in over a decade, which would indicate that home prices are becoming more affordable—or at least, not rising at unprecedented rates like they were in 2021.
Interestingly, LVR documented a median price of existing single-family homes sold in January 2023 at $425,000, compared to $435,000 in January 2022. This is a decrease of $10,000 for prices in Southern Nevada.
Average home prices in Nevada
Currently, the average median home price in Nevada is around $430,000.
The median sales price for used single-family homes is slightly lower at $425,000.
Current mortgage rates for April 2023
Bankrate has reported the current interest rates in Nevada are as follows:
6.02% for a 15-year fixed mortgage
6.73% for a 30-year fixed mortgage
Will rising interest rates lower home prices?
Although rising mortgage rates may not directly cause a drop in home prices in Nevada and Las Vegas, they are likely to slow or halt growth in home values.
As mortgage rates rise, borrowing becomes more expensive, and this could potentially reduce demand and hurt the rate of price appreciation.
The Las Vegas housing market changed last year in 2022
The Nevada housing market, and by extension, the Las Vegas housing market, experienced a volatile year in 2022.
Median home prices soared to record highs before retreating to more familiar territory in the third and fourth quarters, and in May 2022, single-family homes reached an astonishing $482,000.
Prices fell from this peak quite some distance, ending the year at $425,000 in December 2022, according to Las Vegas Nevada government statistics.
U.S. News reported that the number of authorized building permits in Las Vegas rose to 2,125 at the beginning of 2022, marking the largest monthly number since mid-2008. However, January 2023 saw a significant drop, with only 766 permits authorized.
Las Vegas housing supply and demand, from 2022 to now
According to Norada, the January 2023 housing supply in Southern Nevada was 4.1 months of inventory, representing a substantial 478.5% increase from the same time last year.
This presents buyers with an opportunity to capitalize on the growing housing supply.
While we have not yet reached a full-blown buyer’s market, as the inventory has not reached six months, this year is significantly more favorable for buyers compared to 2022.
In contrast, Rocket states that Las Vegas remains a seller’s market, with homes in the area selling for 7.8% more than the previous year.
Will the Nevada real estate market crash in 2023?
A housing market crash in 2023 is unlikely for Nevada or Las Vegas. Even though the market is cooling off, it still offers considerable opportunities for both buyers and sellers.
Las Vegas has a growing population with new buyers
The city of Las Vegas benefits from a growing population.
In fact, Macrotrends reports that the Las Vegas metro area population increased to 2,899,000, a 2.11% rise from the 2022 population of 2,839,000.
In 2019, the metro area had a population of 2,699,000.
In other words, in four years, the Las Vegas metro area population grew from:
2,699,000 → 2,899,000
The increase of 200,000 people in just four years has undoubtedly generated significant demand for housing, and we anticipate the trend to continue.
Population migration from California
Many Californians are migrating to Nevada each year, with tens of thousands (if not more) choosing the Las Vegas area as their new home.
Favorable tax laws and relatively low crime rates in places like Henderson are significant draws for people fleeing California in the search for cost affordability and less crime.
Nevada has low taxes
Nevada and Las Vegas offer several tax benefits to residents, making the area an attractive draw for homebuyers and investors, particularly for people from areas with heavy tax policies.
Some of the benefits of living in Las Vegas include no state income tax, low property taxes, and no estate or inheritance taxes.
These benefits contribute to a lower overall cost of living compared to neighboring states like California, drawing more people to the region and supporting a robust housing market.
Homeowners have stronger equity than during the 2007-2008 financial crisis
The majority of today’s homeowners have positive equity in their homes, which reduces the chance of a housing market crash.
According to Nevada Current, real estate data analyst ATTOM reports that over 50% of Nevada homeowners with mortgages are “equity rich.”
What will happen if the housing market crashes?
In the event of a housing market crash, interest rates would rise, the number of homebuyers would decrease, home prices would fall, and many homeowners would likely default on their mortgages.
Home sales in Nevada
The housing market in Nevada has undergone some shifts recently, notably in the areas of single-family home sales and condo and townhome median sales prices.
There is a decline in single-family home sales
Despite this decline, the median sales price remained stable at around $425K in December 2023.
Condos and townhomes have seen an increase in median sales price
According to the same report, the median sales price of condos and townhomes increased to $255K in January 2023, up nearly 5% from the previous year.
In January 2022, the median sales price of condos and townhomes was $243K.
Average rent prices in Nevada
RentCafe states that the average rental price for an apartment in Las Vegas in 2023 is approximately $1,460, with the average apartment size being 894 square feet.
50% of apartments in Las Vegas run between $1,000 and $1,500.
Only 6% of apartments exceed $2,000 per month in rent.
Las Vegas real estate market forecast for 2023
In 2023, we anticipate a slight decrease in home values while interest rates will remain below the historical average of 7.75% (averaged from the 70s).
Housing inventory forecast this year
The housing inventory is expected to continue its upward trend throughout 2023, offering more opportunities for buyers to find properties at competitive prices.
Will there be more foreclosures in 2023?
Foreclosures are projected to rise above what they were in 2020 and 2021 and possibly above what they were in 2022. However, opinions vary on the extent of the increase in foreclosures.
Is Las Vegas a good place to make a real estate investment in 2023?
In general, Las Vegas is considered a good place to make a real estate investment.
The city is business-friendly and tax-friendly and benefits from steady population growth and a relatively strong job market.
Thriving tourist industry and infrastructure
Two points of favor for Las Vegas are:
(1) Its thriving tourism industry, which creates demand for short-term rentals and vacation properties.
(2) Its ongoing infrastructure developments and expansions, which can potentially increase property values in the long term, providing a solid foundation for real estate investments.
What Does All This Mean?
While the Las Vegas housing market has experienced some volatility and cooling in recent years, it remains a promising arena for real estate investment and home buying in 2023.
Factors such as a growing population, migration from California, low taxes, and strong homeowner equity contribute to a stable market that is unlikely to crash.
Buyers and investors can take advantage of the current market conditions, thanks to increased housing inventory and relatively low interest rates, and may be able to find properties that meet their needs and offer potential long-term gains.
As the city continues to grow and attract new residents, the demand for housing in Las Vegas is expected to remain strong, making it a viable option for real estate investments in 2023 and beyond.
Further Reading: Why is Vegas housing so cheap?
There are a handful of reasons why housing is more affordable in Las Vegas than in major cities like Los Angeles and New York City.
- Plenty of room – Although less true than it was in the past, the Las Vegas area benefits from a large supply of land that has allowed and continues to allow for development and construction.
- Lower construction costs – The local regulations in Las Vegas are more conducive to housing construction than in cities with lots of red tape.
- Lower cost of living – Lower taxes, utilities, and transportation costs all contribute to a more affordable cost of living in the Las Vegas area than in some other major cities.
- Population migration and the tourist economy – Las Vegas has seen a steady migration of people from expensive areas like California who are looking for a lower cost of living. This has helped maintain a reliable demand for housing and supported a stable local real estate market.
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