It was just a few years ago when the global economy was rocked, the domestic stock market was cratering, and concerns about local home prices emerged. More recently, economic conditions have been strong, stock values reached all-time highs, and the price of a typical home approached its previous high-water mark. Economies tend to work in cycles.
The housing market has remained relatively stable despite concerns over housing affordability and elevated mortgage interest rates. The median single family home price in Southern Nevada stands at $473,000 in the resale market, which is up 7.0 percent from a year ago and within 1.9 percent of the prior peak of $482,000 reached in May 2022. At the same time, effective availability equates to 1.6 months, which remains well below historical norms.
Earlier this month, I had the opportunity to speak to the membership of the Las Vegas REALTORS®, the organization responsible for approximately 15,000 real estate professionals who are on the front lines of the boom-bust cycles that have played out over the past several decades. In preparation for that event, I focused much of my attention on the fundamentals of the economy and the question that friends and family often ask – is now a good time to buy a home?
This is the type of question that requires an answer specific to the questioner. Everyone has a unique financial situation, a unique employment situation, a unique family dynamic, and a unique set of personal goals. For these reasons, the recommendation is unique to that person. However, there are two general trains of thought regarding the current purchase dilemma.
The 58 percent of Nevada homeowners who currently hold a mortgage with an interest rate of less than 4.0 percent are likely to remain in place and enjoy their current living situation. The result is that potential resale availability remains more limited for those seeking a home, and the tight supply generally translates into stable or elevated price points going forward.
For others considering a move, the decision calculus likely boils down to whether they should try to time the market—attempting to balance the financial implications of a potentially lower interest rate in the future against a potentially higher housing cost down the road. If prices continue to climb at the current pace a year from now, the result is a couple hundred dollars more per month at today’s mortgage interest rates. If interest rates dip and prices remain the same, a full percentage point decline in rates would result in a couple hundred dollars of savings per month. There are also potential outcomes that include falling prices and/or rising interest rates.
There is no right answer. However, there is one wrong answer – if one decides to borrow money that they simply cannot afford. Today, the number of borrowers who are either past due or in foreclosure stands at a decades’ low in Nevada. At the same time, just over 99 percent of homeowners with a mortgage in Nevada are reporting positive equity in their home.
Oftentimes, the financial analysis of homebuying decisions can outweigh the quality-of-life considerations. Focusing on the right home that is within your budget should eliminate much of the noise. While home equity likely remains the single-largest component of household wealth for many, it is also important to think about that next house purchase as a journey to find home sweet home.
Members of the editorial and news staff of the Las Vegas Review-Journal were not involved in the creation of this content.