The Nevada real estate market has suffered the same fate as every other state around the country. Nearly a decade's worth of positive growth was interrupted in the blink of an eye when the Coronavirus was officially declared a pandemic. Years of appreciation, economic expansion, and improving sentiment were brought to a standstill in a matter of days. It is worth noting, however, that the regression was only temporary. Since the pandemic started dictating how the Nevada housing market will operate, real estate has been firing on all but a few cylinders.
Most notably, everything is in place except inventory. Demand remains healthy, and interest rates are still relatively low (despite increasing year-to-date). That said, inventory may increase over the course of 2022 as mortgage rates inch higher. It is too soon to tell what the jump in rates will do to the local market, but any increase in inventory will be a welcomed one. More listings should ease competition and bring home values back down to earth, which is good news for just about everyone.
The Top Nevada Real Estate Markets
While the best real estate market in Nevada is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Number Of Homes Sold: 4,433 (-25.5% year over year)
Number Of Homes For Sale: 16,010 (+22.1% year over year)
Number Of Newly Listed Homes: 7,243 (+14.1% year over year)
Median Days On Market: 23 (+8 year over year)
Months Of Supply: 3 (+1 year over year)
Homes Sold Above List Price: 44.6% (-11.7pt year over year)
Homes With Price Drops: 37.7% (+23.1pt year over year)
Median Rent Price: $1,528 (+5.3% year over year)
Price-To-Rent Ratio: 25.54
Unemployment Rate: 4.7% (latest estimate by the Bureau Of Labor Statistics)
Population: 3,143,991 (latest estimate by the U.S. Census Bureau)
Median Household Income: $62,043 (latest estimate by the U.S. Census Bureau)
Foreclosure Rate: One in every 2,408 housing units
Nevada Median Home Prices
The median home price in Nevada is $468,427, which is a far cry from where things were a decade ago. As recently as October 2012, Nevada saw its median home value drop to about $142,000. Since then, the state of Nevada has ridden a volatile wave of indicators on its way to appreciating 229.9%. Few markets across the country, for that matter, can even come close to matching the rate of appreciation Nevada saw over the course of the last decade. However, it is worth noting that the fastest rate of appreciation occurred during the pandemic. From the moment COVID-19 was declared a global emergency, real estate in Nevada has appreciated 51.1%. To put things into perspective, the median home value in the United States is $354,165. Since the pandemic began, the median home value in the United States has increased by 39.9%, well below that of Nevada's rate of appreciation.
Over the last two years, price increases have resulted from unique macroeconomic indicators. In Nevada, in particular, demand greatly outweighed supply. As the Fed dropped interest rates to combat fears of a slowing market during the pandemic, more and more buyers took to the market. With rates as low as they were and government stimuli flooding the economy, more people wanted to buy than ever before. However, listings remained few and far between. For starters, some homeowners were uncomfortable with the idea of showing their house during a pandemic. Other homeowners didn't want to sell and immediately had to compete against others in the market to buy. Inventory couldn't keep up with demand, and prices rose accordingly.
Moving forward, prices are expected to continue rising. If for nothing else, many of the same indicators that resulted in previous increases are still in place. The biggest difference, however, is slowing demand. To combat inflation, the Fed has increased mortgage rates. Mortgage applications have begun to drop, which means competition will lessen, but there's still far more buyers than sellers. As a result, prices will increase over the next 12 months, but at a slower pace than in the last 12 months.
Nevada Median Rent Prices
There isn't a single market where rental rates aren’t influenced by their home price counterparts. More often than not, changes in home values (and inventory levels) will be reflected in local rental rates. If home prices appreciate, many prospective buyers may be forced to remain renters, effectively increasing competition in the rental market. The more people that are priced out of buying, the more competition there will be for rental housing, which would explain the price correlation. Consequently, renters in Nevada are experiencing the same phenomenon.
Rental rates in Nevada have increased nearly every month since the pandemic began. In the last year alone, the average rent in Nevada has increased 5.3% and now sits around $1,528. At that rate, tenants can expect to pay somewhere in the neighborhood of $1,186 for a 1-bedroom unit and $1,430 for a 2-bedroom unit. For some perspective, the median rent in the United States is about $1,362; that's after increasing by as much as 11.1% over the last 12 months.
Moving forward, Nevada's rental market is expected to grow more crowded. As interest rates rise, fewer people are expected to apply for mortgages and few homeowners are expected to sell because they don't want to deal with higher borrowing costs. Consequently, more people will be driven to the rental market, increasing competition throughout the year. With more demand, landlords will have the ability to increase asking prices. It is too soon to say just how high rents will go, but it's safe to assume they will grow throughout 2022.
Nevada Foreclosure Trends & Statistics
According to ATTOM Data Solutions' Midyear 2022 U.S. Foreclosure Market Report, a total of 164,581 U.S. properties filed for foreclosure in the first six months of the year. For the period, foreclosure filings were up 153% year over year but down just one percent from the same time period two years ago.
“Foreclosure activity across the United States continued its slow, steady climb back to pre-pandemic levels in the first half of 2022,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “While overall foreclosure activity is still running significantly below historical averages, the dramatic increase in foreclosure starts suggests that we may be back to normal levels by sometime in early 2023.”
On a national level, 0.12% of all housing units (one in every 854) had a foreclosure filing in the first half of 2022. The Nevada housing market, on the other hand, had a foreclosure rate of 0.18%, enough to make it the sixth highest foreclosure rate in the country. Over the first six months, Nevada had a total of 2,259 homes file for foreclosure, up 146.4% from the same period last year and 46.0% from the same period two years ago.
As recently as May, the counties with the highest distributions of foreclosures include:
Tax Lien Investing
Tax Lien or Deed: Tax Lien and Tax Deed state
*Most counties have only Tax Deed sales
Interest Rate: 10%
Redemption Period: 2-3 years (depending on property type)
Nevada Real Estate Investing
Real estate investors in Nevada have made a living off of investing in distressed assets. Not surprisingly, distressed homes have become synonymous with attractive profit margins, low acquisition costs, and seller motivation—three of the most coveted indicators of a real estate deal. Despite being higher than most states, Nevada's foreclosure rate is expected to rise. Investors who get their finances in order sooner rather than later may find it easier to get a deal below market value when the influx occurs.
The best way for today's investors to secure a deal with attractive profit margins is to buy a foreclosure. Remember, home prices have increased 27.4% over the last year alone. As a result, the Nevada real estate investing community may want to consider an alternative approach: long-term rental properties. While rehabbing is still a viable exit strategy, today's most prominent market indicators look as if they are leaning in favor of rental property portfolios.
While up year-to-date, interest rates are still considered relatively low. As of July, the monthly average commitment rate on a 30-year fixed-rate mortgage is 5.54%, according to Freddie Mac. At that level, it's still affordable to borrow institutional money, just not as cheap as it was last year. More importantly, today's rates can easily help justify buying real estate that has done nothing but appreciate for eight years. Lower rates mean lower monthly mortgage payments, which suggests it'll be easier for landlords to generate more cash flow from rental properties.
In addition to lower borrowing costs, the onset of COVID-19 has also made vacancies less of a threat to the landlord community. Inventory levels, or lack thereof, are actually working in favor of landlords. While many people may actually want to buy, the fact of the matter remains: more people will be relegated to renters because there simply aren't enough homes to meet demand. As a result, those who can't buy will be forced to rent, ultimately allowing landlords to increase asking prices.
The Nevada real estate investing community has the privilege of exercising any number of exit strategies. Market indicators suggest rehabbing and short selling are still very much on the table. However, the new landscape left in the wake of the Coronavirus looks to cater to landlords and passive income investors. Interest rates are too low, and demand is too high not to consider buying rental property in Nevada.
Nevada Housing Market Predictions
Real estate in Nevada has done its best to mimic national trends. For the better part of a decade real estate in Nevada has exhibited many of the same characteristics as its national counterparts. Price increases, confidence in the market, and several other indicators are in line with national trends, but what does that mean moving forward? What can Nevada real estate investors, homeowners, and prospective buyers expect for the foreseeable future?
Mesquite could see an influx of buyers: With a median home value roughly $55,000 less than the state average, Mesquite looks like it may represent a bargain. That said, there’s reason to believe Mesquite should see an influx of younger buyers who are looking to find cheaper alternatives to cities like Reno, Las Vegas, and Carson City. Having appreciated at about the same pace as the state average in the last year, Mesquite’s median home value should continue the trend upwards. The attention generated by the city's relative affordability will potentially attract new buyers and stimulate higher appreciation rates. As a result, Mesquite could be a good place for local investors to consider looking.
Inventory will drive appreciation: The Nevada real estate market has found itself lacking in the inventory department. Most of Nevada’s largest cities, for that matter, have far fewer available listings than balanced markets typically exhibit, and the pandemic only made things worse. The state's three months of supply aren't nearly enough for today's buyers. While new inventory is expected to come eventually, new listings are still a ways out, which means prices should increase for the foreseeable future
More people will move to the suburbs: Without a need for many people to live close to an office, many people are expecting a mass exodus from large cities. Today's work-from-home culture has enabled everyone to pack up and move to less-expensive and larger living spaces. As a result, we may see metropolitan prices decrease while suburban prices increase.
The Nevada real estate market appears to have kept pace with national averages, and even outpaced some major indicators. Appreciation rates, home values, demand, and inventory are all closely aligned with the rest of the country. As a result, real estate in Nevada has been allowed to thrive. Everyone partaking in the market—buyers, sellers, and investors—has found at least some reason for optimism. With that in mind, however, it's not a bad idea to temper short-term expectations. The pandemic may keep Nevada from rebounding as fas as many other states because of the higher-than-average unemployment rate. Real estate in Nevada won't be far behind. When the rebound officially initiates, investors who get in now will be happy they did.
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