Nevada Real Estate Market Trends & Analysis
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 latest retraction is only expected to be temporary. For the moment, it appears as if the local housing sector is picking up momentum at a faster rate than it was lost in the first quarter. Most of the ground lost in March has been made back up, and then some.
The first quarter of 2020 was fraught with uncertainty, and the residents of Nevada were no exception to the rule. Nonetheless, the light appears to be at the end of the tunnel. For the time being, it looks as if the worst is behind the Nevada real estate market. As a result, the recent lull in activity has awarded local investors an opportunity to participate in a hot marketplace.
Nevada Real Estate Fees & Regulations
Real Estate
| Closing Conducted by: | Title Companies, Escrow Companies, Lenders |
| Conveyance: | Grant Deed |
Foreclosure Procedure
| Primary Foreclosure Method: | Non-Judicial |
| Process Period: | 3 - 5 Months |
| Notice of Sale: | Trustee |
| Redemption Period: | None |
Taxes
| Income Tax: | None |
| Corporate Tax: | None |
| Sales Tax: | 6.85% |
| Estate Tax: | No |
| Inheritance Tax: | No |
| Median Property Tax: | 0.84% |
| Property Taxes by County: | http://www.tax-rates.org/nevada/property-tax#Counties |
Average Transactional Costs
| Closing Cost: | $2,265.00 |
| Transfer Fee: | Transfer fee: Up to 700,000 county population 0.13%; over 700,000 county population 0.25%; Tax regardless of size 0.26% |
| Origination Fee: | $1,570.00 |
Nevada Housing Market Overview
- Median Home Value: $316,275
- 1-Year Appreciation Rate: +4.2%
- Median Home Value (1-Year Forecast): +4.6%
- Median Rent Price: $1,540
- Price-To-Rent Ratio: 17.11
- Unemployment Rate: 13.2% (latest estimate by the Bureau Of Labor Statistics)
- Population: 3,034,392 (latest estimate by the U.S. Census Bureau)
- Median Household Income: $55,434 (latest estimate by the U.S. Census Bureau)
- Percentage Of Vacant Homes: 14.11%
Nevada Median Home Prices
The median home price in Nevada is $316,275, which is a far cry from where things were no more than eight years ago. As recently as October 2012, in fact, Nevada saw its median home value drop to about $142,000. Since that time, the state of Nevada has ridden a wave of positive indicators, not the least of which was responsible for a 122.7% increase. 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. It is worth noting, however, that the appreciation of real estate in Nevada was high because of how hard the state was hit by the recession. Simply put, real estate in Nevada got hit so hard that it had more room for growth than just about everywhere else. Nonetheless, Nevada has managed to recoup all of its losses, and then some.
To put things into perspective, the median home value in the United States is $256,663—or $59,612 less than that of Nevada’s median home value. Since October 2012 (right around when the national real estate market started to recover), median home values across the whole country jumped more than 50.0%.
Real estate in Nevada (on average) has appreciated at a much faster pace than the national average for the better part of a decade. However, the last year has seen the national market make up some ground. As it turns out, Nevada was less insulated from the Coronavirus than most other states. Due—in large part—to the state's dependence on tourism (think Las Vegas and Reno), unemployment was particularly bad. The hotel sector, which accounts for a large portion of the state's two biggest cities, was essentially out of commission for the better part of 2020.
Fewer people employed meant fewer buyers on the market. Uncertainty and economic turmoil kept many people from participating at all. And while record-low mortgage rates have enticed some people to start buying homes again, Nevada has a long way to go until the pent-up demand returns to normal. In the meantime, Nevada may lag behind the rest of the country, albeit modestly.
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. In the event 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.
Following in the wake of nearly a decade’s worth of appreciation, Nevada rental rates have increased for eight consecutive years. Since the recovery really started to take hold (the first quarter of 2012), rental rates in Nevada have increased 25.2%—going from $1,230 a month to $1,540 a month. At that price, tenants will pay an average of $18,480 a year to remain renters. With a price-to-rent ratio of 17.11, however, it’s usually better to rent in Nevada than to buy a house.
While rents have increased for eight years in a row, the Coronavirus is expected to alter the leasing landscape. In particular, we may see a rent increase in suburban neighborhoods. If for nothing else, more and more people appear ready to trade their metropolitan residences for suburban homes. The advent of the "work-from-home" culture has removed the need to live within proximity to an office, and many people would rather avoid the confined quarters of city living where the virus tends to spread faster. As a result, we are already seeing an exodus from large cities to suburban neighborhoods. The change could mean city apartments will drop in price in the meantime, which may represent a unique buying opportunity for investors.
Nevada Foreclosure Trends & Statistics
The Nevada housing market has come a long way since the recession, but that doesn’t mean there is no room for improvement. One of the most pressing issues to result from the last downturn is still prominent today: foreclosures. To be clear, Nevada is facing a relatively high rate of foreclosure. With one in every 1,978 homes in some state of distress (default, auction, or bank-owned), Nevada’s foreclosure rate is officially somewhere in the neighborhood of 5.0%. To be clear, the foreclosure rate across the United States is approximately 3.6%.
While the Nevada real estate market currently boasts a high foreclosure rate, things are starting to look more encouraging. Thanks—in large part—to improving economic fundamentals, Nevada has seen a drop in foreclosure filings. As recently as August, in fact, “the number of properties that received a foreclosure filing in NV was 83% lower than the previous month and 99% lower than the same time last year,” according to RealtyTrac. The decrease is particularly encouraging for Nevada residents, as the national foreclosure rate has shown signs of increasing.
Despite decreases in foreclosure filings, the following counties have the largest distributions of distressed homes:
Lyon (1 in every 22,979)
Clark (1 in every 175,523)
Washoe (1 in every 191,068)
To be clear, the latest increase in foreclosure filings in the United States should serve as a precursor for the Nevada real estate market. While local foreclosures haven't increased yet, the economic uncertainty left in the wake of a high unemployment rate will most likely increase the number of distressed homeowners. As a result, it's safe to assume there will be an influx of foreclosures sooner rather than later. Local investors who position themselves well now may be able to lend a helping hand.
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 and homeowners across the country have enjoyed several years of seller gains and attractive ROI (return on investment). According to Attom Data Solutions’ most recent Home Sales Report, in fact, the average home seller in 2019 “realized a home price gain of $65,500 on the typical sale, up from $58,100 last year and up from $50,027 two years ago.” Profits were calculated using the median purchase and resale prices and currently represent a 13-year high.
The report went on to say that profits “represented a 34 percent return on investment compared to the original purchase price, up from 31.4 percent last year and up from 27.4 percent in 2017, to the highest average home seller ROI since 2006.” Simply put, average U.S. home seller profits are higher than they have been in a really long time.
It is worth noting, however, that profits aren’t only realized at the time of a sale. The cost of acquiring a home plays a huge role in calculating one’s ROI, too. Lower purchase prices have become synonymous with more attractive profit margins, which is why most investors choose to invest in distressed homes. More often than not, distressed properties award savvy investors the opportunity to capitalize on attractive profit margins across the country, and Nevada is no exception.
Real estate investors in Nevada who want to increase their odds of finding a good deal with attractive profit margins should pay special considerations to bank-owned homes. Making up 71.4% of the state’s distressed inventory, bank-owned homes are the most abundant source of foreclosures in Nevada. Perhaps even more importantly, investors need only to take a trip to their local lender to identify said properties; there, they’ll be able to negotiate a purchase price for the bank's inventory.
Of course, knowing where to find deals with attractive profit margins is one thing; knowing what to do with them once they are acquired is an entirely different thing. Nevada real estate investors need to not only know where to find good deals, but they also need to know which exit strategies to execute, which begs the question: What should real estate investors in Nevada do with the homes once they are acquired? Should they rehab and flip them? Should they look into wholesaling? Should they build a long-term, passive income portfolio?
Much like the rest of the country, real estate in Nevada is (on average) more expensive than it has been in quite some time. As a result, profit margins for real estate investors are growing thinner. It is getting harder and harder to justify rehabbing exit strategies when acquisition costs continue to increase. That’s not to say rehabbing and flipping aren’t viable exit strategies in the Nevada housing market, but rather that opportunities are growing slimmer with each price increase. Therefore, instead of focusing primarily on rehabbing, real estate investors in Nevada may want to consider building a long-term passive income portfolio. Years of cash flow could easily help oddest today’s higher purchase prices.
Nevada Housing Market Predictions
Real estate in Nevada has done its best to mimic national trends. For the better part of a decade, in fact, real estate in Nevada has exhibited many of the same characteristics as its national counterpart. 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 $24,000 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 already appreciated more than 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: Not unlike every other state across the country, 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. As a result, competition over the available houses has simultaneously increased prices and made it more difficult for buyers. And 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.
Summary
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. Nonetheless, real estate in Nevada won't be far behind. When the rebound officially initiates, investors who get in now will be happy they did.
Sources:
https://www.census.gov/quickfacts/fact/table/NV/PST045218
https://www.bls.gov/regions/west/nevada.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/nv/
https://www.realtytrac.com/statsandtrends/nv/
https://www.realtytrac.com/statsandtrends/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/nv/home-values/
https://www.zillow.com/home-values/
https://www.nerdwallet.com/mortgages/mortgage-calculator/calculate-mortgage-payment/nevada
https://www.attomdata.com/news/market-trends/home-sales-prices/attom-data-solutions-year-end-2019-u-s-home-sales-report/
https://www.zillow.com/research/us-total-housing-value-2019-26369/
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