In real estate, there are buyer’s markets and seller’s markets. But it’s been a very long time since Nevada has seen a seller’s market like this, if it ever has.
“Normal inventory is a 6-month supply, now it’s days or hours,” says Gary MacDonald, Dickson Realty agent and president of the Reno-Sparks Association of REALTORS®.
MacDonald says there are a couple of reasons for this unprecedented market. “It’s a perfect storm of low supply, high demand and low interest rates.”
In Southern Nevada, you can add high unemployment to the mix, which further lowers the sales inventory, shares Aldo Martinez, sales associate with Berkshire Hathaway and president of the Las Vegas REALTORS® (LVR).
“When you have 10.4% of the population out of work, those people can’t qualify for a mortgage,” he says. “It does them no good to sell their homes because they won’t be able to qualify for another until they can get back to work.”
Low Supply and High Demand
When the economic downturn happened in 2007, builders came to a standstill and it was several years before they started moving again.
“Until 2013 or so, you didn’t see many homes being built here or nationally, so that lost generation of housing isn’t available for sale,” MacDonald says. “At the same time, there are more people coming into this marketplace than we’ve ever seen. So it’s just economics.”
The pandemic has also contributed to Nevada’s strong seller's market, as a record number of people have started working from home.
“People can now live and work where they want and a lot of people want to live here,” MacDonald says.
Something Interesting About Interest Rates
While low interest rates have spurred more people to explore homeownership, they’re also encouraging others to stay in the homes they already own.
“Interest rates have been so good that people have refinanced and streamlined their mortgages to the lowest payment possible,” Martinez explains. “Where it used to be that people stayed in their homes for five to seven years, now it’s seven to nine.”
Many homeowners have used that refinancing money and quarantine time to improve their homes, whether that’s redoing a kitchen, painting or even digging a pool.
“They’re doing things to make that home they might have been ready to sell into something they would want to buy,” MacDonald says.
While buying a home in this market is definitely more complicated, it is not impossible.
LVR has created a new website to make this process easier on Nevada buyers. Martinez says that LasVegasRealtor.com is a consumer-driven website designed for buyers to explore their options on their own terms.
“They can go in and find up-to-date information on rentals and homes for sale, and we’re not collecting consumer data,” he says. “When they’re ready, they can invite a REALTOR® in to see what they’re doing.”
MacDonald offers three tips for buyers to navigate this market:
- Get pre-qualified – As a buyer, it’s important to know how much house you can afford to buy before you start looking. That pre-qualification (or approval) letter will also be imperative if you get into a bidding war.
- Have cash on hand – “A lot of homes are going over asking and appraisals,” MacDonald explains. “Do you have the wherewithal to make an above asking price offer and come with cash if the house doesn’t appraise within your loan amount?” (More on this below).
- Hire a real estate agent – MacDonald and Martinez both talk about why it’s so important to work with a professional, especially in this market.
- “How are you going to navigate this market and know what to offer or how to secure a property without an agent?” Martinez asks, adding that some people might contact the listing agent about a home they’re interested in. “Then you’re working with an agent that represents the seller, not you.”
- “Even though it’s number three on my list, it’s actually number one because good agents have a plethora of good lenders they can send you to,” MacDonald says. “These are people they have relationships with, so they can guide you better as you make your decisions.”
Martinez goes on to explain that since there aren’t as many options, buyers have to have a moving-target perspective. He gives the example of the home he just helped his sister-in-law buy in Las Vegas. They wanted to stay in a certain area, but the size of the home was more important and they had to stay under a certain dollar amount. The house she eventually bought was the right size and price, but it’s not in the exact neighborhood she wanted.
“It’s important to be versatile and flexible,” Martinez says, “Manage your expectations. Right now, it’s not about getting a deal. It’s about getting a house.”
In addition to managing expectations, it’s important that buyers be on stand-by. “My sister-in-law had to be versatile and able to respond quickly when I said, ‘let’s go,’” Martinez says.
Cash is King
Part of being able to respond quickly is having the cash on hand to make the deal. Both Martinez and MacDonald say that homes are appraising lower than most banks will finance them for.
“Appraisers are looking in the rear-view mirror, while pricing is moving forward,” MacDonald explains. “They’re looking at comparable homes (also known as comps) and what they have been selling for in the past.”
If a home appraises for, say $350,000, that’s what most lenders will loan you to buy it. But if that $350,000 home is selling for $370,000, the buyer will have to come up with that $20,000 difference.
The Home Is Possible down payment assistance program can come in handy in this scenario as it can cover down payment and closing costs, allowing the buyer to use their savings to cover the difference between what the home appraises for and what it’s actually selling for.
Martinez says that if the savings are not what they need to be, homebuyers can explore gift money or other options. This is another reason to meet with the lender early. They can tell you exactly what you need to do to prepare ahead of time.
How Much Longer?
While neither Martinez nor MacDonald own a crystal ball, they did make some educated guesses on how long this market is going to last — or at least the factors that could affect it.
“As more people get their vaccine and we’re not as afraid of COVID anymore, people will start putting their homes on the market again, which will help with inventory,” MacDonald says.
Martinez sees unemployment as one of the biggest factors for Southern Nevada, which could take 12-18 months to even out.
“We need to get people back to work,” he says. “As more people get inoculated and we start developing herd immunity, the hotels will start opening up more, which will help.”
Ready To Get Started?
“As a first-time buyer, get a REALTOR®, get a good lender, figure out what you can spend and then go out and enjoy the process,” MacDonald says.