Last month I blogged about 5 Predictions For The US Housing Market in 2015, which painted a rosy picture for this year. I just read a fascinating blog entry by Sam Khater, Deputy Chief Economist for real estate data collection giant, CoreLogic. Khater points out that real estate has returned to a level where “normal” economic influences dictate the market, primarily good ol’ fashioned supply and demand and increasing employment numbers.
A major factor in Las Vegas area real estate are distressed properties, ie short sales, foreclosures and auctions. These properties tend to be priced lower than market value as the lending institutions usually want to keep them on their books for as short as possible and they want as quick a sale as possible. This is why distressed properties have a tendency to drive down prices. Now, we have always had these kinds of listings, but they’ve generally made up around or under 5% of total sales so their effect on market prices tended to be localized to the immediate vicinity of the distressed property. In 2007, that number started increasing dramatically and by 2009, some figures indicate that nearly 70% of the single family homes on the market were foreclosures.
The Las Vegas market was one of the hardest hit by the mortgage crisis, so it should come as no surprise that we may be a bit behind in the overall recovery. However, we’ve got a lot going for us. Foreclosures still account for over 10% of single family home sales, but that represents a massive reduction from the peak in 2009, and that number continues to decline.
In addition, the Las Vegas area is attracting an increasing number of people who are moving here, which is creating more jobs which in turn increases employment levels. According to a recent news story on 13 Action News, our private sector growth rate, which is an indicator of job creation, is one of the fastest in the nation. The increase in population and employment means we are poised to see an increase in demand for homes. And, with distressed homes making up less and less of the available inventory and thus putting less and less downward pressure on price, we are returning to that point where non-distressed or “regular” home sales are the norm, and the number of homes versus the number of buyers dictate price and not a massive backlog of distressed homes that lenders are selling off at bargain-basement prices. And that, dear Reader, is what a normal market is, and why it is a good thing. Here’s to 2015 and normal!