Spring is coming to a close and the hot summer rapidly approaches. The temperatures are not the only thing heating up. The final numbers for the month of May, showed more than 700 residential units sold. With inventory tight, buyers are engaged in a battle to get to first position.
The Clark County median is sitting right at $300k up about 8% over last May according to data collected by the RMLS. Some are surprised that it is not double digit growth year over year, but that is just a sign that the market's ability to pay is becoming tapped out. With the median household income in Clark County sitting at roughly $60k annually, that means the median purchasing power is limited to about $1800 per month. $1800 a month equates to about a $275,000 purchase price. These are rough numbers and there are many variables, but in general when the median price of a house exceeds the median purchasing power, the prices tend to level out or stabilize a bit.
Demand is still high enough to offer a rapid sales opportunity for sellers, but the market has begun to show real reluctance to look at overpriced listings. Last year and up until about six months ago overpriced listings were still being courted as buyers were willing and able to pay. Now the ceiling for our market has been breached and that will cause a stabilization in the upward pricing particularly under $350k. Sellers will have to bring a reasonable price to market if they want a fast sale and the bidding up is slowing a bit as buyers are leery of low appraisals.
The middle and top of the market may continue to see some growth as the bottom has been feeding a healthy volume of buyers that took profits on a smaller house and are looking to move up. Even though sales are robust and pricing is softening a little bit, the entry level market remains ultra tight at least partly due to the reality that many of the sellers in the middle and upper part of the market are retiring Baby Boomers looking for the classic downsize. These Boomers are competing with the entry level buyers and they are often coming with big down payments of even all cash offers. This makes it challenging for first time buyers.
I hear a great deal of chatter among the community centered around a fear of another bubble. Although the prices have been accelerating rapidly since 2012, the rapid growth is not as robust as it was in the middle 2000's when 15-18% year over year gains were happening. Furthermore, the shady and dangerous lending activities that were going on prior to 2009's crash are no longer happening either. The real estate market does ebb and flow economically like many other commodities, and there is no short term guarantee that prices will continue to appreciate. There is however reason to believe that an event anywhere near the magnitude of the last market correction, is highly unlikely.
I believe that market conditions locally will continue to show modest appreciation gains but likely less than 5% growth in values over the next 12 months. Trends are what they are however, significant positive or negative economic shifts can knock these types of predictions over in a heartbeat. For buyers worried about buying at the top of the market, I say this: rents are high and many people can still buy the same house they are currently renting for less per month. Unless one is a mobile person that moves allot, buying still makes way more sense than renting in this market.
For sellers wondering what their home is really worth right now, contact your trusted real estate pro and have him or her conduct a Comparative Market Analysis. If you don't have a local pro, fee free to reach out to me and I can give you a detailed analysis at no cost to you.