Inventory Continues to Increase!

We have been quietly adding inventory over the last couple of years. As interest rates start to settle down a bit, more buyers are entering the market. This should lead us to a neutral market if the trend continues. At this point we remain in conditions that favor sellers, but buyers are able to be choosier than just a few years back.

The latest data from the RMLS show that here in Clark County, we had 1638 active listings and 584 closed sales last month bringing the inventory to 2.8 months which is a still very healthy. The median sales price last month was $550,000 with a high of $2.3 million and a low of $60,000. The average sale price was substantially higher at $623,078 suggesting that activity in the mid-level market may be on the rise.

Rates are starting to settle into the 6s which bodes well for buyers that have struggled to qualify with rates in the 7s. 

The prognosis for the 4th quarter looks promising as rates come down and inventory softens up pricing a bit. We should continue to see very modest appreciation through the end of the year.

Interest Rates are softening up a bit

We are seeing some relief in mortgage rates and likely will see some more over the next several months. Housing prices have remained flat and the median price has fallen off its record highs of a year or so ago. The lower median is more an indication of more activity in the lower end of the spectrum and less activity at the top, rather than actual falling prices. 

We are not seeing much in the way of the classic middle move up market where homeowners sell their entry level  2 bed or 3 bed house to move up to a larger 4 bedroom home. There are two primary reasons driving this lack of middle move up. First, interest rates are much higher now than they were when most of these potential sellers financed the current house. I have harped on the notion that homeowners are married to their 3%-4% mortgage for months now. Second, there is a current trend across the USA of smaller family sizes. The USA is no longer having families large enough for replacement population. We are relying on new immigration to keep growth moving forward. Smaller families means less of a need for a larger house, whether the rates are low or not.

When the bulk of the sales activity is near the bottom of the market, the median will come down, even if prices are rising. Locally prices remain steady, neither rising much nor falling much. If typical interest rates fall into the high 5s or very low 6s, we may see some of that middle move up market return and thus the median would perk up a bit as well. I do not expect to see the middle move up market return to the glory days of yesteryear unless Gen Z decides to buck the Millennial trend of smaller families and start having 2-3 kids each. With our economy in an upward inflationary cycle, the small family trend is likely to continue. 

One thing that could help move those larger 2500+ square foot 4 and 5 bedroom homes in the $600-800k range would be joint ownership by two small families or more multi-generational family living. In the mean time buyers will continue to have a difficult time finding homes in the entry level price ranges due to a lack of inventory, and sellers of larger homes will face pickier buyers and downward price pressure. 

Locally inventory levels are creeping up to about 3 months which remains firmly in favor of sellers, but the trend is slowly moving towards neutral conditions. I suspect we will remain in a low volume market with steady prices for at least the next 6 months.