Las Vegas 2022 Real Estate Recap
2022 was truly a tale of two markets – the first half and second half were dramatically different. The first half of the year was a continuation of the historic seller’s market we saw in 2021 and the second half was a dramatic slowdown primarily driven by interest rates.
Homes for sale over the last two years were at a record low. Above all else, the only reason the market was so hot was because of a huge shortage of homes for sale (supply) and a massive surge in buyers (demand) due to historically low interest rates. The second half of 2022 rebounded hard, total homes for sale were up 2-3X. This increase puts us back at 2019 levels.
The closed price to list price ratio (a metric that determines how much of the list price a seller gets) exceeded 100% all of 2021 and up to June 2022. This indicates a very hot seller’s market with lots of demand, very little inventory, and bidding wars. July 2022 and on it dropped, indicating bidding wars subsiding and buyer leverage increasing. This was when the market flipped from a seller’s market to a buyer’s market.
Median days on market hit the lowest level on record ever between 2021 and Q2 2022 – indicating massive buyer demand and quick sales. Properties were generally selling in less than one week on market. This is an outlier, not the norm – it was never sustainable. In the second half of 2022 it increased every month to about one month overall, this is comparable to 2019. From record lows of one week to about one month.
Expired listings (properties that were listed for sale and failed to sell) were at the lowest levels in years from Summer 2020 to Q2 2022. They hit the lowest point ever in the first half of 2022. They increased to 2018 levels as the year closed out. This indicates the marketplace is rejecting these overpriced and poorly marketed houses, the market has clearly changed. Buyers now have the power and will no longer settle for subpar overpriced houses. This is an indicator of a healthy market.
Median list price peaked in May 2022 and has been trending down since.
Months of inventory bottomed out in March 2022. This low point indicates this was the peak of demand – 1.2 months of inventory overall. It has 3-4X since then and ended 2022 at 4.2. This is the highest since January 2015. This indicates we are now in a buyer’s market for the first time in nearly 10 years.
New listings peaked in June as homeowners rushed to get their houses to market combined with our seasonally strongest market (Summer). They reached the highest level in the last 5+ years.
Median sales price peaked in April through May and dropped later in the year. Prices entered the year at $375,000, peaked at $400,000, and ended at $330,000. There were lots of micro variations by month but the market even with the massive interest rate correction we saw in 2022 is up 35% since 2019, up 25% since 2020, and up 7.2% year over year.
Sales dollar volume peaked in March and ended the year down to levels last seen in 2019. This is a combination of decreasing median sales prices and decreasing closed sales.
Closed sales peaked in March and ended the year down to 2019 levels – the lowest in 5 years.
I personally call the second half of 2022 an “interest rate market correction”. Interest rates are the primary driver of this housing slowdown. Interest rates in 2022 had one of the quickest increases we’ve ever seen. Interest rate increases are the primary reason the housing market has cooled off.
In 2022 rates went up 99%. This is an interest rate correction, not a market crash. 2021 was a flatline market – there was very little fluctuation and rates were the lowest ever – this combined with record-low inventory cooked the housing market.
My outlook is rates are not coming down soon. Many experts I know say a healthy interest rate for a sustainable housing market is 4.5 to 5%. Not where we’re at now and certainly not where we were prior.
This is an expected contrast to the frantic seller’s market we were in from the Summer of 2020 to Q2 of 2022. All markets are similar to a pendulum, the harder it swings in one direction the harder it swings back in the opposite direction. It was a foregone conclusion entering this year as interest rates started increasing that there was going to be a major slowdown. This was only magnified by the torrid market that preceded it. This is the pendulum in action – the harder property values go up the quicker it will slow down when rates start increasing. All data right now is unusual. We are in a truly historic cycle, there has never been a market like the one we’re currently in. This market is cooling down from an insane pace. This slowdown paints a picture that the housing market is crashing, it isn’t.
The lowest level of homes for sale ever combined with the cheapest interest rates ever is a dynamic we have never seen before. The market is not crashing, underlying homeowner health is stronger than ever. The market is adjusting from cheap money overcooking it. All data – except interest rates – are adjusting back to a normal historical level.
What is my outlook for 2023?
Buyers – finally a BUYER’S market has arrived! Buyers now have more leverage and more houses for sale. The main concern is the lack of affordability primarily driven by interest rates increasing. Most buyers last year saw their payment on a median-priced home jump 30-40% in a couple of months. However, there are numerous loan programs available that can drop your interest rate 2-3%. This is a rare buyer’s market. Many will look back years from now and regret not acting now during a slowdown. “Be greedy when others are fearful and fearful when others are greedy.” Many are fearful right now.
Sellers – I expect property values this year to stay flat. I do not expect major appreciation or depreciation. However, homeowners have seen an unprecedented increase in property values the last couple of years, especially in 2020 and 2021. Regardless of any property values dropping, the average historic rate of appreciation is 5%. In the last 3 years homeowners have averaged a gain of 10.7% annually. Even with recent decreases homeowners are well ahead of the historic rate.
Rates – interest rates are tied directly to inflation. Based on numerous reports and data I do not expect interest rates to drop substantially in 2023 but I also expect them to plateau. There are numerous loan programs available right now that can drop interest rates 2-3% for a minimal amount of money. Savvy buyers will use this slowdown to get a great deal on a house AND at a great interest rate with these programs.