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The Real Estate Market Cycle: Where We Are & What That Means for the Future

By 03.13.19 May 13th, 2020 Sellers' Knowledge

The real estate market is a cyclical one—and understanding its nuanced ebbs and flows is crucial for making informed decisions when you list your Las Vegas property for sale or start your search for land for sale in Las Vegas. Today, then, we’re offering up our analysis of where we currently are in the real estate market cycle and—most importantly—what that means for buyers and sellers across the Las Vegas Valley. Read on for our key takeaways. 

The market is shifting.

As Las Vegas land brokerage experts, we’ve spent decades analyzing real estate market cycles—both locally and nationally—in order to make sound predictions that empower buyers and sellers. From our on-the-ground experience and the in-depth analysis of our in-house research team, we believe we’re currently in the middle of a market shift based on four main indicators:


  1. New home sales are dropping. We’re currently seeing a continued decline in the sale of new homes. Nationally, sales of new single‐family houses in October 2018 dropped 8.9% to a seasonally-adjusted annual rate of 544,000. (This dip is also 12% lower than numbers from one year prior in October 2017.) Locally, the 2019 Southern Nevada economic outlook has single-family and multi-family housing permits dropping from 12.3% in 2018 to 8.3% in 2019.


  1. Supply is increasing. It’s no surprise that a slow in demand inevitably leads to an excess in supply—and the most recent numbers released for October 2018 show that’s exactly what’s happening. At the current pace, it would take 7.4 months to sell all available supply. (A 6-month supply of housing inventory is considered an indicator of a balanced market.) This is the highest level of supply we’ve seen in over 7 years. Anecdotally, we also know that Spring 2018 saw finished inventory of new homes piling up and, in some cases, builders adjusting prices, increasing incentives, and running national sales campaigns in response (behavior that’s similar to what we saw in the 2005-11 crash).


  1. Developers are changing their acquisition strategy. Where, historically, it was common to see developers passover development sites that were less than 10 acres while paying a premium price for development sites that were greater than 10 acres, in 4Q2108, homebuilders have been favoring smaller development sites to reduce their land-exposure in the event of a recession. This adjusted, “short-burst” acquisition strategy could point to a decrease in developers’ confidence in the market. In other words, their actions tell us they’re not comfortable with holding large pieces of land for extended periods of time right now. 


  1. Interest rates are rising. Another indicator of a shifting market? Rising interest rates. In the current cycle, the Fed began raising its benchmark interest rate in December 2015 and, so far, has raised the rate seven times in the last three years. (While this is an indicator of confidence in the market—i.e. the Fed no longer thinks the economy needs the “help” of a super low interest rate—rates that increase too dramatically and too quickly can inevitably lead to a slow in the economy and a decrease in home sales.) Long-term interest rates (i.e. the 30-year-fixed mortgage) are rising in response to the increasing federal interest rate—though not as dramatically as they did during the 2005-11 crash. 


Our take: A recession is imminent. 

While what’s happening now might not be an exact carbon-copy of the 2005-11 recession, we do see some striking parallels when comparing the two cycles. (Check out our then-and-now analysis of the last recession and where we’re currently at for an in-depth comparison.) A majority of the trends we’re seeing (the decline of new home sales, an excess of inventory, increased incentives from builders, and rising interest rates) are the same indicators our Las Vegas land brokerage experts saw before the 2005-11 crash. We do believe we’re seeing the initial signs of a slowdown and know that the natural ebb-and-flow of the real estate market will inevitably bring us another recession—but, from our predictions, one that will hopefully pale in comparison to the previous cycle.




Want to learn even more about the current real estate market? Browse our blog or reach out to our Las Vegas land brokerage team to chat buying or selling Las Vegas property