The Nevada housing market experienced a rollercoaster ride during 2022. Median home prices reached record highs mid-year before pulling back through the second half of the year. At the outset of 2022, overall sales volumes were in line with 2021 while prices consistently increased through the first part of the year. However, those dynamics shifted in the second half of 2022 amid rapidly rising mortgage rates and broader economic concerns. Higher borrowing costs cooled overall housing demand, which slowed sales volumes and negatively impacted pricing through the end of the year. Notably, directional trends in the Silver State largely mirrored national trends.
On a national level, home prices peaked during the second quarter of 2022, growing year over year by 17.8 percent, according to the Federal Housing Finance Agency’s House Price Index. In the third quarter (latest data available), home prices fell 0.7 percent from the peak but remained up 12.4 percent on an annual basis. In Nevada, home price growth also peaked in the second quarter after increasing 21.8 percent over the year, which exceeded the national growth rate by 4.0 percentage points. Although the state’s rise in pricing outperformed the nation, its home price decline was more pronounced, with a quarterly fall of 3.5 percent from the peak.
The Southern Nevada housing market experienced the same volatility throughout the year. The median price of single-family homes climbed early in the year to an all-time high of $482,000 in May 2022. During the balance of the year, median pricing declined in six of the last seven months and closed the year at $425,000 in December 2022. The second-half price fall pushed the median price down to its value in December 2021, effectively eliminating the price gains over the course of the year. Compared to the end of 2019, however, the median sales price was up 35.8 percent. The slowdown in demand was evident in sales volumes in 2022. A total of 27,800 sales were recorded during the year, down 28.1 percent from 2021 and the lowest annual total since 2014.
As a result of declining sales throughout the last half of 2022, effective availability ticked up. The measure that compares the number of listings (available units) divided by the number of closings taking place reached 4.0 months in December 2022 in the single-family market, which was down from 4.8 months in November 2022 but up from 0.7 months in December 2021. Effective availability reached its low point in March at 0.6 months before ratcheting up over the second half of the year. Mortgage rates played a significant role in overall housing availability throughout 2022. The average 30-year fixed rate hovered near 3.0 percent in 2020 and 2021, fueling homebuying and refinancing that allowed homeowners to lock in historically low rates. The 30-year fixed rate climbed over 6.0 percent by the end of 2022. In the current rate environment, homeowners have been reluctant to put their homes up for sale to lose their favorable interest rate position. This dynamic could limit the number of homes put on the market into 2023.
In early 2023, downward pressure on mortgage rates appears less likely. Borrowing costs climbed through 2022 in concert with the Federal Reserve’s raising of its key interest rate in the fight against inflation that reached a four-decade high. The Federal Reserve raised the federal funds target rate by a cumulative total of 4.25 percentage points during the year, and the expectation is that further hikes may be needed in 2023. While is it likely the market will continue to experience some settling, the reality is that homeowners (as a whole) are in a much better position than they were during the onset of the Great Recession. To keep up to date with city of Las Vegas data from Applied Analysis, visit the community dashboard.
Photo: Courtesy of Summerlin