Southern Nevada Housing Market Review

The national economy finished 2023 in a stronger place than when the year started. The economy avoided the recession many forecasters deemed an inevitability, and the Federal Reserve’s goal of soft landing the economy was on track, with inflation on the way down and job growth holding solid. The Fed targeted inflation by raising interest rates over the past two years, and while this tactic was successful, the rapid rise in borrowing costs for homebuyers led to one of the slowest years for the housing market in recent history.

The average 30-year fixed mortgage rate started 2023 at 6.5 percent and continued to climb through the year as the Fed raised rates four times. The average mortgage rate peaked at 7.8 percent in October before closing the year at 6.6 percent, nearly identical to where it started the year, but a far cry from the sub-3 percent rates of 2021. Rising rates had a two-pronged impact on housing markets across the nation. Potential homebuyers faced higher borrowing costs that reduced how much they could afford, and existing homebuyers who purchased or refinanced when rates were at record lows grew reluctant to sell their homes and replace their locked in low-rate mortgages with more expensive ones.

The impacts of high rates were evident in the Southern Nevada housing market in 2023. On the year, the resale single-family home market tallied 22,502 closings. That total was down 19.1 percent from 2022 and marked the lowest annual total since 2007. The resale condo/townhome market experienced similar trends, with closings falling 15.8 percent on the year to 6,513, the lowest total since 2008.

The slowdown in closings was tied to the collapse in homes available on the market. With homeowners staying put with low-rate mortgages, the number of resale single-family homes posted on the market in 2023 fell 29.9 percent on the year to 28,201, and the number of condo/townhome units listed dropped 20.1 percent to 8,182. Both annual totals were the lowest since at least 2007, the earliest data available. The shrinking number of homes on the market pushed effective availability (the number of listings divided by the number of closings) for single-family homes down to 2.5 months in December 2023, down from 4.0 months a year earlier. In the condo/townhome market, the metric fell from 3.5 months to 2.4 months over the year.

The decline in effective availability and stabilization in pricing as the year closed reflected consistent homebuyer demand amid the limited-supply market. The median resale prices of single-family homes and condo/townhomes hit annual lows in spring 2023 before rebounding over the latter half of the year. In the single-family market, the median resale price barely budged from $450,000 over the final six months and closed the year up 5.9 percent. By comparison, month-to-month median pricing varied more in the condo/townhome market, with the December 2023 price of $270,000 finishing up 9.3 percent on the year.

The relative stability in the Southern Nevada housing market at the end of 2023 could continue through 2024 if the Federal Reserve continues easing interest rates as inflation comes down. The Fed left rates untouched in the second half of 2023 after a run of 11 rate hikes totaling 5.5 percentage points since early 2022, and it has signaled that rates could be cut in 2024 should inflation continue to cool. Fannie Mae forecasted the 30-year fixed-rate mortgage rate to slide to 5.8 percent in 2024 before falling to 5.5 percent by the end of 2025. The forecast suggests total home sales to increase 3.7 percent in 2024 followed by a rebound in 2025 in the form of a 12.6 percent increase.

The dynamics of Southern Nevada’s housing market are unique compared to many parts of the country, but lower borrowing costs and more stable price increases would provide potential positive momentum for the market’s sales volumes to rebound from the cycle low point of 2023 and result in a more normalized market in 2024.