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Archives for November 2022

Housing Market Trends 2022: Will Home Prices Fall?

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Current Housing Market Trends 2022

The housing market is predicted to slow down further in the last quarter of 2022. For sellers, this could be terrible news, but for buyers, it's great. Yet, there is still the problem of sky-high mortgage rates. The bright side is that if buyers hold off, the supply of homes will increase, putting further pressure on sellers to decrease prices. This would constitute a long-overdue course correction for the housing market.

Mortgage rates are skyrocketing. Home sales are declining. Supply is improving. Here are the latest housing market trends as seen in September 2022. We are witnessing a sharp halt in the housing market. The average 30-year fixed mortgage rate is currently just over 7%, up from roughly 3% earlier this year. This makes an already expensive housing market even more unaffordable.

If mortgage rates continue to rise, although, at a slower rate than in recent months, demand will decrease further in the last quarter of 2022, while home prices will continue to grow year-over-year, albeit at a slower rate. The real estate market has emerged as a boon for sellers and a source of worry for buyers in the middle of this epidemic. Home prices have been increasing in the mid-single digits for many years.

The housing market appears to be fully in the “correction” area since mortgage rates have surpassed the 7% threshold, home sales have cooled dramatically, and fears of a national recession loom large. In the fourth quarter of 2022, experts anticipate a further slowdown in sales, rising interest rates, and heightened concern among buyers and sellers over the future.

However, the housing market will not crash. The main reason is that the current housing market is not driven by lax lending rules, subprime mortgages, or overly leveraged homeowners. Home price appreciation in the current housing market is backed by fundamentals and is defined by a relative deficiency of supply relative to demand. This demand has been fueled mostly by millennials entering their prime home-buying years, as opposed to fix-and-flip investors.

It appears that most markets will experience a seasonal slowdown in the fourth quarter of 2022. The present rise in mortgage rates is likely to have a further depressing effect on house sales activity, leading to a steeper decrease in sales than is typical for the end of the year. Price cuts on homes for sale are on the upswing, and with fewer people buying expensive (higher-priced) homes, housing values could fall even farther than initially anticipated.

“Seasonality plays an important role in the housing market since it has an impact on housing demand and supply,” says Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors (NAR). “Every year, transactions and prices tend to be above-trend in the summer, while activity typically slows down by the time winter comes. Activity in the last quarter typically drops by 15 percentage points from the third quarter. Nevertheless, I believe the market will remain competitive due to tight inventory.”

Housing Sales Trends for September 2022

Existing Home Sales 

With the exception of a temporary decline at the onset of the Covid 19 epidemic, existing home sales are at their slowest since September 2012. Home sales of previously owned homes rather than new construction — have been down all year. And, with both mortgage rates and housing prices staying high, buyers are unlikely to be in a hurry to make that purchase. According to new data from the National Association of Realtors (NAR), buyers are still taking a wait-and-see approach to the present housing market trends.

Existing-home sales include all non-new-construction home sales, such as single-family homes, condos, townhouses, and co-ops. According to the NAR report issued on November 18, existing-home sales in the United States declined for the ninth month in a row in October 2022. The 5.9 percent dip from September equates to a 28.4 percent year-over-year decline as compared to October 2021.

“More potential homebuyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher,” Yun said in a statement. “The impact is greater in expensive areas of the country and in markets that witnessed significant home price gains in recent years.”

Distressed sales – foreclosures and short sales – represented 1% of sales in October, down from 2% in September and identical to October 2021. Single-family home sales declined to a seasonally adjusted annual rate of 3.95 million in October, down 6.4% from 4.22 million in September and 28.2% from one year ago. Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 480,000 units in October, down 2.0% from September and 30.4% from the previous year.

In October 2022, 26 percent of total sales were made in cash, up from 22% in September and 24% in October 2021. This indicates that there is a sizeable group of buyers who are not impacted by mortgage rate changes. Investors (who make up many cash sales) made up 16% of all transactions in October, up from 15% in September, but down from 17% in October 2021. This also shows that higher interest rates have less of an influence on investors' purchases as compared to first-time buyers.

Detached single-family houses continue to be in great demand. These properties provide greater living space and separation from adjacent houses than attached properties provide. Last month there was a surprising uptick in sales of new single-family houses and many experts believed that is likely to be short-lived as home prices continue to rise and the average contract rate for a 30-year fixed-rate mortgage tops 6 percent, decreasing affordability.

The West witnessed the largest monthly reduction in existing-home sales, with a 9.1 percent drop from September and a 37.5 percent year-over-year loss. Sales in the Northeast declined 6.6 percent month over month and 23 percent year over year, while sales in the Midwest fell 5.3 percent month over month and 25.5 percent year over year. The South experienced the smallest dip, with existing-home sales falling 4.8 percent since September and 27.2 percent year on year.

The South accounted for close to half of all the sales in October, accounting for 45 percent, followed by the Midwest at 24 percent and the West at 18 percent, with the Northeast accounting for only 13 percent. The highest sales were seen in the price segment of $250,000 to $500,000. This price range accounted for 48% of total home sales. The price segment in the $100,000 to $250,000 range accounted for 15% of total home sales. The price segment in the $500,000 to $750,000 range accounted for 19% of total home sales.

Existing home sales trends
Source: N.A.R.

New Home Sales

The Commerce Department announced that new home sales increased by 28.8% month-over-month in August. The seasonally‐adjusted estimate of new houses for sale at the end of August was 461,000. This represents a supply of 8.1 months at the current sales rate. The median price of a new home sold in August was $436,800, a 0.3% decrease from July.

Mortgage applications have plummeted this year due to fast-rising mortgage rates, which are already at their highest level since the Great Recession. Therefore, sales are predicted to fall further. The Federal Reserve is raising rates this year to reduce decades-high inflation. It is increasing the cost of buying a home and crushing demand.

Residential construction was mixed in August 2022, as housing starts rose 12.2% while permits fell 10%, the Census Bureau reported recently. Housing starts were at an annual rate of 1.575 million while permits for future homes came in at an annual rate of 1.52 million. Single-family starts increased slightly, as home builders continue to moderate their production levels as the cost of construction materials remains at elevated levels and buyers react to rising mortgage rates.

Regionally, the biggest drop in permits came in the South, where markets have been among the hottest. Multi-unit starts also fell more than those for single-family homes. A slowdown in new construction is concerning because the housing market is still underbuilt in comparison to demand. With millennials continuing to enter their prime home-buying years and a lack of existing-home inventory, new home construction is critical in meeting shelter demand.

Privately owned housing completions were at a seasonally adjusted annual rate of 1,342,000 in August. This is 5.4 percent (12.1%) lower than the revised July estimate of 1,419,000, but 3.1 percent (10.5 percent) higher than the August 2021 rate of 1,302,000. Single-family housing completions in August totaled 1,017,000, up 0.4 percent (12.8%) from the revised July rate of 1,013,000. The August rate for units in buildings of five or more units was 318,000.

Housing Prices Continue to Trend Upward – September 2022

With a near record-low inventory of previously owned homes, some economists believe higher borrowing costs will have a moderate impact on the new housing market. In the long run, an infusion of newly-built homes could benefit the housing market. But there won't likely be a surge in new inventories this year or even next year. Builders cannot develop new homes quickly enough to meet up with customer demand. Over a decade of underbuilding in the new home sector has increased pent-up demand, despite builders' best efforts to increase inventory.

According to the forecast (by realtor.com), home price rise may slow in the future, but it has remained hotter for longer than expected, leading to an upwardly revised prediction of 6.6 percent for 2022. Home sales are slowing, lowering their original 2022 growth forecast to 6.7 percent. While they now predict a significant drop from 2021, if house sales match their forecasts, 2022 sales will be the second-highest since 2007, after only 2021.

The listing price, also known as the asking price, is the amount a seller has marketed a property for, whereas the sale price is the amount it ultimately sells for. Although price growth slows, homes are still more expensive than a year ago. The latest data for September 2022 from Realtor.com shows that the national median home price for active listings decreased to $427,000 from a record high of $449,000 in June.

This represents an annual growth rate of 13.9%. However, it is a deceleration from last month’s growth rate of 15.4%, and down from a peak growth rate of 18.2% in June. The share of homes having their price reduced grew from 11.0% last September to 19.5% this year. The share is now above the 2017 and 2019 levels but still below the share of price reductions in September 2018 (21.2%).

And, for the week ending October 15, 2022, the median listing price rose by 13.2% over that same week last year.  The housing market is resetting as mortgage rates approach 7%, a level not seen in two decades and very likely to be exceeded in widely watched mortgage rate statistics later today. Several trend indicators, such as home price growth, new listings, and time on market changes, did not change much over the week.

In contrast, after several weeks of little movement in active listings, this week's trend was up by the most in the last 15 weeks relative to last week's. This increase in current listings certainly reflects the extent to which home buyers are struggling to navigate the market in light of the additional costs and reduced purchasing power imposed by higher mortgage rates, and it also signals fewer home sales transactions in the future.

Weekly Real Estate Trends
Source: Realtor.com®

Housing Market Trends for 50 Largest Metro Combined Average

In September 2022, active listing prices in the nation’s largest metros grew by an average of 10.2%. Southern metros led the charge in active listing price growth, growing by 11% on average over the past year. Listing prices in the southern metros of Miami (+28.3%), and Memphis (+27.3%) grew the most among large metros, with Milwaukee (+27.0%) placing third.

Western metros saw the greatest increase in the share of price reductions (+15.6 percentage points), followed by southern metros (+10.7 percentage points). Homes in Phoenix (+32.3 percentage points), Austin (+27.4 percentage points), and Las Vegas (+20.0 percentage points) showed the greatest growth in the share of homes with price reductions compared to last year.

Region Active Listing Count YoY New Listing Count YoY Median Listing Price YoY Median Listing Price Per SF YoY Median Days on Market Y-Y (Days) Price Reduced Share Y-Y (Percentage Points)
Midwest 4.8% -14.0% 11.8% 8.4% +5 days +4.1 pp
Northeast -6.0% -17.2% 8.2% 5.6% +5 days +2.1 pp
South 57.5% -3.9% 11.8% 10.3% +6 days +10.7 pp
West 64.2% -12.2% 7.3% 6.6% +10 days +15.6 pp

Home Sales Price Trends for 2022

According to the National Association of Realtors®, house prices were still greater than they were a year earlier, even though increasing borrowing rates made housing less affordable. In September, the median price of an existing home that was sold was $384,800, which is 8.4% higher than it was a year ago. This marks 127 consecutive months of year-over-year increases, the longest-running streak on record.

However, it was the third month in a row that the median sales price retracted after reaching a record high of $413,800 in June, the usual seasonal trend of prices declining after peaking in the early summer. Due to seasonality, home prices tend to dip from July to August, but the reduction this year was more dramatic than typical, which suggests a considerable slowdown in the housing market.

However, home prices are still being supported by limited supply. At the end of September, there were 1.25 million homes for sale, which was down 2.3% from August and 0.8% from the previous year. At the current rate of sales, that equates to a 3.2-month supply, unchanged from August and up from 2.4 months in September 2021.

Much of the growth was fueled by an 11.8 percent increase in property prices in the South. All other regions experienced home price growth of between 6% and 8.5%. Sales continue to be more robust on the higher end of the market, where the supply is stronger.

  • The median existing single-family home price was $391,000 in September, up 8.1% from September 2021.
  • The median existing condo price was $331,700 in September, an annual increase of 9.8%.
  • The median price in the Northeast was $418,500, an increase of 8.3% from one year ago.
  • The median price in the Midwest was $281,500, up 6.9% from the prior year.
  • The median price in the South was $351,700, an increase of 11.8% from September 2021.
  • For the thirteenth consecutive month, the South experienced the highest pace of price appreciation compared to the other regions.
  • The median price in the West was $595,400, a 7.1% increase from September 2021.

Housing Price Trends 2022

Will Higher Mortgage Rates Crash the Housing Market?

Mortgage rates fell sharply early in the pandemic, reaching historic lows of less than 3% at the start of 2021. The days of sub-3 percent 30-year fixed mortgage interest rates are over. The mortgage rates are rising at the fastest pace in decades.  Housing prices are still higher than the previous year despite rising mortgage rates. Mortgage rates are slowing down home prices.

Economists predicted rates to rise by the end of 2022, but the recent surge in rates has many analysts wondering what would happen next. It happened faster than many predicted, with rates on 30-year fixed loans breaking through 5 percent in April to the highest level in more than a decade.

As mortgage rates rise, competition among those who can afford to buy should continue fierce for the time being. The economic recovery, particularly inflation, has been very evident in the late epidemic phases, and we now face a backdrop of mortgage rates rising at the quickest rate in decades. More than two-thirds of mortgage experts surveyed by Bankrate believe rates will continue to rise since inflation is not slowing down quickly.

The Fed has raised interest rates several times this year, and its policy has a direct impact on the interest rates on various mortgage products, specifically adjustable-rate mortgages and home equity loans. Fed policy has fewer repercussions for fixed mortgage rates, which track 10-year Treasury yields more closely. Borrowers will see an end to the historically low rates that typified the period following the 2008 and 2009 global financial crises.

Experts disagree on the direction of mortgage rates in the coming week. 64% of respondents to Bankrate's weekly poll believe that interest rates will increase, while 18% believe that they will decrease and another 18% believe that they will remain the same. It appears that mortgage rates will remain between 7% and 7.5% over the new few weeks. Rates are expected to remain unchanged in this range until the Federal Reserve sees that its monetary policy is decreasing inflation.

As of November 02, 2022, interest rates jumped for almost all types of loans compared to a week ago. The national average 30-year fixed-mortgage rate is 7.22 percent, unchanged over the last week. A month ago, the average rate on a 30-year fixed mortgage was higher, at 6.89 percent. The average rate for a 15-year fixed mortgage is 6.46 percent, up 2 basis points since the same time last week.

  • At the current average rate, you’ll pay a combined $680.14 per month in principal and interest for every $100k you borrow.
  • Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $869 per $100k borrowed.
  • Monthly payments on a 5/1 ARM at 5.55 percent would cost about $571 for each $100,000 borrowed over the initial five years
  • But with adjustable-rate mortgages, it could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.

How Mortgage Rates Have Moved in November 2022:

  • 30-year fixed mortgage rate: 7.22%, the same as last week
  • 15-year fixed mortgage rate: 6.46%, up from 6.44% last week, +0.02
  • 5/1 ARM mortgage rate: 5.55%, up from 5.53% last week, +0.02
  • Jumbo mortgage rate: 7.22%, up from 7.20% last week, +0.02

With inflation blazing and the U.S. economy chugging along, the average 30-year mortgage rate was 7.22 percent this week, no change from the previous week, according to Bankrate's nationwide poll of large lenders. Although the Federal Reserve doesn’t influence rates on fixed mortgages, its recent move to raise the federal funds rate due to inflation — and the indication it’ll continue to raise that rate this year — does have some impact on mortgages. One of the primary challenges that investors and buyers will need to address this year is rising interest rates.

Today's rates are much higher than they have been in years, which is likely to have a few knock-on consequences in the US housing market – though they are unlikely to produce significant declines in housing prices. While quickly rising mortgage rates may dampen the strong housing demand somewhat, do not anticipate a halt to home price appreciation. A slower rate of appreciation is more likely. The impact of higher mortgage rates is not yet fully reflected in the recent sales data but it has given affordability a big hit.

Keep in mind that, despite recent increases, mortgage interest rates are still within reach when seen in historical context (back in 1981, rates topped 18 percent for a 30-year fixed-rate mortgage). If the house you're eyeing is a good fit for your family and won't put you in financial peril, go ahead and buy it. The longer you delay, the more money you'll have to spend on rising rentals and saving for the down payment you'll need to buy a house. It all depends on your financial status and the housing market in the area where you live.

Rising mortgage rates still have the potential to drive a sizable portion of buyers away from the housing market. This year has already seen a significant increase in housing prices. When combined with interest rate increases, it may become too much for many homebuyers. As a result, the first half of the year is likely to see continued high house prices. When inventory increases and mortgage rates rise, the housing market may soften in the second half of 2022 (and in 2023 as well).

Even with rising mortgage rates and higher prices, the housing market would remain a seller's market due to very low supply and increasing demand as more millennials are projected to buy houses in 2022. Now millennials make up the largest share of homebuyers in the US, according to a 2020 survey from the NAR. According to a new study by Realtor.com, buying is more cost-efficient than renting in a growing number of the largest cities in the country.

This is encouraging news for the millions of millennials who are approaching the peak homebuying age. Millennials are the largest generation in history, and they are already in their mid-thirties, approaching their prime home-buying years. They were delayed in purchasing a home, but are now back in full force. Thus, we have two, four, or five years of millennial homeownership.

Sources:

  • https://www.realtor.com/research/
  • https://www.zillow.com/home-values/
  • https://www.bankrate.com/mortgages/todays-rates/
  • https://www.realtor.com/research/august-2022-data/
  • https://www.nar.realtor/research-and-statistics/housing-statistics/
  • https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index
  • https://www.realtor.com/news/trends/housing-market-reset-in-buyer-friendly-direction/

Los Angeles Housing Market: Prices, Trends, Forecast 2022-2023

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Are Housing Prices Going Down in Los Angeles?

We'll discuss the recent trends in the Los Angeles housing market. The market dynamics are changing now. After a two-year housing boom spurred in large part by record-low borrowing costs, the Los Angeles real estate market is now cooling down. There has been a decrease in house purchases and an increase in the number of homes for sale. Bidding wars have become less prevalent as a result of fewer buyers and more inventory, so buyers may have an easier time bidding around the asking price.

The median price in Los Angeles County peaked in September 2021 and has been on an up-and-down roller coaster since. It fell in July 2022, which was disappointing because it typically climbs from June to July; it even rose from June to July in 2009, when all hell had broken loose, putting this drop in a unique perspective. In October 2022, the median home price took a small jump of 0.6% from the previous year but it dropped 4.2% from the previous month.

  • Los Angeles County's median home price in October 2022 was $854,280.
  • The median home price in September 2022 was $891,770.
  • Last year, in October, the median home price was $848,970.

C.A.R.’s resale report for October shows that at the regional level, sales in all the major regions of California dipped by more than 35 percent from a year ago except for the Far North. In Los Angeles County, the number of closed sales dropped by 39.8%. It shows that things are continuously becoming less hot as compared to the previous year due to higher mortgage rates.

The Los Angeles Metro Area posted a decline of -40.8% year-over-year in sales of existing single-family homes. The median home price in the Los Angeles metropolitan region was $742,570, 2.4% higher compared to October 2021, when it was $725,000. However, it was a decline of 1.0% from September's price of $750,000.

Generally, a balanced market will lie somewhere between four and six months of supply. Inventory is calculated monthly by taking a count of the number of active listings and pending sales on the last day of the month. If an inventory is rising, there is less pressure for home prices to increase. With 4.1 months of supply left, it is still short of what economists say is needed for a balanced market. Hence, the Los Angeles County housing market will continue to see upward pressure on home prices.

  • Months Supply of Inventory (SFH) for Los Angeles County is now 4.1 months.
  • Months Supply of Inventory (SFH) for the Los Angeles Metro Area is 3.7 months.

Los Angeles Real Estate Market Trends

Los Angeles County home prices are still slightly higher than last year. The following Los Angeles housing market trends are based on single-family, condo, and townhome properties listed for sale on realtor.com. Land, multi-unit, and other property types are excluded. This data is provided as an informational resource only.

Based on last month's data, Los Angeles County was a balanced's real estate market, which means that the supply and demand of homes are about the same. A balanced market typically has a total sales-to-total listings ratio between 0.12 and 0.2. Markets with a ratio above 0.2 tend to favor sellers, while markets with a ratio below 0.12 tend to favor buyers.

There are around 218 cities in Los Angeles County where Realtor.com has active listings right now. They take into account two aspects of the housing market. The market demand is measured by unique viewers per property on their website, and the pace of the market is measured by the number of days a listing remains active on their website.

  • In October 2022, the median list price of homes in Los Angeles County was $839K, trending up 5% year-over-year.
  • The median listing price per square foot was $565.
  • The median price of sold homes was $800,000.
  • The sale-to-List Price Ratio was 100%, which means that homes in Los Angeles sold for approximately the asking price on average.
  • A seller would prefer this ratio to be 100% or more.
  • On average, homes in Los Angeles sell after 61 days on the market.

If a region’s housing market is balanced it means that there is enough demand from buyers to equal the supply from sellers. Based on the supply-demand dynamics, the real estate appreciation rate in Los Angeles is predicted to remain slightly skewed on the sellers' side. The moderate demand but tight inventory should put upward pressure on the prices. Hence, the home values in the Los Angeles housing market could continue to appreciate over the next 12 months albeit at a very smaller pace as compared to the past two years.

Some economists forecast that house prices would tumble in 2023, but few, if any, foresee declines comparable to the Great Recession. In large part, this is due to the fact that foreclosures were mostly responsible for the previous significant decreases. Now, financing criteria are much stricter, and experts say that unless they are forced to, many homeowners prefer not to sell for less than their neighbor did a few months ago.

Los Angeles Housing Market

C.A.R.’s Oct 2022 resale housing report shows that in Los Angeles County, homes are still moving fast. The median days on market is 20 days. But the sales of existing single-family homes are massively down 39.8 percent from the previous year. If you’re looking to buy a house in LA’s real estate market, you may still end up paying slightly more than the asking price. The average sale price to list price ratio in LA was 97.9% in October. In October 2021, it was 102.1% and in September 2022, it was 98.2%. Higher mortgage rates in 2022 are leading to less number of buyers bidding up the prices of homes.

  • The single-family median price went up by 0.6% YoY to $854,280.
  • Last month the median home price was $891,770.
  • Last year at this time the median home price was $848,970.
  • Single-family sales were down 39.8% YTY and 6.1% MTM.
  • The condo market also showed less buyer turnout.
  • Sales of existing condos were down 43.3% YTY and 12.1% MTM.
  • The median condo price in Los Angele grew by 0.9% YTY to $585,000.
  • It was a decline of 2.2% from September's price of $598,450.
  • Last year at this time the median condo price in Los Angeles was $575,000.
Los Angeles Housing Market Report
Infographic Courtesy of CALIFORNIA ASSOCIATION OF REALTORS®

Are Home Rents Going Up or Down in Los Angeles?

The Zumper Los Angeles Metro Area Report analyzed active listings across the metro cities to show the most and least expensive cities and cities with the fastest growing rents. Rents in Los Angeles are higher than the state median rent. The California one bedroom median rent was $2,101 last month. Laguna Beach was the most expensive city with one-bedrooms priced at $3,580 while Yucca Valley was the most affordable city with one bedrooms priced at $1,010.

The Fastest Growing Cities in the Los Angeles Metro Area For Rents (Y/Y%)

  • Corona had the fastest growing rent, up 29.9% since this time last year.
  • Oxnard saw rent climb 25.7%, making it the second fastest growing.
  • Redondo Beach ranked as third with rent jumping 25%.

The Fastest Growing Cities in Los Angeles Metro Area For Rents (M/M%)

  • Santa Monica had the largest monthly rental growth rate, up 3.5%.
  • Glendale rent increased 2.3% last month, making it second.
  • West Hollywood was third with rent climbing 2.1% last month.
Los Angeles Rental Market Trends
Credits: Zumper

Los Angeles Housing Market Forecast 2022 & 2023

Los Angeles home prices could rise but at a slower rate. Los Angeles has a track record of being one of the best long-term real estate investments due to high price appreciation. According to some analysts, home prices in Los Angeles are unlikely to drop, but the rate of increase will moderate.

In other words, prices will continue to rise, albeit at a slower rate than in the preceding two years. The analysts argue that despite the recent rise in supply and decrease in demand, there is still a severe housing shortage and a big number of individuals who can and want to purchase a home.

Let us look at the price growth recorded by Zillow, a leading real estate marketplace. Zillow Home Value Index is an adjusted measure of the typical home value and market changes across a given region and housing type. It reflects the typical value for homes in the 35th to 65th percentile range. ZHVI also represents the whole housing stock and not just the homes that list or sell in a given month.

The typical home value of homes in Los Angeles County is currently $846,652. It indicates that 50 percent of all housing stock in the area is worth more than $846,652 and 50 percent is worth less than it (adjusting for seasonal fluctuations). Using this methodology, Los Angeles County home values have appreciated by nearly 4.6% in the last twelve months.

Los Angeles County Housing Market Insights

  • Typical Home Value: $846,652 as on October 31, 2022.
  • 1-year Value Change: +4.6%
  • 22 Median days to pending (October 31, 2022)
  • 1.005 Median sale-to-list ratio (September 30, 2022)
  • 51.3% Percent of sales over list price (September 30, 2022)
  • 36.2% Percent of sales under list price (September 30, 2022)

NeighborhoodScout.com's data also shows that in the past ten years, Los Angeles real estate appreciated 146.06%. This amounts to an annual real estate appreciation of 9.42%, putting Los Angeles in the top 10% nationally for real estate appreciation. During the latest twelve months tracked by them (2021 Q2 – 2022 Q2), Los Angeles' property appreciation rate has been hovering around 14.34% and in the latest quarter between 2022 Q1 – 2022 Q2, it has been 3.63%, which annualizes to a rate of 15.33%.

Tight supply and steady demand from home buyers have boosted home values across the Los Angeles metro area over the last two years. Prices rose steadily over the past year, despite the economic slowdown brought on by the pandemic. A large number of millennials entered their 30s in 2020, a trend that will continue for several years.

Home prices are trending higher and are more attractive for sellers in the current phase. Higher mortgage rates will decrease home sales and the pace of home price appreciation. Zillow's forecast updated predicts that LA Metro home values will decline by 2.4% from Sept 2022 to Sept 2023.

  • Los Angeles-Long Beach-Anaheim Metro home values have gone up 6.8% to $903,359.
  • The Los Angeles metro housing market forecast ending October 2033 is a bit negative.
  • Zillow predicts that LA metro home values may decline by 1.8% between October 2022 to October 2023.
  • If this forecast is correct, Los Angeles home prices will be lower in the 3rd Quarter of 2023 than they were in the 3rd Quarter of 2022.
Los Angeles Housing Market Forecast
Courtesy of Zillow.com

Is Los Angeles Housing Market Going to Crash?

Soem of housing analysts say that home prices in Los Angeles and Orange counties will fall by the middle single digits in 2023, while home prices in the Inland Empire would fall by the high single digits over the same time period. They anticipate that prices will continue to fall on a regional and national scale in 2024, but at a considerably slower rate, followed by a little increase in 2025. Compared to last year, the home sales in August 2022 were down in all six counties, with San Bernardino county recording the highest sales decline of 32.6% YTY.

Do buyers have any advantage? Is it the right time to buy a house in Los Angles? This is a never-ending question with no definitive answer. Buyers believe it is not a very good time to buy a home in Los Angeles due to rising mortgage rates and home prices. On the other hand, it is definitely a good time to sell so you can expect more inventory due to increasing seller optimism.

More houses are expected to be listed in the coming months which may bring down the pace of appreciation to some extent. Affordability is a big issue in Los Angeles County as nearly three in four residents can’t afford to buy a median-priced home in the area. According to HousingWire, an index that combined median income and median home prices made Los Angeles the least affordable city in the country, and several younger residents said they were concerned they will never be able to afford a house. Home shoppers are leaving Los Angeles for cheaper metros, the most popular being Las Vegas.

Is Real Estate a Good Investment in Los Angeles?

Should you consider Los Angeles real estate investment? Many real estate investors have asked themselves if buying a property in Los Angeles is a good investment. You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2022.

Los Angeles is a moderately walkable city in Los Angeles County. It is home to around four million people. It is the largest city in California and the second-largest in the United States. Los Angeles Metropolitan Area is a 5- region that includes Los Angeles, Orange, Riverside, San Bernardino, and Ventura. The L.A. metropolitan area with over 13 million people rivals New York in population as the largest in the country. However, being a huge real estate market is not reason enough to invest here.

The Los Angeles real estate market is considered one of the premier markets for both investors and homeowners. It is also touted as the nation’s least affordable housing market. If you look in the long-term, it’s always a good investment to buy in Los Angeles. It is said that you will always get your money back or you would make a profit, as Los Angeles has a track record of being a great long-term investment.

According to Neighborhoodscout.com, a real estate data provider, one and two-bedroom large apartment complexes are the most common housing units in Los Angeles. Other types of housing that are prevalent in Los Angeles include single-family detached homes, duplexes, rowhouses, and homes converted to apartments.

Single-family homes account for about 40% of Los Angeles' housing units. In April 2020, the single-family homes posted their biggest percentage gains of the year so far in the Los Angeles metro area. House prices increased by 4.9% in Los Angeles County, 3.7% in Orange County, and 5% in the Inland Empire.

The Los Angeles housing market has been hot for years. In 2018, home prices in Los Angeles reached record heights, climbing to levels far above those recorded in the years leading up to the Great Recession. If we check historical data, in Los Angeles and Orange counties, year-over-year price increases peaked at 8.2% in April 2018 and have declined every month since. In October 2018, home prices in Los Angeles and Orange counties rose 5.5% over the previous year, according to the latest available data from the closely watched S&P CoreLogic Case-Shiller index.

A big factor, according to experts, is that many would-be buyers are increasingly priced out. But real estate agents also say a growing number of people who could buy, like Saavedra, have decided they don’t want to pull the trigger at the top. Home values in Los Angeles are up less than 3 percent since last year. After years of steady escalation, home prices in Los Angeles County are tapering off, according to a new report from CoreLogic.

They find that Los Angeles county’s median home price was $579,500 in January, down slightly from December’s median price of $581,500. That’s a 2.6 percent increase over the same time last year. By this comparison, prices shot up nearly 8 percent between January 2017 and January 2018. Prices continued to rise through much of 2018 but began to drop heading into Q4 2018. In Q4 2019, home prices were still slightly higher than a year earlier, but the spread has narrowed.

2018’s FRM interest rate increase decreased the principal amount homebuyers can borrow while making the same sustainable mortgage payment. The National Association of Home Builders and Wells Fargo Housing Opportunity Index has given the title of least affordable housing market to Los Angeles. In Los Angeles-Long Beach-Glendale region, only 11.3% of homes sold during the fourth quarter of 2019 were affordable to families earning the area’s median income of $73,100.

The 2020 pandemic had its impact on the market bringing down the rent prices while houisng prices reached record highs. Los Angeles real estate market isn’t the most affordable in the country, but it’s a market with ample investment opportunities for those who can afford the median price of over 700K.

However, this number doesn't apply to every part of the Los Angeles real estate market. There are some neighborhoods where prices are much cheaper and completion between buyers is much lesser. The high rate of appreciation has not prevented real estate investors from realizing a great return on investment. Instead of flipping rehabs, you should consider investing in rental properties.

Let’s find some factors that make LA a good place to invest for wealthy investors. We’ll address the biggest factor pulling people to the Los Angeles housing market next. In this section, we're not taking into account the short-term impact of the pandemic on the economy and housing market.

Los Angeles Hidden Real Estate Deals

Distressed sellers exist in every real estate market. If you do find an ideal property in the Los Angeles housing market, the increased selection of properties means you’re far less likely to end up in a bidding war. If you’re looking for other great deals, check out Vermont Vista, Hyde Park, Wilmington, and Cypress Park, where the asking prices are below the Los Angeles median price. In December 2020, the median list price of homes in Vermont Vista was $580K while the median sale price was $566K.

Foreclosures can be a great way to snap up Los Angeles real estate at a bargain price. Foreclosure rates, though, vary wildly. Note that for every home in foreclosure with the bank, there is probably another that is approaching that point and would be sold at a discount by a distressed seller who wants to avoid foreclosure. In distressed neighborhoods, fix and flip may be an option. So is buying Los Angeles real estate cheap and renting it out in a market starving for affordable rental units.

Single-Family Rental vs Multi-Family Investment

Years of appreciation have led Los Angeles real estate investors to favor rentals over flipping. This market favors rental property owners. In the city of Los Angeles alone, renters live in more than 600,000 apartments spread across 118,000 properties, according to the city’s Housing and Community Investment Department. In late 2019, California became the second state (after Oregon) to pass a statewide rent control law. It covers all multi-family rental units built more than 15 years ago. The state law applies on top of any stricter local ordinances.

Therefore, rent control applies to Los Angeles rental properties if they are multi-family units. Single-family detached homes rarely fall under rent control ordinances. They are generally not subject to LA Rent Control. The only exception is when two or more dwelling units are located on the same lot; then rent control rules are likely to apply. The simplest solution to this is to only buy single-family Los Angeles rental properties. Never buy a property with a separately rented granny flat or upstairs apartment you could rent out, as well.

On the other hand, homeownership rates in California have been declining for years. The sea change has been the growth of renting among the middle and upper classes. For example, a third of Los Angeles residents with incomes over $100,000 rent instead of own. Baby Boomers downsizing their homes choose to rent condos and homes that others maintain. Millennials who have a good income often say their parents lose their homes in the Great Recession and choose to rent instead.

This is driving demand for the luxury Los Angeles real estate market, whether condos, apartments with concierges, or luxury homes rented instead of purchased so that the resident can easily move if they lose their jobs. Only San Jose and San Francisco have more high-income residents that rent than the Los Angeles real estate market. Although apartment prices are high and rising, they’re lower in Los Angeles than in California.

That’s one bright spot in an otherwise tough rental market for Los Angeles renters. The latest data from Zumper shows that the rents have been declining because of the pandemic. A one-bedroom apartment rents for around $1,940 (-14.2% YTY) and a two-bedroom apartment rents for $2,700 (-10.9% YTY). The average rent people pay is around $2400 a month.

The Military also adds renters to the Los Angeles housing market. Any military base will pump renters into a real estate market. The Los Angeles real estate market is simply notable for having a large military population but a job market so diverse that the closing of a base won’t hurt the area’s home prices overall.

The Los Angeles AirPort Base, Edwards Air Force Base, and smaller facilities dump many renters into the Los Angeles housing market. Those with families often choose to rent Los Angeles rental properties instead of life on base. On top of that are defense contractors like Raytheon in Long Beach and El Segundo who pay people a premium to live here.

Current Rent Prices in Los Angels: Before the pandemic, the average rent for an apartment in Los Angeles was $2,524, growing by 2% YTY, according to RENTCafé. The average size for a Los Angeles, CA apartment is 792 square feet. 40% of the households in LA are renter-occupied while 60% are owner-occupied. Studio apartments are the smallest and most affordable, 1-bedroom apartments are closer to the average, while 2-bedroom apartments and 3-bedroom apartments offer more generous square footage.

As of November 20, 2022, the average rent for a 1-bedroom apartment in Los Angeles, CA is currently $2,435. This is an 11% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Los Angeles increased by 6% to $1,795. The average rent for a 1-bedroom apartment increased by 2% to $2,435, and the average rent for a 2-bedroom apartment decreased by -1% to $3,268.

  • The average rent for a 2-bedroom apartment in Los Angeles, CA is currently $3,268. This is an 11% increase compared to the previous year.
  • The average rent for a 3-bedroom apartment in Los Angeles, CA is currently $4,499. This is a 3% increase compared to the previous year.
  • The average rent for a 4-bedroom apartment in Los Angeles, CA is currently $6,000. This is a 4% increase compared to the previous year.

Some of the most affordable neighborhoods in LA are:

  • Jefferson Park, where the average rent goes for $1,355/month.
  • El Sereno, where renters pay $1,396/mo on average.
  • Vermont Knolls, where the average rent goes for $1,445/mo.
  • Glassell Park & Cypress Park, where the average rent goes for $1,485/month.
  • Cypress Park, where renters pay $1,396/mo on average.
  • North Hills, where renters pay $1,530/mo on average.

Construction Isn’t Meeting Housing Demand in LA

The Los Angeles housing market has seen a bump in residential construction. This has helped to satisfy some demand from renters. However, due to increasing demand, the new supply hasn’t brought prices down. The current supply of existing single-family homes is 1.4 which is insufficient to meet the demand. This also suggests that any new wave of construction will at most result in rental rates remaining steady instead of causing them to fall.

The geography of this region also limits the supply. The Los Angeles metropolitan area is perched between the ocean and the mountains. You obviously can’t build on water. There’s only so far you can build into the hills when mudslides and earthquakes limit how much you can build there. The Los Angeles real estate market is further constrained by the vast national parks around L.A. like the Angeles National Forest. These areas simply cannot be turned into residential areas.

Two of the most fundamental economic indicators are employment and income. Home sales usually are directly tied to an economy's health and rise and fall with economic activity. As economies slow, the supply of money tends to become more restrictive. What makes Los Angeles unique is the employment market. Want to work in Hollywood? Move to L.A. Want to work for a production company or in fashion? Come to L.A. If rent is too high, share an apartment or single-family home with friends. In terms of home prices, income, and employment indicate whether people can afford current and future increases.

The Golden State added 310,300 jobs in 2019, a 1.8% increase, to a total of 17.61 million, according to data released by the California Employment Development Department. The previous year’s increase was 1.6%. In Los Angeles County, nonfarm jobs grew by 67,800 to a total of 4.65 million. That was a 1.5% rise, led by healthcare and social assistance (up 28,000) and construction (up 8,500). The unemployment rate was 4.4% in December, down from 4.7% a year earlier.

Note that due to the ongoing pandemic, Los Angeles County’s unemployment rate has increased. It fell to 11% in November from a revised 12% in October amid seasonal hiring gains in retail and logistics, according to the State Employment Development Department. It was 19.6 percent in April 2020. Every major sector of the county’s economy suffered significant job losses during the past 12 months, led by accommodation/food services, which shed 120,000 payroll jobs.

How to Invest in Real Estate in Los Angeles?

In any property investment, cash flow is gold. California has the 6th largest economy in the entire world. This is largely driven by its innovative production, the heavy tech sectors in the state, and more. The Los Angeles real estate market has many points in its favor beyond its sheer size. The strong market fundamentals make the Los Angeles housing market a good place to invest if you’re looking at buying real estate in California.

How good is it to buy a Los Angeles investment property? Not every real estate investor wants to enter the most expensive and competitive Los Angeles real estate market. For buyers, the affordability is dropping and only 30% of LA county residents own a home. Home Prices are so high and out of reach for many buyers – many consider LA homes grossly over-priced.

While Los Angeles home prices may be increasing slightly over the next year, the fact remains that there are many homes available at fair prices. Growing household formations, ongoing job creation, and rising wage growth are fueling housing demand,” said NAHB Chief Economist Robert Dietz. “But a record-low resale inventory, coupled with underbuilding as builders deal with supply-side constraints, continue to put upward pressure on home prices even as interest rates remain at low levels.”

There’s still a strong opportunity for rental property investment in Los Angeles. There is a strong and continuous demand for apartments for rent in LA. This is fueled by always tight inventory, severe competition from tenants, rising wages, and a good economy. Therefore, for a great opportunity for rental income for investors. Good cash flow from Los Angeles investment properties means the investment is, needless to say, profitable.

A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding a good Los Angeles real estate investment opportunity would be key to your success. If you invest wisely in Los Angeles real estate, you could secure your future. The best investment is now looking for a rental property that will generate good cash flow. Your best tenants would be the retirees who intend to relocate to Los Angeles and want to purchase property to rent out.

The running costs for owning and managing a Los Angeles rental property should not be high. While hiring a property management company you should expect to give up roughly ten percent of the rent for each property they manage. Remember to factor this loss into your calculations when budgeting for a new rental property. The three most important factors when buying real estate anywhere are location, location, and location. The location creates desirability. Desirability brings demand.

There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your Los Angeles investment property and you should be able to get a good return on your investment over the long term. The neighborhoods in Los Angeles must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools, and shopping malls.

A cheaper neighborhood in Los Angeles might not be the best place to live in. A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio. Los Angeles real estate prices are well above average cost compared to national prices. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals such as duplexes and triplexes in Class A neighborhoods. The inventory is low, but opportunities are there.

Even as Los Angeles home prices have reached new heights, the market remains attractive to residential real estate investors. As they continue to compete for potential investment properties at the lower end of the market, the challenges for first-time homebuyers will remain. The homebuyers won’t be able to outbid real estate investors and would end up renting.

Home prices in Los Angeles are well below the national average for all cities and towns in the United States. According to Realtor.com, there are around 83 neighborhoods in Los Angeles. Bel Air has a median listing price of $4.7M, making it the most expensive neighborhood. Sunland-Tujunga is the most affordable neighborhood, with a median listing price of $695K.

Investing in more affordable neighborhoods (at least some of them) can give you a bigger return on investment in a shorter period of time. Here are some of the best neighborhoods in Los Angeles for buying investment properties.

El Sereno is a densely urban neighborhood (based on population density) located in Los Angeles, California. It is a predominantly Latino neighborhood northeast of Downtown Los Angeles. It is bordered on the north by Highland Park and South Pasadena, on the east by Alhambra, on the south by East Los Angeles, and on the west by Lincoln Heights and Montecito Heights. The average rental price in El Sereno is currently $1,921, based on NeighborhoodScout's exclusive analysis. Rents here are currently lower in price than 75.6% of California neighborhoods.

El Sereno real estate is primarily made up of small (studio to two bedrooms) to medium-sized (three or four bedrooms) single-family homes and small apartment buildings. Most of the residential real estate is occupied by a mixture of owners and renters. Demand for real estate in El Sereno is above average for the U.S. and may signal some demand for either price increases or new construction of residential products for this neighborhood.

What You’ll Pay in El Sereno: According to Realtor.com, in October 2021, the median list price of homes in El Sereno was $765,000 while the median sale price was $839,000. Homes in El Sereno sold for 3.26% above the asking price on average in October. On average, homes in El Sereno sell after 49 days on the market. The trend for median days on market in El Sereno has gone up since last month, and slightly up since last year.

Wilmington is a neighborhood in the Harbor region of Los Angeles, California. Wilmington shares borders with Carson to the north, Long Beach to the east, San Pedro to the south and west, and Harbor City to the northwest. The community of Wilmington is one of the oldest in Los Angeles. It is a modern and progressive community with a long and proud history of being the gateway to Los Angeles and the rest of Southern and Central California. There are historical museums, military installations, parks, and waterfront attractions to visit. Click on the image below to see some postcard images from the past.

What You’ll Pay in Wilmington: According to Realtor.com, in October 2021, the median list price of homes in Wilmington, CA was $600,000, trending up 13.7% year-over-year. The median listing price per square foot was $463. The median sale price was $625K. Homes in Wilmington, CA sold for approximately the asking price on average in October.

Highland Park is a neighborhood in Los Angeles. It is bordered on the south and east by the 110 freeway and stretches west almost all the way to Eagle Rock Boulevard. The neighborhood is in the midst of a renaissance, which has made it an affordable alternative for young professionals who find themselves priced out of central Los Angeles. It has been undergoing gentrification over the last 10 years and has seen an influx of trendy shops and restaurants, new parks, nightlife, and vibrancy.

What You’ll Pay in Highland Park: According to Realtor.com, in October 2021, the median list price of homes in Highland Park was $938,000, trending up 7.9% year-over-year. The median listing price per square foot was $711. The median sale price was $1.1M. Homes in Highland Park sold for 4.92% above the asking price on average in October.

West Hills is a residential and commercial neighborhood in the western San Fernando Valley region of the City of Los Angeles, California. The percentage of residents aged 35 and older is among the highest in Los Angeles County. Historic landmarks and many city parks are to be found within the community, as are commercial districts, a business district, and religious establishments. Niche.com ranks it #42 in Best Neighborhoods to Live in Los Angeles.

What You’ll Pay in West Hills: The median home value in West Hills is $936,065 and home values have gone up 22.8% over the past year. According to Zillow, it is a sizzling hot neighborhood based on three metrics: the list-to-sale price ratio, the prevalence of price cuts on home listings, and time-on-market. All these metrics show that buyer demand is very high in this neighborhood. Mashvisor also lists West Hills among the top three neighborhoods to purchase long-term Los Angeles investment property.

Mid City West is quite an appreciating neighborhood. For a prime city location, it's very safe, and in the residential areas, it's pretty quiet. This area is the true LA experience. It's diverse and much of it reaches into what people consider part of West Hollywood. Since 2012, the property prices have appreciated every year in this neighborhood. The current median home value in Mid City West is $1,913,156 and home values have gone up 5.6% over the past year.

What You’ll Pay in Mid City West: The good thing for new buyers is that the market has cooled off. The competition is less (as of now) so you can negotiate the deal down to the standard. Rental properties in Mid City West are in high demand right. The average rent for a 1-bedroom apartment in Mid City, Los Angeles, CA is currently $1,795. This is a 6% increase compared to the previous year.

Central City is an affordable neighborhood in LA for buying an investment property. Since 2012, the property prices have appreciated every year in this neighborhood. The median home value in Central City is $569,683. Central City home values have gone up 11.2% over the past year. The competition is less (as of now) so you can negotiate the deal down to the standard. The median listing home price in Central City East was $459.5K in October 2021, trending up 6.9% year-over-year. The median listing home price per square foot was $562.

If you think of investing in LA, you have decided on a long-term investment property. Here are the ten neighborhoods in LA having the highest real estate appreciation rates since 2000—List by Neigborhoodscout.com.

  1. W 21st St / S Orange Dr
  2. Irvington Pl / N Ave 51
  3. Montecito Heights Northeast
  4. N Ave 57 / Monte Vista St
  5. Happy Valley
  6. N Ave 52 / Granada St
  7. Highland Park
  8. Harvard Heights Southwest
  9. Highland Park North
  10. Apple St / S Dunsmuir Ave

As with any real estate purchase, act wisely. Evaluate the specifics of the Los Angeles housing market at the time you intend to purchase. Hiring a local property management company can help in finding tenants for your investment property in Los Angeles.

This article shouldn't be used to make real estate or financial decisions. Some of this article's information came from referenced websites. Norada Real Estate Investments provides no express or implied claims, warranties, or guarantees that the material is accurate, reliable, or current. All information should be validated using the below references. Norada Real Estate Investments does not predict the future US housing market. This article educated investors about LA real estate. Buying a rental property needs research, planning, and budgeting. Not all investments are good. Always do research and consult a real estate investment counselor.

REFERENCES

Market Data, Reports & Forecasts
https://www.car.org/marketdata/data/countysalesactivity
https://www.car.org/en/marketdata/interactive/housingmarketoverview
https://www.zillow.com/losangeles-ca/home-values
https://www.redfin.com/city/11203/CA/Los-Angeles/housing-market
https://www.realtor.com/realestateandhomes-search/Los-Angeles_CA/overview
https://www.zumper.com/rent-research/los-angeles-ca
https://www.zumper.com/blog/los-angeles-metro-report/
https://www.littlebighomes.com/real-estate-los-angeles.html

Covid-19 Impact/News
https://la.curbed.com/2020/2/28/21157988/home-prices-los-angeles-report
https://www.latimes.com/homeless-housing/story/2020-07-23/southern-california-home-prices

Best Neighborhoods and Statistics
https://www.zillow.com/
https://en.wikipedia.org/
https://www.neighborhoodscout.com/ca/los-angeles/real-estate/
https://www.mashvisor.com/blog/invest-los-angeles-real-estate-market-2019/

LA demographics
http://worldpopulationreview.com/us-cities/los-angeles-population

Rent control
https://www.latimes.com/archives/la-xpm-2007-dec-30-re-aptlife30-story.html

Foreclosures
https://www.realtytrac.com/statsandtrends/foreclosuretrends/ca/los-angeles-county

Rental market/Apartments
https://la.curbed.com/2019/2/4/18210857/los-angeles-rental-prices-2019-average
https://www.rentcafe.com/average-rent-market-trends/us/ca/los-angeles
https://la.curbed.com/2019/2/26/18241819/rent-vs-buy-los-angeles-high-income

Job & Unemployment Stats
https://fred.stlouisfed.org/series/CALOSA7URN
https://www.labormarketinfo.edd.ca.gov/file/month/la$pds.pdf

Military market
http://www.laalmanac.com/military/mi05.php
https://militarybases.com/california

Good time to buy/price predictions
https://la.curbed.com/2018/12/7/18128000/los-angeles-real-estate-market-prediction-2019
https://www.forbes.com/sites/ellenparis/2019/02/23/buyers-should-revisit-los-angeles-and-san-francisco-housing-markets-for-new-opportunities/#47bd1029428c

Las Vegas Real Estate Market: Prices, Trends, Forecast 2022-2023

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How is the Housing Market in Las Vegas?

The Las Vegas housing market was extremely hot last year. The pandemic housing boom pushed home prices. The current market conditions are moving toward stability, making it an excellent moment for both buyers and sellers to bargain like it's the old days. Las Vegas home values are still historically high for sellers. For buyers, the market is moving; more properties are becoming available, and sellers are lowering their prices. 53.7% of October closings were on the market for 30 days or less.

The most recent report from the Las Vegas Realtors revealed that local home values fell for the fifth consecutive month in October 2022. This is a trend that is undoubtedly being felt in Southern Nevada. LVR reported that the median price of existing single-family houses sold in Southern Nevada for the month of October was $440,000, down 2.2% from September.

However, the median home price is still greater than 7.3% higher than it was a year ago. Consider that local home prices are nearly four times higher than they were in January 2012, when they reached their post-recession low. In that era, the median price of a single-family home in this area was $118,000.

  • The median price of previously owned single-family homes in January 2022 was $435,000.
  • The median price of previously owned single-family homes in October 2021 was $410,000.
  • The median price of previously owned single-family homes in October 2020 was $340,200.

There is currently a 4.6-month supply of houses available in Southern Nevada while last October, the housing supply was at 1.1 months. Months of supply are a good indicator of whether a particular real estate market is favoring buyers or sellers. Typically, a market that favors sellers has less than 6 months of supply, while more than 6 months of supply indicates an excess of homes for sale that favors buyers. 

In October, 97 homes sold for $1 million or more, compared to September’s 97 homes, so we were flat. The median sales price in the Luxury Market increased to $1,530,000 and in September that number was $1,277,383. Almost $252,617 increase in the median sales price.

Investors believe that Southern Nevada's housing prices are real and that the market is nearing a tipping point. The current price surge cannot be sustained. Las Vegas ranks among the 10 most overvalued of the nation’s largest housing markets, with homes selling for 41.88 percent above their long-term pricing trend, according to an analysis by professors at Florida Atlantic University and Florida International University.

The only disadvantage is that buyers and investors buying now in the most overpriced markets are paying near-peak prices and risk being stuck for an extended period of time before realizing solid returns on their real estate investments. While first-time buyers face difficulties entering the market, seasoned owners are snapping up second homes.

According to Nevada Census data, there will be a 1.51% increase in population between 2020 and 2025, as well as a 1.46 percent increase in median income during the same period. Even though builders are bringing more homes to market, demand continues to outnumber supply. Builders are still not building at a rate that meets the needs of homebuyers.

All these factors will lead to less supply and will help keep the single-family home values from crashing in this region. The Las Vegas metro area home values are predicted to rise in the next twelve months (check the forecast below). The national housing market is also cooling off due to rising mortgage rates which make housing less affordable for many potential buyers. 

Southern Nevada Housing Market Trends

The following Las Vegas housing market trends are based on single-family, condo, and townhome properties listed for sale on realtor.com. Land, multi-unit, and other property types are excluded. This data is provided as an informational resource only. The median list price of homes in Las Vegas, NV was $440K in October 2022, trending up 10.6% year-over-year. The median listing price per square foot is $253. The Paseos has a median listing price of $859K, making it the most expensive neighborhood. 

  • The median list price of homes in West Las Vegas, NV is $313.3K, trending up 13.9% year-over-year.
  • The median list price of homes in East Las Vegas, NV is $300K, trending up 15.4% year-over-year.
  • East Las Vegas is the most affordable neighborhood in Las Vegas.
  • The median list price of homes in North Las Vegas, NV is $420K, trending up 12% year-over-year.

Las Vegas Real Estate Market

  • A full summary report published by Summerlincommunities.com (Data by LVR) on Las Vegas Real Estate Market Update shows that 1,724 single-family houses were sold in October.
  • This figure is down 15.1% from September and down 44% from October 2021.
  • The median sales price of previously owned single-family homes went from $450,000 to $440,000, down 2.2% from September.
  • It was still up 7.3% from the prior year.
  • The median sales price of condos and townhomes went from $270,000 in September to $266,000 in October.
  • Which is down 1.5% from September, but up 12.7% from the prior year.
  • In October, there were a total of 2,883 new listings, which is down 14.6% from September and down 19.1% from the prior year.
  • There were also a total number of 7,906 single-family houses listed without offers at the end of October.
  • The number of single-family listings is down 2.6% from September, but up 140.5% from the prior year.
  • The housing supply in Southern Nevada increased to 4.6 months of inventory.
  • The housing supply is up 14.6% from September and up 329.3% from the prior year.   
  • Months' supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace.
  • 53.7% of the closings for October were on the market for 30 days or less.
  • In September this number was at 56.8% and in October 2021, 79.9% of the homes were on the market for 30 days or less.
Las Vegas Housing Prices
Source: Las Vegas REALTORS®

On a monthly basis, here's how the Las Vegas housing market ended

Las Vegas Housing Market Trends
Source: Las Vegas REALTORS®

Las Vegas Real Estate Market Forecast 2022 and 2023

What are the Las Vegas real estate market predictions for 2022 and 2023? From 2017 to 2018, home values in Las Vegas appreciated by nearly 30.4%. In two years, Las Vegas home values rose significantly due to the low availability of homes and very high demand. It was named the number one real estate market in the USA for 2018 by Realtor.com based on the price and amount of existing homes, new home construction, and local and economic trends.

Las Vegas home values reported the highest year-over-year gains in home values, totaling a 13 percent increase, according to the S&P's Corelogic Case-Shiller Index in 2018 (the leading measure of U.S. home prices). However, in 2019, Southern Nevada’s housing market overall cooled off with slower price growth and slumping sales. It looks almost flat throughout the year in the graph given below. Although overall price appreciation rates were slower in 2019 than in 2018 they greatly varied across different zip codes.

Southern Nevada prices were up 2.6 percent year-over-year in December 2020, compared with 3.8 percent nationwide, according to the S&P CoreLogic Case-Shiller index. The median prices for new homes increased by just 1 percent. Appreciation has been steady and strong in 2021 as the Las Vegas metro home values rose by 26.8% (Dec 2020 to Dec 2021).

As of October 31, 2022, home values in the Las Vegas metro have gone up nearly 13.9% over the last twelve months (Zillow Home Value Index). It represents the whole housing stock and not just the homes that list or sell in a given month. NeighborhoodScout.com's data also shows that Las Vegas real estate appreciated by about 258.95% over the last ten years. Its annual appreciation rate has been averaging 13.63%. This figure puts it in the top 10% nationally for real estate appreciation.

  • Between 2021 Q2 – 2022 Q2, the Las Vegas appreciation rate was about 22.29%.
  • Between 2022 Q1 – 2022 Q2, the appreciation rate was 3.34%.

Here is the home price forecast for Nevada, Clark County, Las Vegas, Henderson, and Las Vegas Metropolitan Area. 

  • Las Vegas-Henderson-Paradise Metro home values have gone up 13.9% over the past year.
  • The latest forecast by Zillow is that they are estimated to remain flat between October 2022 to October 2023.
  • Henderson home values have gone up 12.3% over the past year to $492,623.
  • Paradise home values have gone up 14.1% over the past year to $396,789.
Las Vegas Real Estate Market Forecast
Courtesy of Zillow.com

All these trends and predictions can be positive or negative depending on which side of the fence you are – Buyer or Seller?  This area is skewed to sellers due to a very low level of inventory that can't meet the demand of the rising population. In a balanced real estate market, it would take about five to six months for the supply to dwindle to zero. In terms of months of supply, it can become a buyer's real estate market if the supply increases to more than five months of inventory.

Currently, the housing supply in Southern Nevada is at 4.6 months. Given how hot the local economy was before the pandemic, the Las Vegas real estate market will remain strong due to a growing population and booming economy – which leads to a persistent imbalance in supply and demand.

For buyers, the mortgage rates are higher than last year. Rising interest rates increase the price of properties, limiting the demand for home purchases. Reduced demand also harms sellers, who must lower the value of their property to attract purchasers. Overall, Las Vegas remains one of the hottest real estate markets in the country, as individuals from all over the world flock to reside here. Real estate is a long-term appreciating asset; nevertheless, buyers must manage their expectations and be conscious of the market's fluctuation.

Las Vegas' unemployment rate, just 3.9% in February 2020, shot up to 34% in April 2020. By June 2020 it had tumbled to 18% after casinos and other businesses were allowed to reopen, state officials reported. Even though these effects on the Las Vegas housing market are deemed short-term, it is yet to be predicted what the potential long-term impact could be.

According to the Bureau of Labor Statistics, as of September 2022, Nevada’s seasonally adjusted unemployment rate was 4.4 percent which was unchanged from July and August 2022. In the three Metropolitan Statistical Areas (MSA), the unemployment rates were 5.3 percent in the Las Vegas area, 3.1 percent in Reno, and 3.4 percent in the Carson area in September 2022.

In Nevada’s counties, the lowest unemployment rate was in White Pine County at 2.4 percent, and Clark County and Nye County had the highest rate at 5.3 percent.  The number of unemployed individuals increased by 820 since August 2022 to 67,284 people, which is 16,471 fewer unemployed people than in September 2021. The labor force in Nevada is currently 1,536,886 people, which is 9,796 more people than in August 2022 and is up 45,878 people since September 2021.

Nevada Unemployment Rate
Courtesy of Nevadaworkforce.com

Las Vegas Real Estate Market: Is It A Good Place For Investment?

Now that you know where Las Vegas is, you probably want to know why we're recommending it to real estate investors. Is Las Vegas a Good Place Real Estate Investment? Many real estate investors have asked themselves if buying rental property in Las Vegas is a good investment. You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the Las Vegas housing market's historical and current trends for answers on why to put resources into this market.

Las Vegas is a minimally walkable city in Nevada. It is the 32nd most walkable large city in the US with 583,756 residents. Las Vegas has some public transportation and does not have many bike lanes. Downtown Las Vegas, home to the casinos and hotels, is the city's most accessible neighborhood, but housing is sparse there. In 2018, the Las Vegas housing market was so hot that it outperformed the best U.S. housing markets like Seattle. The Las Vegas real estate market is entirely brimming with new businesses.

It isn't just about casinos, medicine is a growing industry as well. The University of Las Vegas and Zappo's, the internet shoe store, is also based in Vegas. Its friendly business environment is propping up the economy and helping towards the positive Las Vegas real estate market trends. The new businesses are propping up at a much faster rate than the national average.

Las Vegas has a mixture of owner-occupied and renter-occupied housing units. It is a big rental property market. According to Neighborhoodscout.com, a real estate data provider, three and four-bedroom single-family detached homes are the most common housing units in Las Vegas.  Other types of housing that are prevalent in Las Vegas include large apartment complexes, duplexes, rowhouses, and homes converted to apartments.

Las Vegas is the destination point of millions of visitors, the town is famous for its vibrant nightlife, exciting gaming action, and the natural allure of the beautiful desert that surrounds the greater metropolitan area. Tourists pour billions of dollars in Southern Nevada through which thousands of tourism jobs are supported.

Let's learn more about Las Vegas and find out why one should invest in this sturdy real estate market. These things make the Las Vegas real estate market stand out when it comes to choosing a place to invest in 2020 and beyond. Keeping aside the short-term impact of the ongoing pandemic, let's take a look at the number of positive things going on in the Las Vegas real estate market which can help investors who are keen to buy an investment property in this city.

Why Is Las Vegas A Good Place For Real Estate Investment?

THE CITY & ITS DEMOGRAPHICS

  • Las Vegas is a beautiful city of million-lightbulb signs and fantastic architecture.
  • It is an internationally renowned major resort city.
  • It is known primarily for its gambling, shopping, fine dining, entertainment, and nightlife.
  • It is often known as “The Entertainment Capital of the World” – because of its “broad scope of entertainment options including nightlife, shows, exhibits, museums, theme parks, pool parties, and so on.
  • Las Vegas has 68 beautiful parks.
  • It is one of the country's leading vacation destinations, drawing far more tourists than the Grand Canyon or Yellowstone National Park.
  • More than 41 million people visit Las Vegas each year.
  • Over 22,000 conventions are held in Las Vegas every year.
  • It has been one of the fastest-growing major cities in the United States.
  • It is the most populated city in the state of Nevada and the 28th-most populated city in the United States.
  • The current metro area population of Las Vegas in 2020 is 2,699,000, a 2.98% increase from 2019 – Macrotrends.net.

THE HOUSING MARKET & PRICES

  • The most prevalent building type in Las Vegas is single-family detached homes.
  • The city has a mixture of owners and renters, with 51.07% owning and 48.93% renting – “Neighborhoodscout.”
  • Las Vegas is in the top 10% nationally for real estate appreciation.
  • Las Vegas real estate has appreciated by 244.86% over the last decade.
  • It amounts to an average annual home appreciation rate of 13.18%.
  • Home values have gone up 14.2% over the past year (ZHVI)
  • The median sold price of homes in Southern Nevada is $440,000.
  • 1-yr forecast: 0% (ZHVF) until October 2023.
  • Las Vegas rental real estate market remains healthy and affordable for most renters.
  • There's also no slowdown on the horizon for the number of people moving to Las Vegas.

THE ECONOMY

  • The Las Vegas Valley as a whole serves as the leading financial, commercial, and cultural center for Nevada.
  • Las Vegas is home to more than half of the 20 largest hotels in the world.
  • There are more than 150 casinos and roughly 150,000 hotel rooms in the Las Vegas valley area.
  • Las Vegas annually ranks as one of the world's most visited tourist destinations – famous for its mega casino hotels and associated activities.
  • A diversified economy is driven by health-related, high-tech, and other commercial interests.
  • The primary drivers of the Las Vegas economy are tourism, gaming, and conventions, which in turn feed the retail and restaurant industries.
  • Mining constitutes the mainstay of the region's industrial sector.
  • Most of the manufacturing plants are concentrated in the communities of Henderson and North Las Vegas.
  • No state tax for individuals or corporations, as well as a lack of other forms of business-related taxes, have aided economic growth.
  • Construction is also a significant component of the economy.
  • The government is the metropolitan area's single largest employer.

These are just some of the highlights that make Las Vegas a great place to live and invest in real estate. The list can go on and on. Before the coronavirus pandemic hit the state, the Las Vegas real estate market forecast was as hot as the desert heat in Nevada. Keeping aside this crisis for a moment, the housing market in this region provides an excellent opportunity for investors. They are expressing confidence in the stable housing prices and the number of available housing units on the market.

New businesses are being created at a much faster rate than the national average. Las Vegas is also a strong rental market. Nearly 40% of the population rents in Las Vegas. Rental properties near these new businesses will benefit greatly due to the increasing tenant pool and the general improvement in economic activity that they bring. The first half of the previous year saw a huge increase in the demand for housing in Las Vegas, Nevada.

The inventory of homes has further decreased from last year. The current local housing inventory in Las Vegas is just over a two-month supply of homes available for sale. The high demand is followed by an increase in population, as well as an overall improvement of the economy in the area. All these factors have had a huge impact on the Las Vegas housing market, which is considered one of the hottest markets in the nation. Las Vegas has experienced several booms in its history, and it saw an incredible real estate bust during the Great Recession.

Las Vegas' recovery hasn't made the same headlines as the 50% or greater declines in home values did a decade ago. Yet its recovery shouldn't keep investors away. For savvy investors, the Las Vegas real estate market is both stable and predictable. Let's find out the latest trends and forecasts.

Las Vegas Home Prices Are Low Relative to Recent Highs

There have been articles claiming that Las Vegas is ready for another bust. However, prices are declining somewhat as new housing stock comes onto the market. This explains why the inventory of unsold existing homes doubled at the end of 2018. Yet the demographic trends that keep the Las Vegas housing market so hot aren't stopping.

This means that the Las Vegas real estate market is seeing a lull with a guarantee that the price will start to rise. The Las Vegas housing market is a great place for real estate investment. It remains relatively affordable than the expensive seller markets in the US. When people lose their jobs in great numbers, home prices crash as they did in Las Vegas a decade or so ago.

Homes went from an average price of over $300,000 to less than $150,000. Home prices have recovered, though due to inflation, they remain well below historic peaks. Likewise, Las Vegas foreclosure rates have fallen but they remain high by national standards. Around one in a thousand homes are foreclosed on each month.

Las Vegas Housing Prices Are Rising Slowly but Surely

The wide-open deserts around Las Vegas constrain the Las Vegas real estate market. The federal government owns the vast majority of the state. The Clark County government asked the federal government to allow them to take over 38,000 acres of land and start building housing. Nevada Congressional delegation has to ask the Bureau of Land Management, and they may take years to give their permission if they ever do.

This means that Las Vegas is surrounded by a lot of open lands, but it cannot simply expand to meet demand. This will continue to drive up prices in the Las Vegas housing market. We don't think the Las Vegas housing market is set up for a bust because it isn't overheating. The home values have gone up 1.8% over the past year. That's a healthy growth rate, whereas double-digit price increases are unhealthy. This rate is skewed by the number of new luxury homes coming onto the market and the constant churn at the high end of the market.

Las Vegas Is Landlord Friendly

Unlike many other Western states, the Las Vegas real estate market is landlord-friendly. It isn't difficult to evict non-paying tenants from Las Vegas investment properties. In general, they have five days from the date rent is due to “cure” the problem or eviction can begin. The same time frame is used to correct issues like lease violations, after which the person can be evicted. After those five days, the case can go to court, and these are landlord-friendly. Rulings typically arrive the same day, after which point the tenant has one day to leave the premises.

Landlords don't have to pay interest on deposits. There are no limits on late fees, though the late fees due must be spelled out in the rental agreement. There is no payment grace period set by state law. All of this adds up to the Las Vegas real estate market being a paradise for landlords.

Update: On July 1st, 2019, a new tenant protection legislation named SB 151 officially went into effect. It provides tenants with more time to deal with the consequences of eviction after they have had an eviction notice posted on their homes. They will now have seven judicial days to pay their rent or quit. The previous time frame was five calendar days.

For landlords, this new housing legislation also enables them to utilize an attorney or agent to prosecute the eviction action on their behalf. They will now need to go find a permitted eviction process server to carry out these tasks. Those who oppose SB 151 claim that giving tenants more time to go through the eviction process, will make it more difficult for owners to get their properties back on the rental market.

Las Vegas Job Market Attracts People

The Las Vegas job rate has ranged from half a point to a full point above the national unemployment rate. However, that's better than the unemployment rate in Arizona, Salinas, or the San Fernando Valley. And it is places like that sending de facto refugees to Las Vegas. The diverse economy of Las Vegas includes low-skill but good-paying jobs in entertainment, hospitality, and services. It draws thousands of new residents each year. This growth, coupled with its unusual economic basis, has made Las Vegas one of the wealthiest cities in the country.

Since the 1990s, Las Vegas has had one of the fastest-growing employment bases in the country, benefiting from a large labor pool and a favorable business climate. These conditions enabled city promoters to entice businesses of all kinds to choose Las Vegas over California. Every job-killing regulation in California drives businesses to Oregon and Nevada, too, taking jobs with them. This explains why future job growth for the next ten years is expected to be nearly 40%, well over the 33% expected for the nation as a whole. A growing supply of jobs will propel the demand for the Las Vegas housing market.

Las Vegas Rent Prices Are On the Rise

During the Great Recession, Las Vegas went from a fifth of its residents renting to nearly two-fifths. As the job market and personal credit improved, the area is back to having around 19% of residents choosing to rent. However, rents are on the rise. While homes are being built, many people are unable to afford them. This is because the developers who survived the Great Recession are maximizing their profits by building luxury homes, not the affordable homes that many want.

Due to an improving local economy and ongoing population growth, the demand for apartments remains strong in Southern Nevada. For those who can afford Las Vegas investment properties, this guarantees a large rental population that isn't going to be able to afford the new upscale properties that are coming onto the market.

As of November 06, 2022, the average rent for a 1-bedroom apartment in Las Vegas, NV is currently $1,290. This is an 8% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Las Vegas decreased by -1% to $1,099. The average rent for a 1-bedroom apartment decreased by -4% to $1,290, and the average rent for a 2-bedroom apartment decreased by -1% to $1,549.

  • Two-bedroom apartment rents average $1,549 (a 7% increase from last year).
  • Three-bedroom apartment rents average $1,965 (a 1% decrease from last year).
  • Four-bedroom apartment rents average $2,400 (a 5% increase from last year).

The Las Vegas real estate market is a great place to invest in real estate in 2022 based on these trends. There was a short-term decline in the rents but they are rising back. The unemployment rate is also decreasing so it is a great time to snatch up hot real estate deals by selecting the best neighborhoods.

Another report, issued by the Nevada State Apartment Association (NVSAA) shows that Southern Nevada’s apartment market is starting to stabilize, with rents projected to rise more slowly this year than previously projected. The report, produced by the NVSAA based on data provided by CoStar, predicts that apartment rents in Southern Nevada will increase by more than 20 percent from the end of the first quarter of 2022 to the end of the same quarter one year later. The average monthly rent in the first quarter was $1,451, up from $1,198 a year earlier.

Meanwhile, local apartment vacancy rates remain stable, with the average vacancy rate during the first quarter of 2022 at 5.4%. That’s up 0.3% from the same time in 2021. Local apartment construction is also on the rise, with the industry projected to catch up with demand by the end of 2022. The report showed more than 7,000 new local apartment units under construction through the first quarter, compared to about 3,800 units during the same time last year.

The average size for a Las Vegas apartment is 893 square feet with studio apartments being the smallest and most affordable, 1-bedroom apartments are closer to the average, while 2-bedroom apartments and 3-bedroom apartments offer more generous square footage. You can, of course, charge much more for a three or four bedrooms single-family home than an apartment.

The most affordable neighborhoods in Las Vegas are Beverly Green, where the average rent goes for $1,061/month, Crestwood, where renters pay $1,061/mo on average, and Francisco Park, where the average rent goes for $1,061/mo. Other good neighborhoods for affordable rentals include Hillside Heights ($1,061), Huntridge Park ($1,061), and John S. Park ($1,061), where the asking prices are below the average Las Vegas rent of $1,471/mo.

The most expensive neighborhoods by Average Rent are:

Las Vegas Neighborhood Average Rent
Mountain Trails $2,591
Sun City $2,591
The Hills $2,591
Red Rock $2,438
Amber Hills $2,335
The Canyons $2,125
The Crossing $2,125
Paradiso $2,036
Summerlin Village $2,036
The Paseos $2,036

California's Loss Is Nevada's Gain

A $475,000 median price may be steep if you're coming from the heartland where a mid-market home costs $150,000 to $200,000. However, tax refugees from California flooding into Nevada find that same house to be an outright bargain compared to the $781,050 price for a comparable property in Los Angeles.

Southern Nevada is one of the cheaper metropolitan areas in the United States, and it is a fraction of the cost of living in California on nearly every front. This explains why you see so many California license plates in Vegas and why it costs $120 to rent a moving truck to go from Vegas to San Francisco but $2000 to come to Las Vegas.

As per the data by Lasvegasrealestate.org, the luxury home market has expanded as 30% of buyers are moving from California to take advantage of Las Vegas' low cost of living. Even the most expensive custom homes from builders such as Blue Heron are found to be a bargain for out-of-state buyers and investors.

Possibly our second-largest market is retiree buyers in 55+ Communities who enjoy the weather, health care, and activities that only Las Vegas can combine in one city at a value not matched in any major city anywhere in the USA.

Nevada Is the Ultimate, Low Tax Locale

While those who own Las Vegas investment properties will need to pay their mortgage if they don't pay cash for the property and ongoing expenses like maintenance and insurance, Nevada offers very low taxes. There is no state income tax.

Nevada's property tax rates are among the lowest in the U.S. The state's average effective property tax rate is just 0.69%, which is well below the national average of 1.08%. Homeowners in Nevada are protected from steep increases in property tax bills by Nevada's property tax abatement law, which limits annual increases in property tax bills to a maximum of 3% for homeowners.

Thus, even if home values increase by 10%, property taxes will increase by no more than 3%. The taxable value of a property is calculated as the cash value of the land (the amount the land alone would sell for on the market), and the replacement cost of all buildings minus depreciation of 1.5% per year since construction.

The assessed value is equal to 35% of that taxable value. Thus, if your County Assessor determines your home's taxable value is $100,000, your assessed value will be $35,000. Tax rates apply to that amount.

There are numerous tax districts within every Nevada county. Hence, when comparing between counties, it is useful to look at average effective rates. Clark County contains almost 75% of the state's residents and includes Las Vegas. The average effective property tax in the county is 0.70%, slightly higher than the statewide average, but still significantly lower than the national average.

If you're planning to buy in Nevada, the most common type of home loan is a 30-year fixed-rate mortgage. This option gives you plenty of time to pay back the loan and your interest rate remains the same for the duration of the loan's life unless you refinance. You can also consider a 15-year fixed-rate mortgage.

It allows you to pay off your loan quicker and comes with a lower interest rate, but your monthly payments will be higher. As we write this, the average Nevada rate for a fixed 30-year mortgage is 3.46%, and for a fixed 15-year mortgage it is 2.83%.

Nevada Real Estate Investment Markets

Las Vegas is a shining beacon in the desert for those fleeing California or simply hoping to make it big. Many others simply come to earn a living serving the many tourists who visit here each year or work at the firms relocating to this tax haven. All of this gives the Las Vegas real estate market a bright future.

According to PwC's annual real estate report, the Las Vegas housing market will enjoy a population growth rate that is well above the national growth rate. This is a continuing trend as data from the US Census Bureau shows a net migration of 6.46% from 2012-2016.

This earned the Las Vegas real estate market a spot among the best places that people were moving to in 2018. The city will hold this title well into 2020 according to the forecast. Good cash flow from Las Vegas investment property means the investment is, needless to say, profitable.

A bad cash flow, on the other hand, means you won't have money on hand to repay your debt. Therefore, finding the best investment property in Las Vegas in a growing neighborhood would be key to your success. If you invest wisely in Las Vegas real estate, you could secure your future. The best investment is now looking for a rental property that will generate good cash flow.

Your best tenants would be retirees who intend to relocate to Las Vegas and want to purchase property to rent out. The running costs for owning and managing a Las Vegas rental property should not be high. A cheaper neighborhood in Las Vegas might not be the best place to live in.

A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals such as duplex and triplex in Class A neighborhoods.

The inventory is low, but opportunities are there. There are 50 neighborhoods in Las Vegas. The Paseos has a median listing price of $666.9K, making it the most expensive neighborhood (Realtor.com). Sunrise is the most affordable neighborhood, with a median listing price of $152K.

Some of the most popular neighborhoods in Las Vegas are Paradise, Enterprise, and Spring Valley. Here you'll find the maximum no. of listings. In Spring Valley, Las Vegas, NV, the home prices range from $44.9K – $18.5M while rental properties are within a range of $795 – $11K.

Even as Las Vegas home prices have reached new heights, the market remains attractive to residential real estate investors. As they continue to compete for potential investment properties at the lower end of the market, the challenges for first-time homebuyers will remain. Millennial homebuyers can't outbid real estate investors and hence end up renting.

As with any real estate purchase, act wisely. Evaluate the specifics of the Las Vegas housing market at the time you intend to purchase.

There are many other markets near Vegas, that you can choose for real estate investing. As a result of an influx of companies and jobs in Northern Nevada, strong housing demand continues to put pressure on the available supply. The Reno real estate market is ideal for investors for several reasons. Supply is limited, and demand is growing.

Rental rates are driven by several competing markets that aren't going to slow down any time soon. Forget owning a couple of condos in Las Vegas and invest in a more affordable, stable real estate market like Reno. Good cash flow from Reno investment properties means the investment is, needless to say, profitable. A bad cash flow, on the other hand, means you won't have money on hand to repay your debt.

Nevada Out of State Investment Opportunities  

On the east of Nevada lies the state of Utah, where you can consider investing in Salt Lake City. The Salt Lake City real estate market was ranked one of Millennials' toughest real estate markets due to limited supply relative to demand. Salt Lake is a “slightly hot” real estate market at the moment.

The economy is strong and the city achieves the lowest unemployment rate at 2.1%. The median days on market is 30.5 days, with inventory moving 6 percent faster than last year and 30.5 days faster than the U.S. overall. Home prices in Salt Lake City are expected to rise by record levels in 2020. A strong job market and a robust economy have contributed to the rising housing costs over the past seven years.

Ogden is another good and affordable real estate market in the neighboring state of Utah. The Ogden housing market is appreciating because people move here for work as often as they do live. For example, there are many good-paying jobs in the IT, life sciences, aerospace, and outdoor products manufacturing industries. There are civil service jobs with the state tax office and the local hospital. And then there's the college. This is on top of Utah's employment growth rate of roughly 3 percent a year.

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Las Vegas.

Not just limited to Las Vegas or Nevada but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We're standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Las Vegas turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.

Latest Market Data, Trends, and Statistics
https://www.lasvegasrealtor.com
http://myresearcher.com/glvar-section-new
https://www.zillow.com/las-vegas-nv/home-values
https://www.lasvegasrealestate.org
https://www.littlebighomes.com/real-estate-las-vegas.html
https://www.neighborhoodscout.com/nv/las-vegas/real-estate#description
https://www.realtor.com/realestateandhomes-search/Las-Vegas_NV/overview
https://summerlincommunities.com/las-vegas-real-estate-market-update-august-2020/

LAS VEGAS' ECONOMIC & JOB GROWTH INDICATORS
https://en.wikipedia.org/wiki/Las_Vegas
https://downtown.vegas/visitors-guide/fun-facts

Low taxes
https://smartasset.com/taxes/nevada-property-tax-calculator
Geographical constraints
https://www.reviewjournal.com/news/politics-and-government/clark-county/clark-county-unveils-land-proposal-draws-ire-from-groups

Price growth
https://www.mashvisor.com/blog/las-vegas-housing-market-2019
https://knpr.org/knpr/2018-09/las-vegas-housing-booming-does-mean-another-bust-horizon
https://thenevadaindependent.com/article/las-vegas-appears-to-be-entering-a-steady-housing-market
https://www.forbes.com/sites/forbesrealestatecouncil/2018/07/17/why-las-vegas-luxury-real-estate-is-the-next-big-market-boom/#7b20b1c41543

Landlord friendly
https://www.costellomgmt.com/landlord-tenant-laws-nevada
http://lasvegasgleaner.com/the-rent-is-too-damned-highhttps://www.avail.co/education/laws/nevada-landlord-tenant-law

Loss of California
https://www.ktnv.com/news/nevada-sees-population-boost-as-people-leave-california-in-droves

California refugees
https://finance.yahoo.com/news/hottest-housing-market-2018-163701109.html
https://www.ktnv.com/news/nevada-sees-population-boost-as-people-leave-california-in-droves

Job Market
https://patch.com/california/encino/map-unemployment-rate-drops-in-state-in-may
https://www.sacbee.com/latest-news/article213798654.html

Foreclosure rates
https://www.reviewjournal.com/business/housing/las-vegas-foreclosure-rate-dropping-still-among-highest
https://www.realtytrac.com/statsandtrends/foreclosuretrends/nv/clark-county/las-vegas

Denver Housing Market: Prices, Trends, Forecast 2022 & 2023

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Is Denver Housing Market Cooling Off?

Is the Denver housing market moving in favor of buyers in 2022? As the Denver Metro Housing Market continues to evolve, this blog will keep you up-to-date. The market stats for October continue to indicate that the Denver housing market is no longer in flux. The real estate market has become more balanced, according to DMAR. As the Denver market returns to normalcy, active inventory fell slightly to 7,290 properties on the market at the end of October.

However, this represents a 115.94 percent gain year on year. While there appears to be an increase, the current inventory is still lower than the pre-pandemic inventory of 8,557 active listings in October 2019. Rising inflation and interest rates are clearly altering the market picture, as evidenced by a 26.73 percent drop in new listings from the previous month and a 27.92 percent drop year over year. As a result, average and median sales prices in Denver Metro fell for the first time this month.

However, sale prices have risen in the previous two years, and as a result, the market is way ahead of historical appreciation criteria of where the Denver market should be if the pandemic-fueled purchasing frenzy had not occurred. Overall, while prices have flattened, the historical appreciation seen by sellers cannot be overlooked. The median MLS days increased 240 percent from five days last year to 17 days this year as pricing was adjusted.

While this number grows, many homes on the market are priced based on peak market activity, making them overpriced for the present market. These homes have inflated prices that the market rejects, increasing MLS days. These properties are sold after price adjustments or withdrawal from the market.

<<<READ: Colorado housing market forecast & trends>>>

According to DMAR's Luxury Market Report (properties sold for $1 million or greater), the number of new listings and closings decreased dramatically, and the close-price-to-list-price ratio increased from the previous month. Throughout the month, listings decreased by 28.69 percent compared to the previous month. While supply did drop dramatically, the number of closed properties decreased by 31.52 percent compared to September.

The Denver housing market is shifting to a balanced market. Home prices will either remain stable or fall. As economic uncertainty keeps some buyers at home, the market is becoming more balanced. All significant statistical indicators point to a market slowdown in the Denver area. A market with three to six months of inventory is considered balanced. A market with more than six months of inventory is considered a buyer's market.

The months of inventory for single-family detached residences is 3.43, while attached properties have a month of inventory of 3.08. The Luxury Market offers the most months of inventory of any price range. This shift indicates that the demand for this sort of property has declined proportionally more than the supply. Buyers now have more negotiating leverage when it comes to appraisal and inspection disagreements, thanks to the extra months of inventory.

Are Denver Home Prices Dropping in 2022?

Denver Housing Market's Quarterly House Price Appreciation: The FHFA House Price Index (FHFA HPI®) is an indicator of typical house price inflation in the United States. It is a broad measure of the movement of single-family house prices at various geographic levels. It indicates that home prices increased by 17.5 percent in the Denver-Aurora-Lakewood Metropolitan Statistical Area over the past year. Prices also rose 2.6 percent over the last quarter (as of 2022 Q2).

The Denver Metro Association of REALTORS® (DMAR) published its October Market Trends Report which demonstrated that it was yet another record-breaking month but only in two categories. In this report, the DMAR Market Trends Committee examined the various records broken last month.

Metropolitan Statistical Area (MSA) reports show housing market statistics that focus on the Denver metro region with a relatively high population density at its core and close economic ties throughout the area. It includes Greater Denver Metro Area Counties: Adams, Arapahoe, Boulder, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park. Here are the numbers for July 2022 compared with July 2021.

Median Home Price in Denver 2022

  • (Residential) $566,000 represents the highest October on record. The previous record was in 2021 ($534,700).
  • (Detached) $622,490 represents the highest October on record. The previous record was in 2021 ($584,500).
  • (Attached) $405,000 represents the highest October on record. The previous record was in 2021 ($375,000).

Average Home Price in Denver 2022

  • (Residential) $661,335 represents the highest October on record. The previous record high was in 2021 ($611,076).
  • (Detached) $738,145 represents the highest October on record. The previous record high was in 2021 ($684,141).
  • (Attached) $479,119 represents the highest October on record. The previous record high was in 2021 ($440,036).

As of November 06, 2022, the average rent for a 1-bedroom apartment in Denver, CO is $1,690. This is a 0% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Denver decreased by -5% to $1,389. The average rent for a 1-bedroom apartment decreased by -2% to $1,690, and the average rent for a 2-bedroom apartment decreased by -2% to $2,250.

  • The average rent for a two-bedroom apartment in Denver is $2,250, a 2 percent rise over the previous year.
  • The average rent for a three-bedroom apartment in Denver is $2,795, an 8 percent rise over the previous year.
  • The average rent for a four-bedroom apartment in Denver is $2,930, a 5 percent rise over the previous year.

Denver Real Estate Market
Data by DMAR. Forecast from multiple sources.

Denver Market Trends Showing Month-Over-Month %Change

Denver housing market trends
Source: DMAR

Denver Housing Market Forecast 2022 and 2023

The Denver real estate market predictions for 2022 & 2023. Interest rates remained low and buyer demand remained consistently high throughout 2021. According to DMAR, more homes were purchased last year, totaling 63,684, than in any previous year. While demand was at an all-time high, new listings on the market fell 5.26 percent throughout the year.

At the start of January 2022, the Denver Metro area had only 1,477 active properties on the market, which is 11,175 fewer than normal. Due to sustained demand for housing and a lack of inventory, the market is expected to experience double-digit appreciation in 2022. It will be the first time since 2015-2016 and 1998-2000 when Denver saw back-to-back years of double-digit appreciation.

Denver has a track record of being one of the best long-term real estate investments in the U.S. Let us look at the home price appreciation trends recorded by Zillow over the past few years. Denver's strong economy gives buyers the ability to spend more on housing, consequently increasing real estate prices.

Home values rose so much over the past six or seven years that affordability became an issue for a person earning the median income in this area. But in 2019, it experienced a cooling trend where home values appreciated by a mere 1%. The year ended with an average home price of $486,695 and a median of $420,000. This was up less than three percent from 2018, but up almost 90 percent from 2010.

Zillow Home Value Index — The typical home value of homes in the Denver-Aurora-Lakewood Metro is currently $622,544. It indicates that 50 percent of all housing stock in the area is worth more than $622,544 and 50 percent is worth less (adjusting for seasonal fluctuations). Denver home values have gone up 11.6% in the last twelve months. Denver is currently a moderate seller's real estate market.

  • Typical Home Values: $622,544 (September 30, 2022)
  • 1-year Value Change: +11.6%
  • 1.007 Median sale-to-list ratio (August 31, 2022)
  • 48.2% Percent of sales over list price (August 31, 2022)
  • 30.6% Percent of sales under list price (August 31, 2022)
  • 12 Median days to pending (August 31, 2022)

NeighborhoodScout.com's data shows that in the past 10 years Denver real estate appreciated by nearly 146.94%. This amounts to an annual real estate appreciation of 9.46%, which puts Denver in the top 10% nationally for real estate appreciation.

Here is the latest housing forecast for the Denver MSA. Denver could become a buyer’s market by mid-2023. It is now a neutral market with prices getting softer. The second half of the year is seeing a return to normalization. Higher interest rates are already translating to more inventory, lower or flat prices, and longer days in the MLS.

  • Denver-Aurora-Lakewood Metro home values have gone up 11.6% over the past year.
  • Zillow forecasts that Denver home values are expected to rise by 1% between September 2022 to September 2023.

Denver housing market predictions
Credits: Zillow.com

In conclusion, we can say that these numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller? Denver Metro Area is still a seller’s market across the board but the historically low mortgage interest rates did help buyers as far as housing affordability is concerned.In a balanced real estate market, it would take about six months for the supply to dwindle to zero. In terms of months of supply, Denver can become a buyer's real estate market if the supply increases to more than six months of inventory. Months Supply of Inventory in the metro Denver housing market is still low as compared to a glut of buyers. However, it is shifting towards a more balanced housing market in 2023. Nationally, the houisng market is also cooling off from its pandemic-induced peak.

Is Denver a Good Place to Invest in Real Estate?

Should you consider Denver real estate investment? You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2023. Denver is ranked as the country's 16th-most walkable city, with 600,158 residents. It has some public transportation and is very bikeable. Downtown is the most walkable neighborhood in Denver with a Walk Score of 93.

As per Neigborhoodscout.com, a real estate data provider, one and two-bedroom single-family detached are the most common housing units in Denver. Other types of housing that are prevalent in Denver include large apartment complexes, duplexes, rowhouses, and homes converted to apartments. Single-family homes account for about 40-45% of Denver's housing units.

Denver ranked 13th for overall real estate investment and development, according to some 3,000 industry professionals surveyed and interviewed by the Urban Land Institute and PwC. Survey respondents viewed Denver's housing market even more favorably, collectively ranking it ninth overall.

Of greater importance to real estate investors in Denver is that the area is growing in population. The jobs are increasing and so are the number of renters. It is the largest and capital city of Colorado, home to roughly 700,000 people. The Denver metropolitan area is home to around 2.7 million people. The population has increased by 1.33% since 2019. The Denver-Aurora, Colorado statistical area is home to about three and a half million people.

It has a low unemployment rate of 3% unchanged from 3.30 last month and down from 6.70% one year ago, according to the U.S. Bureau of Labor Statistics. A third of the population of the Denver metro area rents. All these are excellent signs of investors looking to buy a rental property in Denver. Despite the recent cooling off, there are several reasons to consider a long-term investment in the Denver real estate market.

Shortage of housing for a growing population, a strong economy & increasing jobs have been fueling the demand in the Denver housing market for the past many years. Denver is a key trade point for the country, and home to several large corporations in the central United States. It was named 6th on Forbes Magazine’s “Best Places for Business and Careers.” Denver South is home to 7 Fortune 500 companies. It is also home to mining and energy companies such as Halliburton, Smith International, Newmont Mining, and Noble Energy.

Let’s take a look at the number of positive things going on in the Denver real estate market which can help investors who are keen to buy an investment property in this city. We’ll address the biggest factor pulling people to the Denver housing market next.

How Was the Housing Market in Denver Last Year?

Two numbers stood out most: low inventory and skyrocketing prices. The lack of supply, combined with strong demand, drove record price gains. In 2021, the Denver metro averaged $612,274, a 16.68 percent gain over 2020. Prices reached a new all-time high and represented the tenth consecutive year of upward growth. The previous high point for percentage growth occurred in 2000 when it reached 15.77 percent. Those that followed the median price rise saw a 16.67 percent increase in 2021, nearly equal to the change in the average closed price.

Months of inventory (or MOD) is another strong indicator of market direction because it takes both active and closed listings into account. MOI was 0.56 on an annual average basis in 2021. A new record low, surpassing 2020's MOI of 1.21. 2012 was the last year in which Denver averaged greater than 2.0 MOI. The traditional period of four to five months is no longer adequate in light of current trends. As we settle into the new normal, the present market is heavily skewed in favor of the house seller.

Based on the market's sustained demand for housing and a lack of inventory, the market is expected to appreciate by double digits in 2022, which it hasn't seen in back-to-back years since 2015-2016 and 1998-2000. According to DMAR, there are a few elements that will determine if house prices continue to accelerate. The first consideration is supply and demand. At the start of January 2022, there are 41.87 percent fewer residences on the market than there were in January 2021.

The second aspect is that conforming loan ceilings in the Denver metro area increased to $684,250. This is $37,050 more than the applicable national conforming limits. This indicates that the majority of purchasers may acquire a $750,000 property with a 10% down payment without incurring a large loan. However, forecasts for the next year are divided between those who believe that already high prices and rising mortgage rates will price many buyers out of the market and those who believe that limited supply will fuel another year of double-digit price growth.

The median price of a single-family home sold in December was $599,900, which was flat with November's median price and represents a 19.34% increase from last December. The average closing price was $705,753, a 0.25 percent increase from November and a 15.61 percent increase from the previous year. The attached and detached segments both had close-price-to-list-price ratio averages of 101.24 and 101.66 percent respectively. A high list-to-sell ratio indicates a healthy real estate market in which buyers and sellers negotiate less over the sales price.

A third of the Denver metro area rents. Since housing inventory is scarce, prices are going up much faster than wages, and the younger population is more comfortable renting than owning, the Denver housing market is seeing a rapid rise in its rental market. The sheer demand for housing stock is making it profitable to break up large homes into multiple apartments.

Denver remains more expensive than other Colorado cities, including Fort Collins and Colorado Springs, and other major metro areas such as Phoenix and Charlotte, but considerably below California-based rent leaders and more. If Forbes could recommend this as a Denver real estate market investment strategy in 2016, it can be seriously considered today.

They said that any single-family home in the Denver housing market could be considered a good rental property due to the rapid rise in home prices. Denver Has A Large Student Population For Rental Homes. The college market presents a unique opportunity for landlords. There is a constant stream of people who will only rent unless they choose to stay after graduation. They may rent a while longer before feeling secure enough to buy a house.

Buying investment real estate in a college town is high risk. After all, when a college like Evergreen State scares off students or simply fails to attract them like many classics, private liberal arts schools that found themselves rendered redundant after brand-name schools opened their doors, there’s less demand for the rental of the house as a permanent residence.

You don’t have that problem in Denver since there are so many colleges in the Denver area. Schools range from the massive community college network to the 400-student Bel-Rea Institute of Animal Technology. American Sentinel University in Aurora is home to 2600 students, while the Metropolitan State College of Denver has more than 20,000 students.

The Colorado School of Healing Arts has only 100 students, while Colorado Christian University has more than 7000. Yes, the Denver real estate market for those who want to cater to students is diverse. You could invest in rental real estate near any of these colleges, knowing you could rent or sell to people that simply want to live in the area if student demand slacks off.

Denver Rent Prices Are Going Up

Dense urban areas are seeing weaker rental prices and drops in average rents, while some suburban sunbelt areas project small increases in rents. The main reason is working people relocating to less expensive and less dense areas. The August 2022 Rent Report from Apartment List reveals that Denver rents increased over the past month.

Denver rents have increased 0.8% over the past month, and are up sharply by 8.8% in comparison to the same time last year. Currently, median rents in Denver stand at $1,443 for a one-bedroom apartment and $1,785 for a two-bedroom. This is the sixth straight month that the city has seen rent increases after a decline in January. Denver's year-over-year rent growth lags the state average of 10.0%, as well as the national average of 12.3%.

Throughout the past year, rent increases have been occurring not just in the city of Denver, but across the entire metro. Of the largest 10 cities that we have data for in the Denver metro, all of them have seen prices rise. Here's a look at how rents compare across some of the largest cities in the metro.

  • Englewood has seen the fastest rent growth in the metro, with a year-over-year increase of 13.8%.
  • The median two-bedroom there costs $1,827, while a one-bedroom goes for $1,186.
  • Parker has the most expensive rents of the largest cities in the Denver metro, with a two-bedroom median of $2,235; rents increased 1.3% over the past month and 10.6% over the past year.
  • Aurora has the least expensive rents in the Denver metro, with a two-bedroom median of $1,695; rents grew 0.8% over the past month and 11.8% over the past year.

Compared to most other large cities across the country, Denver is less affordable for renters.

  • Rents increased sharply in other cities across the state, with Colorado as a whole logging rent growth of 10.0% over the past year.
  • For example, rents have grown by 12.8% in Fort Collins and 7.0% in Colorado Springs.
  • Denver's median two-bedroom rent of $1,785 is above the national average of $1,358.
  • Nationwide, rents have grown by 12.3% over the past year compared to the 8.8% rise in Denver.
  • While Denver's rents rose sharply over the past year, many cities nationwide also saw increases, including San Diego (+17.6%), Charlotte (+17.2%), and Austin (+14.6%).
  • Renters will generally find more expensive prices in Denver than most other large cities.
  • For example, Charlotte has a median 2BR rent of $1,496.

The “Zumper Denver Metro Area Report” analyzed active listings last month across the metro cities to show the most and least expensive cities and cities with the fastest growing rents. The Colorado one bedroom median rent was $1,508 last month. Boulder ranked as the most expensive cities with one bedrooms priced at $1,940 whereas Laramie was the most affordable city with one bedrooms priced at $680.

The best place to buy rental property is about finding growing markets. Cities like Longmont & Lakewood are good for investors looking to get started with rental property ownership at an affordable price. These trends provide a macro look at the growing rental demand. Each real estate market has its own unique supply-demand dynamics with unique neighborhoods that present their own opportunities for investors.

These cities look good for rental property investment this year as rents are growing over there.

The Fastest Growing Cities For Rents in the Denver Metro Area (Y/Y%)

  • Loveland had the fastest growing rent, up 24.6% since this time last year.
  • Fort Collins saw rent climb 17.7%, making it second.
  • Longmont ranked as third with rent increasing 16.3%.

The Fastest Growing Cities For Rents in the Denver Metro Area (M/M%)

  • Loveland had the largest monthly growth rate, up 6.3%.
  • Boulder rent climbed 6% last month, making it the second fastest growing.
  • Greeley was third with rent increasing 4%.

Denver rent prices 2022
Source: Zumper

Denver Is Relatively Landlord-Friendly

Colorado is relatively landlord-friendly; compare it to the West coast, and it is a landlord’s dream. You don’t have to give tenants notice that you’re entering a property. You can quickly begin evictions if they haven’t paid the rent. That protects your investment in the Denver housing market. There’s no limit on late fees.

There are no state laws that prevent you from rekeying the locks after evicting them. If they violate the lease, give them formal notice. The tenants then have 72 hours to correct the issue or move out. If they don’t comply with notices, then you can go to court. If the court agrees with you, the sheriff gives the tenants 48 hours to move out before forcing them out.

Denver's Limited Room to Grow Keeps Housing Supply Tight

Many of the fastest-growing markets in the US are along the Front Range, a part of the Southern Rocky Mountains. While there are houses in the hills, it is a lot harder to build on the mountainous landscape than on flat plains. In Denver’s case, the massive national forests and Rocky Mountain Park to the west of Denver and its suburbs prevent the expansion of the Denver housing market in that direction. This keeps home prices higher than they’d be in places like Dallas.

The residential median home price in Denver hovers around $530K. That’s a steal for the migrants from California, but the sheer numbers of them coming in is pricing locals out of the housing market. The median monthly rent here – and that includes one-bedroom apartments – is around $1100 a month. Note that you could get much more for a spacious single-family home for rent or a large condo. With a 3 bedroom detached single-family home, you could receive well over $2000 per month in rent. You’ll find strong ROI numbers for the Denver real estate market.

Denver's Quality of Life

We can joke about the people who moved to Colorado decades ago, inspired by the movie “Rocky Mountain High”. We’re not going to joke about the over-hyped medical marijuana industry there today. U.S. News & World Report published its list of the “150 Best Places to Live in the U.S.,” and four of the top five cities are right here in Colorado: Boulder (1), Denver (2), Colorado Springs (4), and Fort Collins (5). Denver was the second-best city to live on that list.

The area was a little lower on value than many like, but it ranked high on jobs, quality of life, and desirability. It is a beautiful city to live near the mountains – located on the western edge of the exquisitely beautiful High Plains. It is exactly one mile high above sea level and has the largest city park system in the nation, with 14,000 acres of mountain parks and 2,500 acres of natural areas.

That isn’t enough on its own to draw huge numbers of people to the Denver real estate market, but it is a factor. It has become the 19th-most populous city in the nation. The metro area population of Denver (as of 2020) is 2,827,000, a 1.33% increase from 2019 (Macrotrends.net).

Denver was ranked as a Beta world city by the Globalization and World Cities Research Network. It has been one of the fastest-growing major cities in the United States, and real estate investments provide a direct way to participate in the strong growth of these economies. The strength of the overall economy significantly impacts the real estate market.

Denver's Strong Economy & Jobs Boost Its Housing Market

Job growth directly affects the real estate market. Demand for all types of real estate increases with the number of local jobs, as during periods of economic development or boom. Jobs are a major reason why people move to Denver in the first place. Denver’s unemployment rate has been well below the national average for years.

In June 2022, Denver MSA had unemployment rate was 3.3%, lower than the national average of 3.7%. Over the past 25 months, Colorado has added 410,300 nonfarm payroll jobs, compared to losses totaling 374,500 in March and April 2020. That translates to a job recovery rate of 109.6 percent, which exceeds the U.S. rate of 96.3 percent.

Forbes ranked Denver as the number one Best Place for Business and Careers in 2015. Additionally, the magazine placed Denver 16th for employment growth and 20th for education. When one considers the huge oil and government sectors, as well as the rapidly expanding aerospace and technology businesses, it's no surprise that Denver is seeing such a big job boom.

The National Renewable Energy Laboratory contracts for research and development while companies such as Halliburton profit from a profitable oil play. Aerospace and technology positions are available at Ball Aerospace, Raytheon, and Lockheed-Martin, whilst software engineers are in demand at Rocket Software, StorageTek, and Sun Microsystems.

That explains why Denver is one of the top cities for in-migration, attracting people from all over the state as well as the country. Due to its proximity to the mineral-rich Rocky Mountains, Denver has long been a home for mining and energy companies such as Halliburton, Smith International, Newmont Mining, and Noble Energy. The top 25 employers in Metro Denver include government and municipal organizations, and corporations.

Denver Technological Center, better known as The Denver Tech Center or DTC, is a business and economic trading center located in Colorado in the southeastern portion of the Denver Metropolitan Area, within portions of the cities of Denver and Greenwood Village. It is home to several major businesses and corporations.

The U.S. Government is the largest employer in Metro Denver. The Department of the Interior includes such agencies as the Bureau of Land Management, Office of Surface Mining and Reclamation, and Bureau of Reclamation, and all have offices in or near the Denver Metro area. Another top employer in the Denver Metro Area is the State of Colorado.

It employs nearly 30,000 people in the Denver Metro area. As the capital and largest city in the state, Denver hosts the State of Colorado in multiple locations. Centura Health is one of the top 25 employers in the metro Denver area. Its massive health care network includes 15 hospitals, eight affiliate hospitals, health neighborhoods, health at home, urgent care centers, emergency centers, mountain clinics, 100 plus physician practices, and clinics and Flight for Life Colorado.

Denver is well known for its proximity to the Rockies. Other attractions in the area include but are not limited to the Denver Zoo and the Denver Botanic Gardens. Many of those 30 million tourists would love to have rented a house or apartment for their visit instead of a hotel. Then there’s the business traveler. Denver hosts around 80 conventions a year, too.

Whether someone is staying for a week for a convention or working a contract job in the tourism industry, this drives demand for short-term rentals that can be incredibly profitable. Renting on sites like Airbnb is legal if you have a business license, though around half of the Airbnb rentals are thought to be violating that rule. Denver is particularly progressive with allowing people to rent out their homes and apartments on Airbnb, though landlords may not agree with it.

Known Areas of Redevelopment

You don’t want to invest in the Denver housing market and end up losing money because the neighborhood is going downhill. Conversely, areas slated for redevelopment will almost certainly go up. And Denver has known and planned for areas of redevelopment. Downtown Denver saw multiple infill projects downtown ten years ago. Redevelopment is planned around Elitch Gardens today.

Key trade point for the country – Denver is home to several large corporations in the central United States. Denver South is home to 7 Fortune 500 companies. Denver was named 6th on Forbes Magazine’s “Best Places for Business and Careers.” Home for mining and energy companies such as Halliburton, Smith International, Newmont Mining, and Noble Energy.

Denver's Demographic Momentum

At first glance, the average age of 36 for residents versus 40 for the national average doesn’t sound too promising. However, this long-established city has already been noted as a great place to retire. That pulls the average age up. The coolness factor and job market attract equal numbers of young adults. That is why Millennials make up about 22% of Denver’s population. And given the job market and quality of life, they’ll probably stay here to raise families, generating more demand for the Denver housing market.

Generation X made that decision, too, which is why roughly a quarter of residents are under the age of 20. Additions to the local labor force tend to drive rents and prices up on properties in the vicinity and result in the local construction of homes and apartments. That will propel the Denver real estate market for decades to come.

Denver Colorado Real Estate Investment Markets

Investing in Denver's real estate can be a worthy investment due to a steady rate of appreciation. There are many reasons why the Denver real estate market is going strong today and is certain to remain strong for years to come. You cannot afford to miss out on this growing and appreciating real estate market. Good cash flow from Denver investment properties means the investment is, needless to say, profitable.

On the other hand, a bad cash flow means you won’t have money on hand to repay your debt. Therefore, finding a good Denver real estate investment opportunity would be key to your success. Even as Denver home prices have reached new heights, the market remains attractive to residential real estate investors in the $300,000 to $399,000 price range. As they continue to compete for potential investment properties at the lower end of the market, the challenges for first-time homebuyers will remain.

The homebuyers won’t be able to outbid real estate investors and would end up renting. The high prices combined with the lack of higher gains have slowed down fixing and flipping investment properties in Denver. The best investment is now looking for a rental property that will generate good cash flow. Your best tenants would be the retirees who intend to relocate to Denver and want to purchase property to rent out. The three most important factors when buying real estate anywhere are location, location, and location.

The location creates desirability. Desirability brings demand. There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your Denver investment property and you should be able to flip it for a lump sum profit. The neighborhoods in Denver must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools, and shopping malls.

Some of the popular neighborhoods for buying a house or an investment property in Denver are Jefferson Park, Berkeley, Park Hill, Cheesman Park, Congress Park, Hilltop, Sunnyside, Capitol Hill, Highland, Platte Park, Stapleton, Reunion, Cherry Creek, Aspen, and Washington Park.

Denver housing prices are not only among the most expensive in Colorado but they are also some of the most expensive in all of the United States. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals such as duplex and triplex in Class A neighborhoods. As with any real estate purchase, act wisely. Evaluate the specifics of the Denver housing market at the time you intend to purchase. Hiring a local property management company can help in finding tenants for your investment property in Denver.

The inventory is low, but opportunities are there. According to Realtor.com, there are 69 neighborhoods in Denver, where properties are available for sale. If you think of investing in Denver, you have decided on a long-term investment property. Here are the ten neighborhoods in Denver having the highest real estate appreciation rates since 2000—List by Neigborhoodscout.com.

  1. Victory Crossing
  2. Stapleton
  3. Stapleton South
  4. Stapleton East
  5. Stapleton North
  6. Stapleton Southeast
  7. CBD
  8. Ballpark
  9. City Center
  10. W 14th Ave / Quitman St

Colorado Springs is another sizzling hot market for real estate investment in 2020. The Colorado Springs real estate market contains several large populations of renters, many practical reasons for people to move here from the surrounding area and across the country, and long-term factors that will drive growth for years to come. Forget the Mile High City and invest in the Colorado Springs real estate market.

Aurora is a fairly large city on the east side of Denver. Its proximity to Denver has long kept it in the realm of the Denver suburb. The Aurora real estate market 2020 is seeing rising prices & rents. Aurora, Colorado is more than a growing suburb. It is a large, thriving city in its own right. It has a bright future, and it is poised for rapid appreciation and increasing rental rates. This is a good time to invest in the Aurora real estate market.

Boulder real estate market is another good place to buy investment properties. Boulder is located in northern Colorado. The Boulder metro area is becoming a high-tech hub, driving up rental rates and property values. Others are lured here by the promise of high-paying jobs or attending school somewhere they can intern at Big Tech firms without paying a fortune. Boulder’s economy is stabilized by the presence of government research institutes and the proximity to Denver’s buzzing economy.

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Denver, Colorado.

Consult with one of the investment counselors who can help build you a custom portfolio of Denver turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best neighborhoods of Denver. Not just limited to Denver or Colorado but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Denver turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.

Let us know which real estate markets in the United States you consider best for real estate investing! 

This article shouldn't be used to make real estate or financial decisions. Some of this article's information came from referenced websites. Norada Real Estate Investments provides no express or implied claims, warranties, or guarantees that the material is accurate, reliable, or current. All information should be validated using the below references. Norada Real Estate Investments does not predict the future US housing market. This post educated investors on Denver real estate. Buying a rental property needs research, planning, and budgeting. Not all investments are good. Always do research and consult a real estate investment counselor.

REFERENCES

Market Data, Reports & Forecasts
https://www.recolorado.com
https://www.dmarealtors.com
https://www.zillow.com/denver-co/home-values
https://www.littlebighomes.com/real-estate-denver.html
https://www.recolorado.com/market-statistics/market-watch.aspx
https://www.realtor.com/realestateandhomes-search/Denver_CO/overview
https://www.zumper.com/blog/rental-price-data/
https://www.zumper.com/blog/denver-metro-report/

Best Neighborhoods for real estate
https://www.neighborhoodscout.com/co/denver/real-estate

Foreclosures
https://www.realtytrac.com/statsandtrends/co/denver-county/denver

Quality of life, Unemployment, Rent, Tourism
https://realestate.usnews.com/places/colorado/denver
https://denverrelocationguide.com/largest-employers-in-denver
https://www.mashvisor.com/blog/why-where-invest-denver-real-estate
https://www.denverpost.com/2014/12/16/denver-experiencing-its-best-convention-year-ever

Landlord friendly
http://www.landlordstation.com/blog/top-landlord-friendly-states
https://www.avail.co/education/laws/colorado-landlord-tenant-law

Short term rentals
https://crej.com/news/airbnb-31-billion-gorilla-room
https://businessden.com/2018/08/27/50-of-airbnb-landlords-ignore-denver-rules-taxes-in-booming-100m-industry

Growing rental market
https://www.5280.com/2017/04/everything-know-denvers-real-estate-market-wrong
https://www.forbes.com/sites/ingowinzer/2016/07/31/should-you-invest-in-denver-area-real-estate/#16f926277fc5

Redevelopment
https://denverinfill.com/home-old.htm
https://www.denverpost.com/2018/03/06/river-mile-denver-elitch-gardens-redevelopment/

Colleges
https://www.collegesimply.com/colleges-near/colorado/denver

Housing Market Forecast 2024 & 2025: Predictions for Next 5 Years

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Housing Market Predictions for Next 5 Years

Here's what some of the experts predict will happen in the housing market in the next five years. According to Zillow, the current typical value of homes in the United States is $357,589. United States home values have gone up 13.5% over the last twelve months and are predicted to rise by 1.2% by October 2023. Home values remained nearly flat from September to October (+0.1%), as buyers and sellers potentially settled on a new market equilibrium.

The housing market forecast remained generally unchanged in October, as the housing market continued to slow amid rising mortgage rates and broader economic uncertainty. Zillow projects home values remain flat through the end of the year, and increase by 1.2% in the twelve months ending October 2023. Many sellers are waiting for the market to cool down, at least evidenced by the flow of new for-sale listings hitting the market, now down 23.9% from last year’s flow.

Fewer homes are being listed for sale, which may force more listings to reduce their prices to match decreasing housing demand. These long-term housing predictions may change as the housing market rebalances and faces headwinds. Buyers and sellers face rising and fluctuating mortgage rates. Demand is capped and prices are lowered by affordability barriers at record highs. New listings are lower than a year earlier, supporting prices but limiting sales. As year-end approaches, the housing market faces considerable downside risks.

  • Zillow expects home value growth to continue to slow over the coming months.
  • Zillow’s home sales forecast now calls for 5.2 million existing home sales in the calendar year 2022.
  • This forecast is up slightly from last month’s expectations for 5.1 million sales.
  • The forecast is up following a better-than-expected reading on home sales in August.
  • However, the housing market predictions for 2023 and the long term are bleaker.
  • The recent reductions in mortgage applications and pending house sales indicate significant negative risks to home sales volume through 2023.
  • Las Vegas (-2.3%) and Austin (-2.2%) saw the sharpest home value declines in October.

Also Read: The Latest U.S. Housing Market Report 

National home values were still rising by double digits over the previous year, but at a much slower rate than in the spring. Affordability constraints have triggered a power rebalancing in the housing market. Home sales are predicted to stay lower than in recent years – at least for the near future predictions. Year-over-year home price growth slowed in the third quarter as mortgage rates rose sharply, resulting in worsening housing affordability.

With mortgage rates still rising (at 7.08 percent as of this writing), resulting in rapidly declining home purchase demand, home prices are expected to fall further in the near term. Some housing markets are on the verge of a drop in home values within the next 12 months. Home prices are expected to dip over the next 12 to 18 months before stabilizing and then recovering, according to experts. Overall the predictions for the next five years are that home price appreciation is likely to range between 15 and 25%, but they will be uneven.

A drop in demand due to rising mortgage rates causes homes to stay on the market longer and slows price increases. Many would-be sellers are tied to low rates, making the switch to a more expensive mortgage difficult, and reducing inventories. This rebalancing gives wealthy purchasers more time to make decisions, less competition, and greater negotiation leverage than in recent years.

The forecast for 5.2 million existing home sales in 2022, also reflects recent market changes and continued weakness in leading indicators of the metric. Homebuyers continued to be deterred by mortgage affordability problems, resulting in less competition and a larger supply of available houses. Since last year, the housing market has cooled dramatically, and homes are now staying on the market for much longer, whether they sell or not.

Days on Zillow – a measure of the median amount of time a for-sale listing has been on the market – was 54 days as of the week of October 16, up from the series' lowest-ever recorded figure of just 19 days in early April and 38 days in the same week in 2021. At this rate, Days on Zillow will likely reach 68 by the end of the year, ten days higher than it was at the end of 2021.

However, this expected level would still be significantly below pre-pandemic time on the market, demonstrating that some market competition exists, even as purchasers drawback in the face of affordability issues, owing in part to a slow influx of new for-sale listings. The pace of buying has slowed as well. The share of inventory that has been on the market for at least 60 days rose to 46% in mid-October.

As rates, and thus mortgage payments, stay high, many potential buyers are being priced out of the market, and affordability will likely not be on their side any time soon.  Sellers who list their home today could expect it to be on the market until Christmas, which is about two weeks later than what would have been predicted last year. While this may appear to be a long predicted wait in comparison to last year's inferno-hot circumstances, it's crucial to note that this time on the market is still far below pre-pandemic standards.

Housing Market Forecast 2024, 2025, 2026

There is an abundance of speculation regarding the forecast of the housing market in 2023. However, what about the real estate forecasts for 2023, 2025, and so on? Although, it is quite difficult to forecast the housing market for the next five years here is an insight into what most experts predict can happen.

Mortgage rates are at their highest point in 20 years, which is having a chilling effect on the housing market and driving down prices. But as supply remains constrained, housing prices in many U.S. markets have not yet begun to level off. Some experts have predicted the future of the housing market over the next five years. Only an oversupply can cause a crash.

The housing shortfall will last another year, with supply eventually catching up with demand by five years. The seller's market will persist as long as home inventory stays low. By five years, it is predicted to become a balanced housing market in which neither buyer nor seller has a monopoly. Instead, negotiation power between parties will be more equal and will vary depending on the circumstances.

Chief economist for the National Association of Realtors Lawrence Yun believes we are likely to see total price growth across the country of between 15% – 25% over the next five years. This forecast is likely to manifest as a decline in the coming year, a plateau in 2024, and then a period of relatively robust growth.

According to Greg McBride, the chief financial analyst at Bankrate, over the next five years, the US housing market is predicted to generate an average annual return in the mid to low single digits. In the long term, we are aware that real estate provides consistent returns above the rate of inflation. The longer the time frame, the more certain we can be about the general direction of travel, which has historically been upward in the real estate market.

According to Goldman Sachs, home prices in the United States will fall 5 to 10% over the next year. According to the same Goldman Sachs research, the housing market will bottom out in late 2023. Prices are projected to level off and remain relatively stable until mid-2024, so a turnaround is not anticipated to occur quickly.

Strong household finances and a relative lack of available homes in the United States could cushion a slowdown in the housing market. The economists believe it is unlikely that there will be a large wave of forced sales in the United States because a recession would likely be mild, the housing market is tight, mortgage quality is high, and the majority of mortgages have a fixed interest rate.

30-year fixed rate mortgage will remain around seven percent for the rest of 2022 and most of 2023. Assuming no major shocks occur, we should see rates of 5.5–6% within the next two years. Despite the fact that the residential real estate market has been exhibiting bubble-like characteristics, most experts do not anticipate a housing market crash. However, housing slowdowns brought on by rising mortgage rates have a tendency to weigh on GDP by reducing residential investment and weakening consumption.

The Zillow home price expectations survey found that the housing market is likely to become a buyer's market by 2023. The panel also predicts rent growth to outpace inflation during the next 12 months, as priced-out potential home buyers exert additional pressure on the rental market.

When will the housing market turn into a buyer's market, according to the panel?

  • The majority of panelists (56%) forecast a big shift in favor of buyers within the next year (sometime in 2023).
  • All 107 survey respondents project home price deceleration in 2023.
  • The share of panelists who believe their long-term outlook might be too optimistic jumped up to 67% from 56% last quarter.
  • Another 24% predicted that the housing market shift would come in 2024.
  • 13% expect the market to favor home buyers in 2025.
  • While just 8% expect that to happen by sometime in 2026 or sometime in the next five years.
  • Metros in the South and Midwest are the least likely to see price declines over the next year.
  • Vacation market areas are most likely to see price declines.
  • Rent growth and inflation should outpace stocks and home price appreciation over the next year.

Housing Markets Which Are Predicted to See a Decline in Home Prices

Prospective buyers are finally seeing a calmer market after the frantic rush for real estate over the last two years. Those who can still afford to own a home are quickly regaining lost leverage, but the transition to a more balanced market is still in its early stages. Home buyers priced out of the market face additional challenges, as high and rising rents may reduce their ability to save for a down payment even further.

According to survey respondents, the inexpensive Midwest markets that are least likely to see home price declines over the next 12 months are Columbus, Indianapolis, and Minneapolis, with only 36% reporting that home price declines from current levels were likely over the next 12 months. A majority of panelists expect fast-growing Southern markets like Atlanta, Nashville, and Charlotte to keep their hot streak going, with 44% predicting declines.

Markets expected to cool the fastest — with 77% of respondents expecting declines — are those that experienced the most growth during the pandemic, such as Boise, Austin, and Raleigh. The panel expects suburban and exurban areas to retain their heat over the next 12 months, while vacation and urban areas are expected to see price declines.

Rent growth should remain strong in the short term as high home prices keep many would-be first-time buyers in the rental market. Over the next 12 months, rents are expected to grow more than inflation, stocks, and home values. The panelists predict an average of 5.4% rent growth throughout 2023 – lower than the 8.6% annual growth they expect to see by the end of this year, but still higher than what Zillow data show to be just under 4% annual growth in the years prior to the pandemic.

Housing Market Predictions For Next 5 Years
Source: Zillow Home Price Expectations Survey

Real Estate Forecast Next 5 Years

According to some experts, the real estate forecast for the next 5 years shows that it will be a balanced market. Despite declining buyers' optimism that now is a good time to buy a house, the number of households interested in becoming homeowners remains high. This is especially true for younger homebuyers, who are likely first-time buyers and are struggling to save for a down payment as rents continue to reach record highs.

Simultaneously, seller expectations for larger down payments appear to be increasing, fueled by a still-competitive housing market and repeat buyers with relatively more available equity. The housing market is unlikely to shift from a seller's to a buyer's market anytime soon. Rising mortgage rates may take some of the steam out of the market, allowing inventory to rise slightly. It would also slow the rate of home price appreciation and reduce the possibility of a red-hot housing market resulting in an overheated market.

The supply of available homes is so low that even a significant drop in demand due to higher interest rates will not turn this into a buyer's real estate market, according to industry experts. Because there are not enough houses available to meet demand, home prices will continue to rise, but the combination of rising home prices and elevated mortgage rates means fewer people will be able to afford to buy.

There would still be continuous price appreciation, scarcity of inventory, and good demand. Some markets will experience lower appreciation rates than others, with the Sunbelt performing particularly well. Home prices do not appear to be decreasing, even in some of the country's most expensive markets, the tier-one markets.

CoreLogic expects to see a more balanced housing market, with year-over-year appreciation slowing to 3.9% by Sept 2023. The CoreLogic HPI Forecast indicates that home prices will increase on a month-over-month basis by 0.0% from September 2022 to October 2022 and on a year-over-year basis by 3.9% from September 2022 to September 2023.

Nationally, home prices increased 11.4% year over year in September 2022. On a month-over-month basis, home prices declined by 0.5% in September 2022 compared with August 2022. No states posted an annual decline in home prices. The states with the highest increases year over year were Florida (23%), South Carolina (17.6%), and Tennessee (17.4%). Large cities continued to experience price increases in September, with Miami on top at 25.6%, followed by Phoenix at 13.8%, and Las Vegas at 13.6% year over year.

The CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country, predicts that Crestview-Fort Walton Beach-Destin, Florida is at a very high risk (70%-plus probability) of a decline in home prices over the next 12 months. Bremeton-Silverdale, Washington; Bellingham, Washington; Eugene, Oregon and Tacoma-Lakewood, Washington are also at very high risk for price declines in 2023.

A worldwide research firm, Capital Economics, predicts that the U.S. house price rise will likely slow in 2023, not this year. Capital Economics forecasted that the U.S. housing market will experience a 5 percent decrease in house price growth by mid-2023, followed by a “gradual rebound” to a 3 percent annual price rise by the end of 2024. It's a major analysis that arrives as the U.S. housing market begins to shift, with increasing mortgage rates pricing out or discouraging potential homeowners.

However, the firm does not forecast a spectacular “price decline” or a housing bubble bust similar to that of 2006, which precipitated the global financial crisis and the Great Recession. A 5 percent fall would definitely constitute a price decrease, but it would not cause home prices to spiral out of control. Remember that house prices have risen steadily for several years and surged significantly during the COVID-19 epidemic.

A price drop is noteworthy, but in the grand scheme of things, it is relatively little. Before the housing bubble of 2006, the U.S. housing market was primarily supported by exceedingly risky bank lending methods that produced a synthetic demand for housing, allowing those who could not afford to retain their homes to acquire them. According to analysts, today's market does not have the same circumstances.

According to analysts, today's market does not have the same circumstances. Capital Economic forecasts that mortgage rates would increase to 6.5 percent by 2023. According to Matthew Pointon, a senior property economist at Capital Economics, if home price growth follows our earlier predictions and declines to zero by mid-2023, mortgage payments would remain above their mid-2000s peak until mid-2023.

“That looks unsustainable and house prices are therefore set to fall. However, our previous point about a lack of forced sellers remains. Therefore, we expect lower home demand to lead to a relatively small fall in house prices, with annual growth dropping to -5% (year over year) by mid-2023,” Pointon added. “That would bring the mortgage payment burden back under the mid-2000s level by the start of 2023.”

Where Will Home Prices Rise the Most in 2024?

Fortune magazine reached out to Moody’s Analytics to get access to its latest proprietary housing analysis, and according to it, home prices will increase by zero percent in 2023—a dramatic decrease from the 19.7 percent price growth the housing market experienced in the last 12 months. However, analysts anticipate that price changes will vary significantly between regions of the United States.

In its analysis, the financial intelligence firm calculated how home prices are likely to shift in 414 regional housing markets between the fourth quarter of 2022 and the fourth quarter of 2024. Among the nation’s 414 largest housing markets, Moody’s Analytics forecast model predicts that 210 markets are on the verge of seeing home prices decline over the coming two years and 204 markets are poised to see home prices rise over the coming two years.

These cities are expected to report the biggest rise in home prices in 2024:

  1. Albany, Georgia (5.5 percent)
  2. Casper, Wyoming (4.52 percent)
  3. Columbus, Georgia (4.09 percent)
  4. Rocky Mount, North Carolina (3.97 percent)
  5. San Jose, California (3.83 percent)

Housing Market Forecast For Next 5 Years

References

  • https://www.zillow.com/research/daily-market-pulse-26666/
  • https://www.zillow.com/research/zillow-2022-hottest-markets-tampa-30413/
  • https://www.zillow.com/research/zhpe-q3-2022-buyers-market-31481/
  • https://www.zillow.com/research/zillow-home-value-and-sales-forecast-september-2022-31431/#
  • https://fortune.com/2022/08/15/falling-home-prices-to-hit-these-housing-markets-in-2023-and-2024/
  • https://www.capitaleconomics.com/publications/us-housing/us-housing-market-update/surge-in-mortgage-rates-makes-house-price-falls-likely/

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