Southern Nevada Housing Market Continues Steady Rise
The southern Nevada housing market has been one of the many positives of the regional recovery. The rebound of the housing market is even more notable considering how far it has come since our state became the epicenter of the national housing crisis. It took time and patience, but the state and regional markets have found their level in a period of stability and steadily rising prices.
Over the past year, Nevada registered the seventh-fastest growing home price increases in the United States, according to the Federal Housing Finance Agency House Price Index. At 7.8 percent, the annual home price appreciation rate has slowed somewhat compared to the double-digit increases of recent years, but it remains among the best in the nation. Over the past five years, Nevada home prices have improved by nearly 84 percent, by far the highest of any state and nearly triple the national appreciation rate of 31 percent.
The statewide trends are mirrored in the Las Vegas market, where the House Price Index climbed 8.6 percent over the past year, ranking 27th among the 100 largest metro areas. On a five-year basis, home values in southern Nevada have skyrocketed 84.8 percent, giving it the second-fastest rising home prices behind only Oakland, California. Today, the median sales price of an existing home is $202,000, the highest point in eight years. These remarkable price gains are particularly welcome given how much home values collapsed during the crisis.
Rising home values have also greatly reduced the number of underwater homes in southern Nevada. Although the latest CoreLogic report showed Las Vegas with the second-highest share of negative equity homes among metro areas, the 17.6 percent rate is a fraction of the 73 percent underwater rate reported seven years ago. Another positive data point is the significant decline in foreclosures, which have fallen to the lowest point in a decade.
The positive news surrounding the southern Nevada housing market does come with caveats. Homeownership has declined, in part due to the wave of investor sales when home prices were at their lowest. Those investments infused capital into the flagging market, but the trade-off has been the homeownership rate in southern Nevada falling below 50 percent, ranking it among Los Angeles, the Bay Area and New York metro areas.
While home affordability concerns aren't as acute in southern Nevada compared to those cities, it is a growing issue. According to the National Association of Realtors Housing Affordability Index, the ability for the typical family to purchase a single-family home declined by 2.8 percent in 2015. Since 2011, the Housing Affordability Index has dropped 34 percent, the eighth-largest decline among metro areas. Homes in southern Nevada remain more affordable than many regions in neighboring states, including Los Angeles, San Francisco, Denver, Seattle and Portland, but less affordable than Salt Lake City or Phoenix. This is a trend we need to watch closely. Rising wages in Nevada will increase household buying power, but we don't want to see home values continue to outstrip those gains and put the dream of homeownership out of reach for so many southern Nevadans.
The housing market is an important component of the southern Nevada economy and a telling measure of the economic well-being of its residents. While some concerns linger regarding home affordability and negative equity, the stability we are experiencing today is a much welcomed improvement over the tumultuous times of the past decade.