I constantly get asked when I think that housing prices will go down, or at least slow down… based on the laws of supply and demand, that will happen when the supply (inventory) increases substantially, the demand decreases substantially, or both.
Here’s an excerpt from a recent article I read; “While 38 percent of experts polled by Zillow recently believe 2024 will be the year inventory returns to 2019 levels, 36 percent pegged 2023 as the year. The remainder believe we’ll have to wait until 2025.”
If you want to read the whole article, go here; https://markets.businessinsider.com/news/stocks/first-time-buyers-inventory-expected-to-rebound-in-2024-1031304612
And keep in mind, in Las Vegas in 2019, inventory levels were much higher than they are now, but they were still low enough to be considered a seller’s market.
Let me explain the way we measure first;
An absorption rate is a mathematical representation of the supply vs the demand; take the number of units available for sale today, and you divide that number by the number of units sold in the past 30 days, and you get your absorption rate.
Example: if there are 8,000 homes available for sale in a particular area and 2,000 sold in the past 30 days, your absorption rate would be 4 months – because if not one new house came on the market and houses magically sold at the exact same rate, it would take 4 months for those 8,000 houses to get sold
The National Association of Realtors says that a balanced market is 4-6 months of inventory (historically, houses in a balanced market appreciate 3%-4% per year);
a number bigger than 6 is a buyer’s market and the bigger it gets the more the buyers are in charge and the slower prices increase (maybe they decrease if that number gets big enough);
a number lower than 4 is a seller’s market and the smaller it gets, the faster prices increase.
Las Vegas has less than 1 month of inventory right (0.6 months today) now and has consistently been less than 1 month since February 2021 with a brief 4 days in August 2021, where it crept over 1 month, but still less than 1.1 months.
How can you have less than 1 month of inventory for that long? Well, when a house hits the market, if it is priced correctly, it will have an accepted offer in just 7-15 days under current conditions, however, it typically takes another 20 or so days to close escrow and transfer ownership to the buyer…
As long as the absorption rate stays below 2, housing prices are going to continue increasing rapidly, and between 2 and 4, still increasing, just slower.
Do you want my opinion? Well, you’re gonna get it. At least in the Las Vegas valley, there is no way we get back to 3 months of inventory before 2024. Of course, I don’t have a crystal ball anymore (it fell in my bathroom and shattered into a million pieces last month), but that is what I believe.
Do you have a need for commercial / industrial / retail buildings or land? Are you ready to buy or sell a home? Do you want a guaranteed cash offer? We can help you with all of that… just call us at 702 SELL NOW or click on this link to my website http://www.702SellNow.com
Choose to have an amazing day….Jeff