While much of the country has been enjoying a healthy housing market, most of the state of Nevada is merely hovering around stable. Being underwater on your mortgage (owing more than it’s worth) in most states does not mean that you will lose your home. In Nevada, however, most likely that is exactly what it means. Real estate firm RealtyTrac.com reports that over 50% of the properties for the 2015 housing market in Nevada that are facing foreclosure are also underwater on their mortgage. This is easily the highest in the country, as the national average is 35%. Nevada also has the highest foreclosure rate in the United States, and its metro areas are perennially in the top five worst in the nation. If not for the state laws, including the homeowner’s bill of rights, the foreclosure rate in Nevada would be much higher.
The foreclosure epidemic continues to be a double-edged sword for the Nevada housing market. On one hand it stunts growth by creating a surplus of available homes, which can negatively effect property values and slow the construction of new homes. But on the other hand, it gives an opportunity to those who may have been priced out of the market in the past to be able to get quality affordable housing. While this issue isn’t specific to only Nevada, why is it that the state isn’t having nearly the same economic recovery as the rest of the country? According to business reporter Eli Segall of the Las Vegas Sun, Nevada took such an impactful hit from the housing crisis that it will take much longer to recover than other states.
When the housing bubble hit, some say the Las Vegas NV real estate market was ground zero. At one time three out of four homeowners were underwater on their mortgage, and the bank was reacquiring three to four thousand homes each month. But there is hope. Recently southern Nevada’s rate of underwater mortgages dropped to 25% and flippers are no longer snatching up re-sales like they had been in the past. Segall believes that the market is getting better but warns that the state still has a long way to go. In June of this year on real estate website Zillow Las Vegas NV had an average home price of $220,000, which was up 10% from June of the previous year, and on rival website Trulia Las Vegas is seeing median sale prices at the highest it has been in 6 years. What is the reason for the sudden turnaround in the Southern Nevada housing market? There are a few.
“Buyers who have suffered the tragedies of foreclosures and short sales are starting to get back in,” says Keith Lyman of the Greater Las Vegas Association of Realtors. People are beginning to come back into the market prepared with more money and knowledge. Lyman also believes that many people are realizing that they’re paying more in rent than what they would be paying for a mortgage so they are deciding to enter the market. Another reason: Now that fewer investors are snagging up properties there aren’t nearly as many cash buyers. This means that someone looking to buy a house through financing stands a chance where they did not before when competing with someone making a cash offer. But despite the silver lining Lyman warns there are still a few dark clouds that need to pass before getting too excited.
There are nearly 40,000 homes that are either abandoned or foreclosed. Lyman thinks that if the Mortgage Debt Relief Act passes it will help to start getting these homes on the market. “When I hear about new homes being built, I get a little bit concerned,” states Lyman. “Because we’ve got a lot of inventory, a lot of vacant, abandoned homes we’ve got to get through first.” But when asked what his housing market predictions for 2016 are he will only say that he is happy with the direction that the state is heading. “We’re back into the stability of things.”
Influencing Factors for the 2015 Nevada Housing Market
- Zillow lists the median home value for Nevada at $209,400. This is a 10.3% increase in the past year and forecasts expect this number to continue to rise 5.5% in the upcoming year.
- As stated earlier the foreclosure rate in Nevada is the highest in the country. In Nevada 6.5 homes per 1,000 are foreclosed. The national average is 3.3 homes per 1,000.
- The Nevada housing market scores a 1.2 out of 10 on the Zillow Market Health Index. This index represents the current health of a region’s housing market compared to other markets across the United States. It is based on 10 metrics (including but not limited to foreclosures, negative equity, and turnover rate).
- Over 22% of homes in Nevada have negative equity and 7.4% are delinquent on mortgage. Compare this to the national averages of 14.4% and 4.8%, respectively.
- Homes that are listed in Nevada spend an average of 71 days on the market.
- On rental websites such as Craigslist Nevada has an average rental list price of $1,249. This is lower than the national average of $1,382.
Best Places to Live in Nevada
As stated earlier the southern Nevada housing market has seen dramatic improvements, especially in the Las Vegas area. “The Las Vegas economy is getting healthier,” says Lied Institute Director Edward Coulson. “The demand for housing is going up. Property values are going up the last couple of years and that’s a cause and consequence of rents going up.” For those looking to take advantage of this a great place to look are the Henderson and Boulder City NV real estate markets. Currently Henderson NV real estate has a median home value of $250,800 and in Boulder City that number is $233,700. In one year this is a 7.6% and a 2.6% increase, respectively. Both are seeing the effects of the surging market in Las Vegas spill over into their own markets all while having lower home foreclosure and mortgage delinquency rates.
On the western border of the state the Reno NV real estate market has also seen tremendous turnaround. Known as the “Biggest Little City in the World,” Reno, like the rest of the Nevada, was hit hard by the housing bubble. But new housing permits have increased over 20%, and home prices have appreciated by 16.2% in the past year. And in the past three years the city has added over 13,000 new jobs. Unemployment is still higher than the national average at 7%, but this is down nearly 1.5% from a year ago. As the second most populous city in the state outside of the Las Vegas metro area it’s no surprise that the two markets would mirror one another. Both cities are major draws to California tourists; Las Vegas serving the Southern California region and Reno drawing in the Sacramento and San Francisco bay residents. And like Las Vegas, Reno holds several events throughout the year in order to boost tourism.
On the northwest border of Reno the Sparks NV real estate market has seen its share of home sale increases as well. The median home value is presently $252,600. This is a whopping 17.5% increase in just the past year. Very little is said about Sparks even though it is the fifth largest city in the state, but the city offers art and culture events. Sparks is also well known for its parks and recreation systems. Sparks Marina Park provides watersport activities such as windsurfing, swimming, fishing and boating and is surrounded by an extensive trails network. For investors looking to take advantage of the Reno housing market Sparks provides a reasonable alternative.
Located 30 miles south of Reno is the Carson City NV real estate market. Nestled close to the “Biggest Little City” as well as bordering Lake Tahoe makes the Nevada state capital a delightful mix for both tourists and residents alike. Like Sparks, home appreciation rates rose at a tremendous rate, increasing 19.8% in the past year and bringing the median home value to $233,100. With its close proximity to Reno, California, and several recreational sites and resorts, Carson City is a great place to take advantage of a wide array of activities. The one downfall for the city is that with its small population job growth is limited. Most jobs are in education and the government sector.