by Dana Gentry, Nevada Current
The long-anticipated end to a frenetic and unsustainable real estate market is a relief to prospective buyers who have been waiting for the market to cool, but a blow to sellers, especially those caught off guard by the rapid turn.
“I have one seller who is not lowering their price because I think they haven’t come to terms with where the market is heading right now,” says Dawn Houlf, a longtime Las Vegas real estate agent. Another would-be seller waited on the sidelines, attempting to time the peak of the market. “They took six weeks to get the house ready to sell and missed the boat.”
Thanks to record prices, higher interest rates, overall inflation, and evidence of recession, the days of multiple offers over asking price from buyers willing to waive inspections and appraisals are gone.
Supply is up 134% from a year ago, according to Las Vegas Reators. The median price of a home in Las Vegas declined in June for the first time in two years, from $482,000 in May to $480,000. That’s still up 21.5% from $395,000 a year ago.
The party may be over but the hangover is fierce for some would-be sellers with one goal in mind – maximizing their return.
“We saw a lot of sellers motivated by greed, for lack of a better word,” says Diane Varney, a Las Vegas realtor. “‘If I get my price, I’ll sell. Otherwise, I’ll stay put,’ That’s not a life event. People usually move for life events.”
Varney says a quarter of listings in Southern Nevada have reduced prices.
“A seller has to be motivated by something other than price. Inventory in Las Vegas is almost four times what it was in March,” she says. “I show them the statistics and explain the laws of supply and demand.”
“If you’re getting showings and no offers, you’re roughly 5% overpriced. If you’re getting no showings and no offers, then you’re roughly 10% overpriced,” Varney says of the rules for a normal market. “We’re coming out of a ‘no rules’ era where we saw 25% to 35% property value increases within the last 24 months.”
In Reno, where the median price of a home was $677,500 in June, 32.6% of listings had price reductions that month, according to Realtor.com, which deemed Reno first in the nation for slashing home prices.
“Pricing your home correctly from the get go is key. I’m seeing price reductions upwards of 20% right now,” says Sarah Scattini, president of the Reno Sparks Association of Realtors. “Sellers are offering incentives to buyers – credits for closing costs, credits to buy down their interest rate. Motivated sellers are likely to be more realistic.
Scattini agrees Reno’s ranking as the top market for slashing prices indicates it was among the most inflated markets in the U..S.
“Prices are getting hit hardest in the markets that have been on the hot streak during the pandemic,” she says. Top 10 markets for price slashing: 1. Reno, NV
2. Austin, TX
3. Phoenix, AZ
4. Anchorage, AK
5. Boise, ID
6. Ogden, UT
7. Sacramento, CA
8. Colorado Springs, CO
9. Evansville, IN
10. Medford, OR
“Eight of the top 10 metropolitan areas with the most price reductions—except for Sacramento, CA (No. 7), and Colorado Springs, CO (No. 8)—experienced higher appreciation during the COVID-19 pandemic through today (March 2020–June 2022) than the national 26.2% rise over the same period,” says Realtor.com.
“These are also markets which experienced a fast ramp-up in prices due to the inadequate supply of housing,” says Realtor.com senior economist George Ratiu.
Nationally, listings were up 18.7% in June from a year ago, according to Realtor.com, which says 14.9% of listings reduced their list price, compared with 7.6% a year ago.
Varney predicts the ranks of real estate agents, which have swelled in recent years, will decline as the market evolves, and deals stop “landing in their laps.”
Some 3 million people hold real estate licenses in America, according to the Association of Real Estate License Law Officials. The number of agents dropped by more than 140,000 from 2007 to 2008, according to the National Association of Realtors.
“We’re going to see unseasoned agents who don’t have skills or longevity get out of the market,” Varney says, adding those who survived the Great Recession will be better equipped to navigate the market’s evolving landscape.
As interest rates rise, so-called creative financing, popular before the housing bubble burst in 2007, is making a comeback.
“There is what we call a bank statement loan, where all they have to do is provide their bank statements and have a 650 or 680 FICO score,” says Houlf. “But that’s at a higher interest rate. You’re looking at seven, seven and a half percent rather than paying five and a half or six.”
Adjustable rate mortgages (ARMs) were popular during the predatory lending practices that preceded the Great Recession and have fallen out of favor. Now, they’re back.
Nevada Current is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Nevada Current maintains editorial independence. Contact Editor Hugh Jackson for questions: [email protected]. Follow Nevada Current on Facebook and Twitter.
