Welcome to 2024! The past three years have been a difficult reality to digest when it comes to home buying; but here we are. All economists were predicting constant rate drops by the Federal Reserve Bank (The FED) in 2024 but after the first meeting in January, Jerome “Jay” Powell (Chairman of The FED) said, not so fast. This meeting marked the fourth straight FED meeting where policymakers opted to maintain and hold the rates steady, dating back to September of 2023. With 6 more meetings scheduled for 2024, the next being in May, it’s now difficult to predict when exactly we are going to see the cuts to the Federal Funds Rate. Most major forecasters DO expect mortgage rates to go down in 2024, but now the timing will be strictly dependent on the economy’s performance.
Inflation has been the biggest factor in the increase to the Federal Funds Rate. From March of 2022 until July of 2023, The FED raised the Federal Funds Rate 11 times. The FED did however forecast that they should make three Quarter-Point cuts before the end of the 2024 calendar. The three scheduled cuts are not going to bring down mortgage rates to what consumers are hoping for. The new normal of 6% mortgage rates is what we should be looking forward to for the unforeseen future. So, in turn, what do these new normal rates mean to the Las Vegas Real Estate Market?
Mortgage rates and home values do have a direct correlated effect to one another. As rates go up, values have a tendency to stay steady or go down. The median home price sold did decrease 4.1% from January 2023 to January 2024, bringing that amount down to $402,617. 1,518 single-family homes were sold in December of 2023. That number was 5.8% higher than the amount of homes sold in November, but was still less than the amount sold in December of 2022. Rising interest rates have priced some prospects out of the current market yet some buyers are taking advantage of the lower number of competitive buyers in the valley.
The higher mortgage rates have realtors fielding less offers on homes and is also creating a longer life cycle for homes on the market. Even though it is forecasted that the Las Vegas valley will have the 12th hottest market in 2024, some homes are still sitting a bit longer than they once were. Homes are currently averaging two offers and are selling at an average of 53 days in the valley. The current hot markets are found in Summerlin and Southern Highlands which are found in the Northwest and Southwest parts of town. With the costs of rent increasing approximately 29% from October 2021 to the end of 2023 and almost 40% since 2019, it’s not a surprise that buyers are still willing to purchase in this higher rate market. It is currently estimated that the average household income required to rent in Las Vegas has nearly reached $70,000. At that amount, a debt free household could still qualify for a mortgage of approximately $2900.
Buyers are beginning to realize that an investment in a home today will most likely NOT be their forever home. Life throws us curveballs; careers change for better or worse, families grow, there may be some dramatic life event that just happens. Most homeowners spend around 5-10 years in their homes and a lot can change in that time period. If a buyer is ready to purchase their home and they qualify, they should jump on the opportunity now!
The waiting game has never benefitted any home buyer. Let’s wait until rates start going down; oh no, prices are increasing and you’re now paying out of pocket above appraised value. Let’s wait for values to go down; now rates are higher and we’re paying a larger mortgage for a smaller loan. Competition will drive the housing market and right now, buyers that are ready, willing and able, to purchase hold the advantage.
Daniel Herrera is the Senior Mortgage Loan Specialist at Laser Mortgage. He can be reached at 714.878.3112 or [email protected]
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