Las Vegas and Henderson Rental Housing Market Articles
The Las Vegas housing market has hit another high! In October, the median price for a resale single family home hit $340,200 (according to Las Vegas Realtors)! What is causing prices to rise, especially now amidst a pandemic and suffering economy? And can these high prices be maintained?
One factor affecting prices is a limited inventory of resale homes available. However, certain aspects of the real estate market changed last month. For example, showings on tenant occupied homes are now permissible with certain restrictions. And late notices and eviction proceedings are now allowed (effective October 15, 2020). How this will impact homeowners who have been thinking of selling is yet to be seen. Homeowners may take the opportunity to list homes for sale that have tenants in place which may increase available inventory. Or homeowners who have experienced lost rent and now in the process of eviction may decide to cash in on their investments.
The real estate market is based on supply and demand. Typically, should supply increase considerably in a rising market, prices may get softer and there may be more room for negotiation between buyers and sellers. However, we also have an unbelievably low interest rate to take into consideration – one of the lowest ever! How does that play a role?
Low Interest Rates
Well, interest rates play a huge role in affordability. It can dramatically affect a house payment. So, even though home prices are rising, the current interest rate is providing for a very attractive payment. Granted, down payments go up when prices go up. However, in many cases, the increase is not so dramatic that it pushes buyers away. And with today’s low interest rate, the prospect of a lower payment, even with higher resale values, is hard to bypass.
Take for example a home currently listed for $350,000. A couple of years ago when that house was $325,000 the down payment would only have been $2500 less. However, consider this difference. 2-3 years ago, the average interest rate was higher than today.
2-3 Years Ago:
$325,000 – 10% down payment ($32,500) = $292,500 at 4% (approximately) interest is $1396 principal and interest only.
$350,000 – 10% down payment (35,000) = $315,000 at 3.25% (approximately) interest is $1371 principal and interest only.
Notice the difference! Even with a higher loan of approximately $25,000, the lower interest rate can actually result in a lower payment than two or 3 years ago!
When you look at the big picture, it really is not surprising that demand is strong for real estate. As long as supply stays below average and interest rates remain at record lows, the perfect combination will exist for a rising market.
The eviction moratorium has been lifted in Nevada effective October 15, 2020. As a result, late payment notices and 7 day pay or quit notices are starting to be served. Of course, for Landlords experiencing a lack of rent, this is news they have been waiting for. For tenants behind on payments due to financial hardship, this is less than ideal. So, what solution can be offered?
Negotiation. Having a meeting of the mind is key. This is an opportunity for landlords and tenants to work together. The situation we all are facing is far from ideal and it is bringing on hardships that we haven’t seen in a long time for both tenants and Landlords. So, perhaps coming up with a mutual solution is the answer.
As a tenant behind on your rent, are you able to come up with a reasonable, monthly re-payment plan that would be agreeable to your Landlord? Since rent is not forgiven, it will eventually be owed. Perhaps coming up with a plan to make your Landlord whole is the answer. Don’t forget! Many landlords have mortgages that have to be paid and a lack of income can put a financial pinch on their monthly obligations. Or they may rely on the rental home you are living in as retirement income.
As a Landlord, are you able to negotiate with your tenant for a monthly re-payment plan? Perhaps writing up a promissory note that you and your tenant can agree to will make it a real possibility. As a Landlord, if your tenant has a financial hardship, are you able to work with them? While rent is not forgiven, are you able to settle for an amount? That, of course, depends on your personal situation and decision.
When negotiation happens, especially in this instance, late payments and evictions can be avoided. Of course, every situation is different and calls for its own solution. In the end, we all hope that this situation will ease soon and a sense of normal is restored.
The Las Vegas real estate market continues to be on fire amidst a pandemic. Buyers are willing to pay more for a home as inventory remains tight and interest rates low. The average sold price of a single family home during August 2020 was $335,000 while condo’s averaged $185,000, another new record for the Las Vegas area (source: Las Vegas Realtors)
Though unemployment remains high and the economy slow in recovering, with many directives in place to mitigate the spread of the coronavirus but restricting economic growth, demand from individuals with savings and stable employment is keeping the real estate market alive and thriving. This scenario also goes to show market stability. How long will this trend continue? That is difficult to predict, as many factors go into keeping real estate alive and healthy. However, economic recovery from pandemic restrictions will be key.
We hope to see the pandemic get under control soon and as a result, positive developments in the economic sector.
It’s no secret that Phase two restrictions due to COVID-19 have been extended – for an unknown period of time. Many Realtors who were planning on showing tenant occupied homes (which is restricted under Phase Two restrictions) that have been listed for sale were eager to start showing them on Saturday, August 1, 2020, when the Governor’s directive would of expired, only to find out that it was extended Friday evening. So, what can you do during this time?
If your property is leased and your tenant is paying rent, consider yourself fortunate! Perhaps keeping the home rented and waiting this time period out may be a possibility until restrictions are lifted.
If you absolutely need to sell a tenant occupied home, forging a good relationship with your tenant may be your best option. Current direction from the Nevada Realtors Association to Realtors states that due to restrictions to mitigate COVID-19, you can work with your tenant to obtain pictures or video of the home – tenant provided that is – so that you can have photos for your listing. You cannot force your tenant to do that, however, it is an option. Three dimensional property scans, virtual tours and virtual staging can also be used (Source: nevadarealtors.org).
If you can generate an offer and go under contract, most transactions can still take place while following directives and safety measures. COVID-19 disclaimers have been made available to Realtors in order to handle transactions during this unique period of time.
Of course, investors are scouring properties these days as well, looking for a rental property to invest in. So, there is still opportunity to sell the home. Granted, it may be more challenging. So, if your rental property is generating monthly income, perhaps consider waiting things out – if it meets your plans and goals. Otherwise, anticipate a sales transaction different than what you perhaps had in mind.
As the state of Nevada looks to re-open after weeks of closure to contain the COVID-19 virus, this will not be an automatic green light to resume life as normal. There is still much work to be done and social distancing to be followed. Many Realtors have been proactive to keep their clients and customers safe, adhering to safety guidelines. This includes Nicklin Property Management. Here are some updates as far as re-opening guidelines as pertain to the real estate and rental industry:
1. Showings and open houses of single family residences occupied by renters is prohibited until May 30, 2020.
2. Social Distancing will still need to be practiced when interacting with the public and face masks should be worn. Employees / Agents must wear face masks when interacting with others.
3. A COVID-19 addendum is available for sales transactions that has been approved by the Nevada Real Estate Division. It gives provisions to prospective buyers who may have a sudden change in employment / income due to the Coronavirus pandemic while purchasing a home.
4. Eviction postponement is tied to Nevada’s declaration of emergency, which is set to expire May 15. Any changes to this should be announced by the Governor’s office in the very near future.
As we have seen, the situation we have seen has been very fluid and subject to change. While it is encouraging to see that certain restrictions have been lowered, we must all still show vigilance in protecting the health of others and take necessary precautions. We look forward to business as normal in the future, however, realize that this will not happen for some time.
Many rental property owners and those contemplating entering the rental market are now anxious about what will happen to the rental market – rent values, rent collection, etc. The truth is, the current COVID-19 pandemic is uncharted territory for most real estate professionals. We are constantly hearing about fluctuations in the stock market, unemployment reports and stimulus benefits. We are also learning that evictions are on hold and late fees can’t be charged (at least here in Nevada).
But what will this ultimately mean for the real estate market? Specifically the rental market?
The measures being taken by government officials to put evictions on hold and not charge late fees clearly indicates that the goal is to maintain relative stability for folks. To be able to get through this pandemic with as as little interruption as possible. On the flip side, many mortgage companies are offering relief to homeowners who can’t make their mortgage payments rather than charging them late fees and initiating foreclosure proceedings. Stimulus benefits and supplemental funding of unemployment benefits are intended to carry folks through this period of time as well. It appears that the plan and hope is that once the pandemic passes and things begin to resume to the way they were previously the economy can rebound without having the added stress of an untold number of evictions and foreclosures, which would be detrimental to the real estate and rental market.
In the end, it really depends on how long the shut down will go on for. That will indicate what we can expect with rental and sale values and demand; whether or not folks will be able to maintain relative stability during this time and once things pick back up again resume their lives without too much loss and have jobs to get back to. In that case, we hope that the market will prove overall stable. However, if we have long term closures, lack of benefits or other unforeseeable repercussions, we may have a different market to prepare for.
It does appear, though, that the ultimate and overall goal right now is to keep people status quo to prevent major shifts in the real estate market so that once an economic rebound occurs, the market can continue to grow and thrive.
How does this affect tenants?
There are provisions for tenants who land on hard times and only able to pay partial rent, such as waived late fees and postponement of evictions, which were authorized by government officials. Additionally, many homeowners are willing to assist tenants during this time. However, rent forgiveness is not obligatory. Assistance may come in the form of rent postponement. This means that eventually the postponed rent will still be due. Thus, if a tenant can afford rent because their job has not been affected or has the means to pay rent, it would be in the tenants best interest to continue making their rent payment. Many homeowners have mortgages on their rental properties and so, a lack of rent means that they may have to resort to other means for payment or qualify for assistance from their mortgage company. Additionally, many homeowners may have also lost their jobs.
Ultimately, predicting what exactly will happen is dependent on many factors. Unfortunately, at this time, it is hard to say with any certainty what will happen. We hope that this situation will be temporary and everyone can find financial stability sooner than later and we can get back to having a thriving real estate market.
Nicklin Property Management & Investments, Inc.
375 N Stephanie St #911
Henderson, NV 89014
NVRE# B.0012045.CORP | PM.0112045.BKR