For years, condominiums were the underdog in the Las Vegas real estate market. That started to change in 2019, although there was a brief dip in 2020 because of COVID. But today, with homes appreciating at an unprecedented pace, condos have remained a popular option, and now, for many, an affordable option.
According to a recent Las Vegas Realtor report, the total value of local condo and town home real estate transactions tracked through the Multiple Listing Service during December was more than $221 million. Compared to one year ago, total sales values in December were up 38.5 percent and median sales price was up 30.1 percent.
With a continued tight single-family housing market in addition to ongoing buyer migration from California, condos will continue to be a popular option for people across a diverse cross-segment of those looking to buy property, including first-time millennial buyers, those priced out of the single-family home market and secondary homebuyers looking for part-time residences or investment property.
There’s no question that 2021 was a wild, and interesting ride, for homebuyers. And, I believe that homebuyers in 2022 are looking at the new year as a fresh opportunity to make their dreams of owning a home come true — be it a luxury condominium or single-family home. Here are a few trends to watch in 2022:
Everyone’s watching interest rates
Rates will go up, although we are not sure of when or how high they will go. Homebuyers are starting to feel the pressure, and it’s creating a sense of urgency. I’ve already had buyers reach out to say they want to buy before the Fed starts hiking rates.
By the end of 2022, Fannie Mae projects interest rates will hit 3.4 percent, while Redfin’s model says 3.6 percent. The Mortgage Bankers Association is forecasting that the average 30-year fixed mortgage rate will hit 4 percent by the end of 2022. Over the course of 30 years, that will add an additional $90,000 in cost to a $500,000 fixed-rate mortgage.
This year could be the year of the millennial homebuyer as 45 million millennials are ready to make moves. Condos, sometimes offering lower price points, can be a good purchase option. Demand from these first-time homebuyers will keep the market competitive. Among the market factors driving millennials toward a home purchase are rising rents, which are projected to increase 7.1 percent in addition to continued workplace flexibility that enables this segment, in particular, to broaden its home-search parameters to include less-expensive cities like Las Vegas without sacrificing high-energy and innovative lifestyles.
Both young and older buyers also often share a preference for experiential living, something that condominiums offer through low maintenance, no yard work and often, smaller footprints that require less upkeep.
For a wild-card trend, I found it interesting that Zillow is predicting that millennials are increasing their interest in purchasing what would traditionally be considered “second homes” before investing in primary residences. This isn’t yet a trend that we have begun to experience, but I thoroughly expect to see an uptick of this buyer soon. For this cohort of first-time buyers owning a “part-time” home could potentially help them build equity during the interim.
Speaking of millennials’ impact on real estate, this generation is the first digital native homebuying segment that expects solutions on-demand — on their phones — resulting in an easy buying experience. According to a recent Zillow survey, 39 percent of millennials said they would be comfortable buying a home totally online as did 36 percent of Gen-Zers. Only 19 percent of Gen-Xers and 7 percent of boomers said they would be comfortable. There’s no question millennials, and close behind Gen-Zers, are changing the homebuying process.
Homebuyers take climate risks seriously
With climate risk data now available on real estate websites like Redfin.com, and natural disasters and extreme weather events continuing to increase in frequency, I expect homebuyers may start considering climate change in their homebuying decisions.
Those concerned about climate-associated risks like flood and fire are also thinking about the resulting impact on insurance costs or the mortgage rate set by their lender.
In addition, homebuyers will begin to seriously calculate into their buying decision a state’s climate change policies. In 2021, the Nevada State Legislature was at the forefront of addressing climate change challenges.
New laws demonstrate that Nevada is serious about enforcing climate regulation and is well aware of the need to preserve and protect our environment and our natural resources.
Approximately 25 percent of DK Las Vegas homebuyers since 2019 are from California. Some were making the move to Nevada permanent and were able to purchase with cash due to the sale of their California home, while others were second-home buyers. In 2022, I see the California migration continuing, especially if California implements a proposed wealth tax as well as other increases in the cost of living.
For those of us who call Las Vegas home, there is no better place to live, raise a family, work and, of course, play! We are indeed an extraordinary city that is only getting better.
Shahn Douglas is the chief marketing officer for DK Las Vegas.