Clark County Housing Market Update
(You won’t read THIS in the paper)
- Seasonal drop in number of listings starts early.
- Will CA fires affect our housing market?
- Short-run and long-run projections.
This index (mid-October data) continued the expected slow reduction as we enter the holiday season. Buyers get busy with the holidays and slow their house hunting. The small decrease in house showings is totally on track with normal seasonal changes. (A slowdown in this index can be the first signal of a major slowdown and is watched carefully.)
As we enter the holiday period, it is normal for the number of homes on the market AND the number of solds to fall. September inventory (the number of months needed to sell current inventory based on September solds) rose slightly from 2.3 to 2.5 months. While this is suggesting a weaker market, this is no more than a typical seasonal adjustment and is not likely a long term trend.
As expected, listings fell 6% from 1979 to 1861. This is a small change which will likely grow each month through the holiday season as it typically does each year. There is one unique feature worth noting this year.
In 2019, the seasonal drop in listings is occurring one month ahead of the past two years. For example, for the first 4 months of 2019, total listings were 50% higher than the prior 2 years. After April, the surplus of listings began a rapid reduction and ended in September 6% below the count last year during the same period. Perhaps this is no big deal or perhaps it means we are heading for a period of fewers sellers wanting to sell. Only time will tell but if it is the latter then this was the first indicator of the trend. Holiday inventory changes usually occur at the same time buyer activity levels drop so the overall effect on the market is minimal. However, this is typically not the case for the first few months of the year, thus creating an unusual selling opportunity. This was discussed in detail in the September newsletter and can be found at www.ckelsey.com.
As we approach the holidays, it is normal for pending sales to begin their decline. That is what we see this month. Pending sales slid from 871 to 757 in September. This gentle slide is normal and should continue through the end of the year.
Price reductions have been slowly increasing from February through July, 2019 . However, in September I reported they fell to 1210 and in October they fell to 757. While this may be a clue that buyers are being more aggressive, as I have mentioned before I do not put much weight into this statistic.
The Average Price:
The average price of a home in Clark County has been on the increase since the beginning of 2012. It is a zig zag line with ups and downs but in general the average price has risen from just under $200,000 to now $415,000, more than doubled since early 2012. This last month, from August to September the average price of a home fell $15,000 to $401,000. I will admit this is a dramatic fall and does not mean your home value dropped $15,000. It more likely means buyers this period bought more homes that were lower priced this month.
Keep in mind this number is an average of all home sales. If in September more homes sold in the lower price ranges then the average will fall. This single occurence likely has little connection to the value of your home. If this becomes a trend over several consistent months this then would suggest falling overall home values. So stay tuned and we shall see.
Market time was unchanged this period.
Short-term Conclusion: (Long-term conclusion is below)
The market shows all the typical signs of a continued strong market. The earliest signal of market weakness would be buyer activity levels (the number of times lock boxes are opened). This indicator remains steady considering the season. I see no clues as yet that we have a market weakening at all.
I have heard from clients and other agents that our Clark County market is slowing. Let’s take a closer look at that for a moment. Remember supply and demand in your economics 101 class. If supply falls then prices go up. If demand falls then prices go down. But if both move equally so as to maintain the same ratios then nothing happens to the price BUT it FEELS slower because there are fewer showings and it may take a bit longer to find the right buyer for a property. But because the ratio of buyers and sellers remained approximately the same, there really was no change in the market that would cause home values to change.
Will the CA Fires cause CA buyers to move this way?
As a real estate agent, I find myself wanting to believe that the California fires of the past few years will affect our housing market. I instinctively suspect that Clark County and the Pacific NW would or should see a major surge of visitors heading north looking for permanent residency. After all, who would choose to live in a place where their families are in danger 6 months of each year to fire and smoke?
The possibility of losing one’s life and home to fire and smoke are not the only motivations I feel should be sending our southern neighbors northward. Reportedly, homeowner’s insurance costs are going through the roof. Premiums for homes in fire-danger zones have more than tripled the past few years and are reported to be going higher. Additionally, as local governments increase building standards to protect against fire, the cost of rebuilding is growing.
The quest for the answer to the question “Should we expect to see growing demand as the result of California fires”, seems more like a study in human behavior than a simple exercise in intuition or logic. Peoples have endured calamities on earth for thousands of years. Perhaps the clearest way to understand what to expect Californians to do today is to study what other peoples have done is similar situations.
The fishing villages along the northeastern shores of Japan have existed and had to deal with tsunamis for hundreds of years,. The Washington Post wrote about this history (click link) almost a year ago . It seems that this portion of Japan is hit by a tsunami every 30-40 years. Many of the villages have placed rock plaques on the hillsides up and down the northeast shores warning not to build below this marker due to the danger of tsunamis. It is common for villagers to heed these warnings for a few years, but the temptation to build closer to their boats and fishing equipment more often resulted in the villages eventually being relocated back down on the shore. Eventually the next Tsunami would wipe them out and the cycle would continue.
The story of these Japanees villages over the years may be key to understanding what to expect regarding the California fires today. The Washington Post story explains that most villages are wiped out but that there are often a few villages that DID heed the warnings of their ancestors and kept their villages above the hillside markers. So, it seems safe to conclude that while most Californians will remain put in CA, some will leave for safer ground just as some of the Japanese villagers heeded the warnings of their ancestors. Arguably, many will consider the Pacific NW to be that safer spot,
I expect we will find that Californians with jobs that require them to stay put and those with families nearby will stay in the state. But in situations where homeowners have some mobility options such as working remotely or those with retirement pensions will choose to relocate when the time is right for them but not before. The migration to the NW will be slow, rather than en masse, but it will occur and help steady our market even when other markets in the nation are waning. The dynamics of the housing market are shifting, the rules are slowly changing. Our NW housing market is gradually becoming more stable and steady. This is a good thing!
In the past, our market has followed the direction of the California housing market. When housing prices dropped in CA, 6 months later our home prices began dropping. I expect this cause and effect will change.
The tale of the Japanese villages offers a prediction for the future of our housing market. Most CA homeowners will remain but a few will leave. The CA fires will result in a slow and gradual increase in demand for our housing. This will have a gradual steadying or stabilizing effect on our housing market over time. The process will be too gradual to really notice, too gradual for demand to get out of control. If there is a good aspect to the terrible CA fires, it is that our housing market will slowly stabilize. Our housing market will become an even better place for investors to focus.
If one is in the habit of looking for silver linings, then the California fires, horrific as they are, will have a slight and gradually stabilizing effect on our housing market and home values over the next few years, at least for as long as the Pacific NW is seen as a safer place to live than CA. A good thing getting even better for Pacific NW homeowners and investors.
Chris Kelsey, Managing Broker
Keller Williams PP
“Don’t be Chicken to Call”