CLARK COUNTY HOUSING MARKET
(almost) MONTHLY REPORT
The Effects of Higher Interest Rates
You won’t read this in the paper.
The RMLS stats for July are in. Let’s get started.
Buyer activity levels:
The best indicator of buyer activity levels available to us is the weekly report on the number of times a lockbox is opened in Clark County. The chart below shows us that over the past12 months lockbox openings have stayed pretty steady. In July of 2022 (just off the chart-sorry) we were having 3300 lockbox openings per week. We are currently at about the same number of openings.
I think a major driver for buyer activity is interest rates. The lower rates fall the more buyers that can afford a home. The higher rates climb the fewer buyers that can afford a home.
From July 2022 through July 2023, we saw interest rates climb from just under 3% to almost 7%. That is over a doubling. Referring to the lockbox chart above, it does not appear that interest rates have slowed down buyer activity in the least. That is pretty amazing and difficult for me to believe. In fact, I do not believe it. My experience and that of other agents with whom I have talked is that showing activity has slowed dramatically over the past year. During Covid it was common to have multiple showings a day. Now it is typical to get 2-6 showings per week. I do not know why the lockbox report does not match actual market experience felt by myself and other agents.
During Covid the market was tight. Inventories were low and buyer activity was high and home values were through the roof. I do not remember anyone predicting that Covid would cause sellers in mass to stay put and not sell. I get that there was a rush on toilet paper, pets and chickens to name only a few. But for sellers in mass to say, “We will put off our plans to sell and just stay put” was totally unexpected. And along those same lines, once the Pandemic was over doesn’t it make sense owners would jump at the chance to move ahead with their plans to sell? But as yet that is not happening. The chart below shows that inventory levels are still remaining low and that is why home values remain high. Inventory levels are actually lower now than last year at this time. Even with interest rates rising and buyer activity slowing, the low inventories are supporting current values.
During the Covid era home values were simply rising at crazy rates as shown in the chart below nationally. I think there has been a misconception that homes values after Covid lost value. Sure, the rate of rise in values dropped quickly but nationally and in Clark County rises in value to slow but never went negative. There was such talk of a recession coming and showing activity just felt like things were really slowing down, many folks just assumed home values were actually falling. The chart below shows nationally home values rose the past 12 months over 3% while RMLS for Clark County shows home values rose just under 2% the past 12 months.
Bonus Thought: From Trading Economics (link) comes this interesting graph on average annual home appreciation. Look at what happened to values during the Covid years and how rises in interest rates have affected values the past year. By clicking on the above link you can also access charts showing how values have changed over the past 10 to 25 years. Interesting. When home values go through the roof like they did during Covid, I think about how difficult it is for a younger person trying to buy their first home and how fortunate current homeowners are who experienced the appreciation. Once one owns a home, it is so much easier to sell and relocate because that amazing equity growth is “baked in” with ownership. And naturally, the more homes one owns the more equity growth there is.* But everyone knows that, Right? 🙂
*(unless there is the period of decline like in 2007-2012)
Annual Home Appreciation Chart
(Directly affected by interest rates)
The Future: What to expect
Interest rates have played a key and major role in home appreciation and market activity over the past 3+ years. As rates fell, demand rose along with home prices. During Covid as rates fell, home values rose at an annual rate of nearly 20%. When Covid ended and inflation became a concern, interest rates rose steadily and market activity slowed bringing home value appreciation rates down to below 5%.
Somehow the national economy has remained healthy through all of this. During rising interest rates there was concern of a recession. It now looks to be averted (or so it appears at this point). It seems the Fed is taking each month as it comes regarding rates depending on inflation.
I suspect the direction of the housing market will wobble back and forth as conditions change and rates are adjusted but the general path I predict will be steady as she goes with home values rising along the way. We are on a long path again of an improving housing market and modestly improving home values.