The transition from apartment renting to owning your first home rests mainly on a foundation of finances. Typically, you save up now so you can buy later. Chances are, you’ve heard about the cities where homeownership is almost impossible for new buyers to obtain. But, there are other cities where the price of owning a home isn’t just increasing — it’s accelerating with each passing year. Or, maybe it’s the rent costs that are growing too quickly. This week, we’re looking into popular tourist destination, Las Vegas, otherwise known as Sin City, and whether it’s the right time to buy or rent in the West Coast market.
Las Vegas, Nevada
Known perhaps more for its status as a gambling and entertainment mecca than as a metropolitan community, the Las Vegas area is home to more than 2 million people–making it the 28th-most populated city in the country. Long summers that can get very hot and cold winters that are gone as quickly as they arrive differentiate the West Coast metropolitan from its neighboring states. With an economy largely dependent on tourism, many of its top industries are related to hospitality and events.
According to Las Vegas Realtors (LVR), the median price of all existing single-family homes sold in the area during May was $315,000. Down from an all-time high in March of $319,000, this is 5% higher than the median price of $300,000 one year ago. For starter homes specifically, the appreciation rate for the past five years is about 15.5% per year. Over three years, that number increases to over 17% each year.
Since the Great Recession, Las Vegas home prices have rebounded to within 5 percentage points of its pre-recession values. For many of the past several years, it’s been at or near the top of cities experiencing positive appreciation.
Why Buy Now?
Tom Blanchard, president of LVR, says the average rental cost in Las Vegas is between $1,400 to $1,600 a month. “Unfortunately, that doesn’t meet the median price range for owning a home, but it’s still a doable number to buy a starter home or condo.”
Renters are seeing anywhere between 3 – 5% price growth each year. In the short-term, this means it’s likely cheaper to rent than to buy. However, the historically high home appreciation rates are tempering, providing an opportunity for renters to enter the market and realize long-term gains.
Blanchard adds, “There is never a “perfect time” to enter the market. Too many people sit on the fence trying to time the market, but the information comes out so late that you usually miss it. And all the hidden costs that new buyers worry about are built into the rent they’re paying now, but not getting equity in return for.”
What to Prepare for
The Las Vegas market is historically more volatile than other markets. New listings for single family units are down almost 30% from last year, but have increased since last month. Yet, home sales activity has been trending downward, but Las Vegas also has reports of properties moving into escrow that have increased some 63% from April to May. If this area is where you want to call home, you might need to prepare to ride out more extreme market swings.