A correction to the local housing market was coming. Over the last two quarters Vivek Sah, director of the Lied Institute for Real Estate Studies and professor at UNLV’s Lee Business School, had anticipated a course correction in the housing marketing after prices had soared over the last few years. He just didn’t predict it would take a global pandemic to create the needed shift in the market.
Sah’s research focuses primarily on housing and real estate investment trusts. His work is published in top real estate journals in the United States and United Kingdom, and he's the current editor of Journal of Sustainable Real Estate. Here, Sah discusses the impact of the global pandemic on the Southern Nevada housing market.
What factors caused by the global pandemic will have a short- and long-term impact on the housing market in Las Vegas?
In the short term, unemployment will have the greatest impact on how quickly the housing market can bounce back. The shutdown of gaming and hospitality will impact not only current homeowners but also people who were planning to buy in the coming months.
The fear factor caused by the uncertainty of the immediate future will deter sellers from selling homes. Prospective buyers will likely hold off buying now, slowing the market further in the longer term.
Additionally, we will see — and have already seen in the last few weeks — stricter requirements by private lenders and banks to qualify people for home loans.
Do you anticipate we will see a housing crash similar to 2008?
The current more diverse economic landscape, the profile and behavior of the average home buyer, and the lending standards and practices in the aftermath of the great financial crisis of 2008-09 are very different and more robust than before. Also, the developers have been cautious to add just enough inventory to keep pace with demand and not flood the market with their housing products. Considering all these factors, there will be a correction in the housing market and not necessarily a crash similar to 2008.
What is your advice for homeowners who see their home value lower during this time?
Housing markets go through cycles. This one lasted almost eight years, and it was time for a correction. As a homeowner, if there are no economic hardships faced by the household, and their ability to pay their mortgage is not affected, then just sit tight regardless of the market value of your home, as values will rebound in the next few years just like after the financial crisis.
What do you think homeowners should expect in the coming months?
In the short term, home values will fall due to the economic shock in the local economy and the expected layoffs in the gaming, hospitality, retail services, tourism, as well as the technology companies that service the gaming industry. All things considered, housing prices will correct over time.
Are there any statistics that show how many people won’t be able to pay their mortgage during this time?
It is difficult to say. However, what we know is that lenders, and banks are working with individual homeowners who have faced an economic hardship recently and allowing them to defer their payments up to at least 90 days (and hopefully more). Some banks may even extend that on a case-by-case basis. Also, depending upon how much funding at the federal level is available, there might be federal programs (based on some criteria) for minority and low-income homeowners.
As job recovery begins to take place, and the gaming and hospitality industry starts bringing back their employees over the next year or so, many will be able to keep their homes through this downturn. However, there will be some permanent job losses as hotels, and casinos and other related companies will not hire everyone back just to err on the side of caution. Those distressed assets will be offloaded by banks in the market, and add to the distress share of housing which had gone down to just 6 percent of the resale market prior to the on-set of the pandemic.
Even though the current situation is unsettling, do you think we will be able to recover as a city long-term?
Yes, of course. We are more resilient economically, and even mentally more prepared as a community than we were pre-2008. Also the recent additions to our community such as the Raiders and the Golden Knights have made us more visible and marketable as an economic hub. So many great things have happened in the last five years, which will position us to come out of this economic shock stronger, and (move) toward a rapid recovery.