While maneuvering through the home buying process earlier this year, Lexi Reyes knew she and her husband had a tightrope to walk.
Already owners of their first home in North Las Vegas, the couple had plans to cash in on the equity in their home in order to upgrade to more spacious digs—to use the money from the sale of their house toward the purchase of a bigger property.
Thankfully for Lexi and Anthony Reyes and their four children, everything worked pretty much according to plan. They now live in a 2,700-square-foot home with four bedrooms in North Las Vegas. Price tag: $525,000.
“It was scary for a while, but I’m glad we did it when we did,” says Lexi, a graveyard shift nurse at Sunrise Hospital. “We bought our previous home for $310,000, which we thought was a lot of money for a home at that time.”
Like the Reyes, many local families have been looking for a housing change. In 2021, more than 50,000 homes—including condominiums and townhomes—were sold in the Las Vegas Valley, a record.
The sales total for this year is expected to be less than that, but nearly 8,600 homes were listed for sale in the Valley at the end of June, a 23% increase from the same month in 2021. According to the Federal Home Loan Mortgage Corporation—commonly referred to as Freddie Mac—the interest rate for a 30-year fixed mortgage hovered around 5.5% as of mid-July, and it’s up more than three percentage points since early January. Borrowers who locked in their mortgage this month or last are paying a lot more, sometimes hundreds of dollars per month.
Today’s rates are a far cry from the all-time highs of close to 17% seen in the early 1980s, but any increases, experts say, make it more difficult for first-time homebuyers—or those who want to upgrade, like the Reyes—to lock in a feasible rate.
Interest rates have been on an upward trajectory in recent months, as the Federal Reserve has made attempts to battle inflation. The Fed was widely expected to raise its benchmark further at its scheduled meeting July 26-27.
“From June 10 to June 13, we had rates go from around 5.5% to about 6.5% in basically three business days,” says Jon Gedde, CEO of SimpliFi Mortgage and chair of the Nevada Mortgage Lenders Association. “That shocked the market. Rates have actually come back down since then, but that increase shook things up a little bit.”
In Southern Nevada, prices for existing homes have only recently started to drop slightly after a long run of monthly increases.
In June, according to the most recent report from the Las Vegas Realtors trade group, the median price for a home was $480,000, which represented a modest $2,000 drop from May.
That was the first time the median price had declined month-to-month in over two years. The June median price was up 22% from the same month in 2021, according to the group.
With the higher prices for homes, many potential single-family homebuyers have already been priced out of the market. As interest rates continue to climb, that will likely push more buyers to the sideline.
“We’re going to see more people sitting it out,” says Elizabeth Renter, a data analyst for online personal finance company NerdWallet. “There are more homes being listed now, which is good news, but Las Vegas was one of the cities hit hardest during the pandemic. For those who can afford the prices and the higher rates, there will be more homes out there, but first-time buyers are going to find it difficult.”
For a 30-year loan at 5.25% on a $450,000 home, Gedde says, a monthly payment will be just under $2,500. That same loan at a rate of 6.5% would be about $350 more per month.
Many industry onlookers expect the 30-year mortgage rate to be in the neighborhood of 6.5% by the end of the year.
“We had people get into contracts over that weekend in June,” Gedde says. “When they came back in and said they were ready to proceed with their loan, we told them about the increase and they…
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