Housing prices in Las Vegas are skyrocketing.

The median price of a single-family home hit an all-time high in June, plus rental prices are rising fast.

Are some people getting priced out?

Well, that's this week on Nevada Week.

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(Kipp Ortenburger) Southern Nevada is in the middle of a hot housing market with the price of homes going through the roof and rent prices also soaring.

Median home prices hit an all-time high in June-- the median sale price for a home was $395,000.

Now, that's up 2.6% or $10,000 from the month before, and the median price for a newly built home was a record-- more than $411,000 in June according to the Las Vegas Review-Journal.

Well, what's driving the price of housing, and are middle-income buyers being priced out?

Joining us to talk about the high-flying housing market are Brandon Roberts, president-elect of Las Vegas Realtors; John Restrepo, principal at RCG Economics, and Nat Hodgson, executive director of the Southern Nevada Homebuilders Association.

Well, thank you so much for being here.

I want to jump right into it, and let's take a deeper dive into what this hot housing market means and what it's telling us maybe about the region.

Brandon, I want to go to you first.

Let's talk about stability.

This is a big concern of the public here.

A lot of people still have memory of 2008 and what happened then.

How is this different, or are we seeing some of the indicators of the same maybe?

(Brandon Roberts) Well, I think this is different a lot because people have equity in their home, and they're buying the homes right.

In the past in the 2007-2008 crash, there was a lot of people that were over-encumbered, that had high interest rates and bought money with no money down, and I think just based by the way that people are purchasing a home, they're sitting better.

-And we are seeing records, the fastest increase since 2004.

Fitch Research reported that Las Vegas home prices could be overvalued by as much as 30% to 34%.

Your colleague, Aldo Martinez, has said he's run out of superlatives of how hot this market is, which could be triggering for a lot of our public thinking of what that bubble was in 2008.

How is that part of this a different conversation?

-Well, it is crazy, it is a hot market.

I mean, you can call it however you want.

It's on fire.

But the biggest thing is there's not enough to supply.

The demand is there.

I think we're short on homes that have been built over the past 10 years, so it's just prices driving up because of the supply and demand.

-Nat, let's talk a little about that.

Is this just a "demand overpowering supply" type of conversation, and why don't we have the supply on hand right now?

(Nat Hodgson) So to talk new, separated from resale, we're building as many homes as we possibly can, you know.

Before COVID and everything hit us, our labor was the number-one issue.

That's still there, it still exists today, and actually probably more so than it did before because people are retiring, right?

So we're building as many as we can.

I don't see in the near future, I'm talking a few years out, where we're going to be able to hit the supply for the demand that's out there.

You know, if you're wanting to sell, that's good news, right?

You have an endless supply of buyers there.

But the sad part is, and you touched on it, it's pricing out Nevadans.

Yes, we are.

New homes, it's a simple arithmetic problem.

It's all the costs added together is your sales price.

And, you know, as soon as both-- I'm sure we'll talk about it later-- but just getting material has been an issue.

So again, I don't see the supply meeting demand for a while.

-John, let's talk more broadly about our economic condition right now.

Is the hot housing market-- and let's maybe go back and talk a little bit about some of our national indicators.

We are seeing economic growth.

We're seeing a lot more jobs added at month end.

Those are really great indicators.

Let's talk about locally.

Is the hot housing market then reflective of a strong and recovering economy here?

(John Restrepo) Yes, yes.

The question is what's driving the-- what's the main driver?

You know, obviously the main driver going back to what you mentioned earlier about the Great Recession in 2008, one thing the feds and the Congress have learned from the last time was the stimulus wasn't big enough.

Remember the last time it was $700 million, and we thought that was a lot.

We're in the trillions of dollars now because they knew that if they didn't pump a lot of money into the system, either through Congressional action or through monetary policy-- there's fiscal policy and monetary policy-- we would drag out this recovery like we did in the Great Recession.

They didn't want that to happen.

One of the downsides of that is potential inflation, you know.

So the other part that came into play, once we shut things down here and across the world, people couldn't go work in factories in China that provide our steel and our, you know, plywood or two-by-fours, whatever it is, or appliances, so the supply chain started shutting down in terms of workers at the same time as people were staying home because everything was shut down.

You know, Americans, one thing we're not going to do is save money.

So we're not spending at restaurants and casinos, what do we do?

We buy stuff on Amazon.

And so the supply chain from China and containers and ships got all clogged up with a variety of factors in place and it caused a huge drive-up in the price of housing.

Usually it's material costs and the labor costs because a lot of folks left the construction industry and after the Great Recession didn't come back.

So you have this confluence of events, but it's all driven by the impact of the virus, of the pandemic.

-You mentioned inflation.

I mean, we're seeing it.

We're seeing consumer price indexes increase, and I mentioned already that we're seeing kind of an overvalue of what the homes are, at least some of the research is pointing to that.

I mean, could that be argued that it's just an inflation conversation?

-What will happen, I think, and it was seen in the commercial real estate markets as well, at some point because everything's in a fever now, right?

You know, house buyers, sellers, commercial developers, the industrial guys wanting to build warehouses and all this sort of-- at some point someone says, I'm not spending that.

I'm not going to pay you $100 a square foot to build this industrial building because that steel from China's too expensive.

So it'll be a cooling off.

That doesn't mean it goes backwards in time, but there'll be a big cooling off.

We're still left with this housing affordability question, because what's not driving prices-- there may be supply constraints, it's not wages.

Wages are still pretty constrained in Southern Nevada when you adjust for inflation.

We're back to the buying power of the 1990s.

So, you know, there are a lot of things there.

Low interest rates have helped gin things up, so there's a lot of things in the air.

We won't see till probably another year that things settle down.

That's assuming the government doesn't pump even more money to prevent another COVID thing where they're providing, you know, more financial assistance to folks.

And there's other things in play, you know, the PPP money and the $1,400 a family money, all that sort of stuff, they don't pump that in again based on the virus, and we're on virus time at this point, right?

-Still on virus time, absolutely.

And as you mentioned, so many variables related to affordability.

We'll get to those in just a sec.

Nat, I want to talk to you a little bit more about something John said there, the cooling off, and one of the indicators we have that could mean and potentially signify some cooling off is the sale of new homes has dropped 6.6% in the last month, but yet we're still seeing the value of new homes increase as I mentioned with records.

How's that even possible?

-Well, first the drop in new home sales, it was by design.

It's the builders looking out, and you got to watch selling a house that you can start for a year and a half because in my 30-plus years in construction, a commodity like lumber going up as much as it did, it was adding $40,000 to the average house.

I mean, some of the larger houses even more.

Well, you're on the hook for that as a builder.

I mean, you can't go back and say hey, you know, by the way this thing went up.

They're limiting how far out they're selling, so that's by design.

It's not because of a lack of interest by no means which means, you know, it'll sell pretty quick, so that's a good thing.

Also, I liked it too, because I know what our labor constraints are.

It's great if you can sell it, but we have to build it, so we're pushing the envelope on both of those.

So I am glad to see for multiple reasons kind of a pulling back.

It's not a shutdown.

I mean, it was a 6% drop.

That's not a whole lot, but it's a start.

-It's a market correction.

-Yes, exactly right.

Again, your risk as a builder, you need to watch how far out you are selling into, and that's good for the consumer too.

We used to say, who knows what's going to happen next year?

Well, nowadays we're saying we don't know what's going to happen on Monday.

It's a new year every week.

So yes, no reason to be alarmed there.

-And some of the supply chains that John was talking about too.

Of course we saw the cost of lumber, as you mentioned, to supply chains catching up to where we were with such large closures from the pandemic.

Can you forecast a little bit of when we might start seeing some of those supply chains come back?

-We're starting to see a little bit of it, but who would have ever thought we'd have a paint shortage?

Paint, something as simple, and it goes back-- and resins for the radiant barrier on plywood or inside a garage door.

It went from the pandemic being an issue to the freeze in Texas be an issue to the little ship that got stuck sideways in the canal that had a bunch of our imports in there.

So I mean, that's why I don't say what's next.

Who knows?

It's going to be something.

The fires up in Northern California didn't help with our lumber.

But just to give you a little glimpse of the lumber, a piece of plywood, a piece, four-by-eight, was $9 before the pandemic.

In some cases it's $80, 8-0 dollars a sheet, and you see how many sheets are on a house.

That just gives you a little glimpse of it.

So I don't know when it's going to end.

Every time we think we're getting back to whatever normal is, we have a little pause again or rollback, and we depend on the whole world of imports.

So it's-- I have no idea.

-Brandon, I want to go to another big factor, who is buying homes and how that might have changed and how that is changing, and how that's maybe driving up some of the prices.

Give us some perspective there.

-We're seeing a lot of people moving here from out of state.

We're seeing a lot of hedge funds purchasing large numbers of properties similar to what they did in the past, and it's making it harder for the first-time homebuyer or the person that lives and works here in Nevada to get in and buy a home.

-A lot of Californians.

-A lot of Californians, yes.

-I was looking at some of the statistics, 30% of home buys are in cash, obviously coming from potentially selling of homes in other states, I'm assuming, is that what you're seeing?

-Yes.

So you're seeing cash from people selling higher-end properties in California moving out here and paying cash for the property, and also the hedge funds are all paying cash as well which if you're getting financing, a lot of our FHA and VA buyers are really struggling to get their offers even looked at or accepted.

-Well, it's not just that houses have become out of reach for people.

Prices for rental properties have jumped significantly over the past year as well.

The Nevada Week team met with a Las Vegas man who is worried he'll be without a place to live.

Melvin Young is a local senior citizen struggling to survive on a fixed income.

Melvin's rent was just raised by $200 a month, leaving him with some difficult decisions, like where to live.

(Melvin Young) With that standard rate, it's a move out, because it's nothing-- the financial aid will cover 15 if you only have 13.

So it's like, you know, what do I do within 20 days or 30 days, and then I have still paid the full money, $1,300.

So it's a crushing situation for seniors at my age, 60.

Sometimes it's a struggle with trying to meet different requirements and, you know, keep up with everyday things.

And there's certainly reason for concern for some of Las Vegas' senior citizens.

The average social security income is $17,000 per year, and the poverty rate for area senior residents is around 11%.

Nearly 30% of people living in the area who are 60 and over received food stamps in 2020.

This makes Las Vegas' high rental costs out of reach for some residents.

I'm Mark Lister, and I'm with Keller Williams Realty, the Marketplace, and I'm a property manager.

I've been doing this for 21 years.

Mark has seen a lot of change in Las Vegas' rental market over the years, but nothing compared to what's happening today.

Rental inventory is real low.

A normal rental market, it should be around about 6,000.

That includes condos, townhouses and houses.

Right now we're sitting under 1,000.

So not much supply and the demand is heavy.

There's people moving from out of state as well as we're getting back on our feet here.

Many renters are getting back on their feet too, and some will have problems finding a place to live in Las Vegas.

If their credit scores are low, they're not going to get a place.

And it looks like reversing the trend will take a ton of time and money, time and money many Las Vegans can't afford.

COVID really kind of exacerbated the problem because with the eviction moratoriums, they got scared and it's well, the heck with this, I'm going to sell.

You know, I can't rent a house with someone just sitting there not paying rent.

As Las Vegas' population increases, costs continue to rise and inventory remains low.

Life for the city's renters will affect landlords, tenants and the entire community as a whole.

For Nevada Week, I'm Heather Caputo.

-Thank you, Heather, we appreciate it.

John, I want to go to you right away.

We've already talked a little bit about affordability.

I mean, inventory low on rentals in addition to new homes and resale of homes.

First off, we're seeing the value in rentals increase also, and then of course as you mentioned, wages are staying the same.

Let's talk specifically about the rental side.

What's the tipping point?

Are we already at the tipping point where the majority of Southern Nevadans can't even afford rent here?

-Yes, we're at that tipping point.

You know, the eviction moratorium I think is ending or has ended, I'm not sure, and they may extend it.

The challenge has been around the country is getting the money to the landlords.

The financial assistance to the landlords for those folks that have been given, you know, the eviction moratorium.

So the feds have had difficulty getting that money out particularly the small mom and pop landlords.

The big, large company landlords, they do okay.

They have enough resources to handle it, the equity funds and investment banking folks.

But it's the small landlords that have not been getting their money as quickly as they should have to make up for the fact that their renters aren't paying rent right now.

It goes back to the virus too, right?

Some of these jobs are low-wage jobs in high-touch occupations, and folks are scared to go back working, you know, the buffet table at a casino/resort, so you have that going on.

There's the issue of if they go back to work, what happens with childcare because the schools are closed, so you have that cost.

So there's a huge number of things going in place, but at the end of the day, the bottom line at kind of the macro level, Kipp, is we have a relatively low-wage, low-skilled workforce.

That's always been a challenge for us particularly in hard economic times whether there's the pandemic or during the Great Recession.

Until we figure out that we have to use-- and I'm not trying to use a loaded question-- I'll answer it back in the only way I can think of-- a living wage where we raise wages so people have more spending power, so to speak, more flexibility.

We're going to continue to have these kind of issues that we're seeing here, particularly in an era now with land constraints and development getting more and more expensive and you can't create more land, as the old saying goes, right?

So apartment buildings will cost more, you know, warehouses, office buildings, all these things will cost more and more, and the rents go up, prices go up, right?

And then you have kind of a confluence of events that put us in a real tough spot I think in Southern Nevada for a while.

Reno doesn't have this problem.

Reno's got a land shortage, a housing shortage, but they have higher-paid wage earners, right?

So they're able to have more flexibility there.

So something really-- and like the story said, it's going to take a lot of time, talent, treasure and political will to have a change in this.

And this issue of housing affordability now flows to the legislature.

Now it flows through to municipalities.

It's not going away.

How do we provide affordable housing.

-Right, and so many of those roads lead to a more diversified economy to bring those wages up of course.

Just as a reference point because we're talking about this, in Las Vegas right now for a rental, a two-bedroom rental, considering that 30% of your income should go to rent, requires a $22-an-hour wage job, more than double what the current minimum wage is, a great reference point here.

Brandon, I want to talk to you specifically about the housing sales, homeownership now also.

Are we at the tipping point there with where our median price is?

-I think we are, and the reason being is because we're starting to see some price reductions on the Multiple Listing Service.

You're still seeing multiple offers on properties, but I think buyers are starting to get to a point where we're hitting that max of what they're really willing to pay.

And that's where we need to get before the prices kind of stabilize or maybe even come down a little bit.

-What kind of populations are really being displaced then right now?

-Populations in demographics or... -Yes.

Are there certain demographics we're just seeing that aren't able to afford that first house?

-I think it's your lower-income residents, and he's right on the rents.

We do property management as well, and we're seeing at the end of these leases rents going up $300, $400, $500, and we're having to have tough conversations with those owners about saying hey, you don't want to just have anybody in here, this been a good tenant, you need to take some of that into effect.

And you're also seeing tenants just kind of having to take it because they can't find something else, and they're not going to find anything else at a more reasonable price so it's tough.

-Nat, this obviously begs the question on the building side if we're seeing any changes in how investments are happening into new home buildings, or potentially how builders or constructors are looking at providing affordable housing or housing that might be more akin to a renter instead of a buyer.

-So the good news is I think we learned a lot during the Recession.

Some call it a memory, I call it a nightmare.

But it's definitely still on our minds, and I think, you know, looking back on it, it set us up to succeed through what we're going through now.

A lot of it, we don't have the investors buying the new homes like we did in '06 and '07; matter of fact, some builders just flat out, if you're not an actual buyer, it's not going to happen.

Others, it's a very low percentage so the good news is people that are actually buying homes today because of the bank restrictions can afford to buy the house, got a loan because of what they make, and they want to live in the house.

You know, that sounds so academic, but we did not have that back in '05 and '06, hence how we got in a problem there.

So I mean, it's not doom and gloom.

Everything we're talking about is real.

Again, solely the new home prices is an arithmetic problem.

The good news is we're paying labor more, but it goes into the house costs.

We're paying, you know, higher fees to build more structures, and that's good but it's again a math problem.

So the good news is it isn't like okay, when that shoe drops, you know, everybody says about a bubble, well, there is no bubble to pop because there's no bubble, but we're very concerned about affordability.

You know, what I can't do is build a $450,000 house and sell it for 400,000 and think that volume will make it up, and we're building all the homes we possibly can right now.

So you know, there's some good stuff, but we need to get our economy on track and control our costs, for goodnes sakes.

-And if I could add to that, I could make some really interesting points.

The other thing that I heard the other day from the chief economist for the National Association of Homebuilders.

I was watching a video of him, and he said we're facing these challenges all over the country, and he calls them the five L's-- -I know, I made more up.

-Land, labor, lending-- and lending standards for home builders are tougher than they used to be-- and he said the one that's the worst is legal, and legal means zoning restrictions and code restrictions and building regulations on how people build and how they allow mixed housing in a project and higher density housing and all these sorts of things.

So there's still certain things we can control through looking at our regulatory process for what rules builders have to build on and have to follow that could help in terms of relieving some of these pressures.

-And I just got to add to your excellent point.

You know, builders build to the rules and regulations and ordinances in each area.

When they say why can't you just build more, it's like you can build eight to the acre.

Yes, but when you follow all these rules you get five, and your costs for infrastructure is X; it doesn't change.

When the denominator goes down, each one goes up.

I mean, again, I go back to it's an arithmetic problem.

But you're absolutely right, John, and we work with the local jurisdictions but we also have residents that, you know, they want what they want because they're in their house, fully understand that.

I mean, we all live here as well.

But that is a true point.

You've got to really want to do the affordable housing and understand what that means.

Again, it is not building a $450,000 house and selling it for 400.

That's not how we're going to get there.

-So it sounds like-- let's talk about policy a little bit here, and it seems to land on the municipal policy that some of our counties and some of our cities could relax maybe some of the restrictions to allow for some of the infill that we see as we drive around the valley and we see these open lots.

Do you have any suggestions?

Is there something that would really help builders be able to fill with affordable housing?

-That's a big question, and I wish I had the answer.

And by the way, the jurisdictions are working.

We're at the table every day on it.

There is no magic bullet, and what looks good on paper, especially infill, you're infilling.

You have surroundings, and that's another barrier, if you will, fully understandable.

Going in the outskirts, we don't have a lot of.

So we don't have a lot of flexibility, but there's some things I think are going to come down.

We need to designate areas and do it right.

You can't shoehorn it, and that's what people across the nation have tried to do.

Other areas have done some different programs and they get this pot of money to build, you know, affordable housing that they really haven't built, so that doesn't work either.

We need to be methodical.

We're all talking about it.

State legislators are talking about it, local governments are talking about it.

The homebuilders are actually going to team up with the realtors going into next year.

This is all of our problem.

We got to help affordability.

I don't have the magic bullet, but again, it does come back to the rules and regulations are out there.

It doesn't mean you lift them, right?

By all means we don't want to do that.

But we need to really put the pencil to the paper and figure out what's going to work.

-And the other thing too, if I can jump in on that, is the whole issue of land.

We've kind of touched on it, and the good news is I think there is a lot of work or coordination now between the realtors and home builders and the commercial development industry.

Everyone understands we have an issue.

Everyone understands that you have to have a good jobs/housing balance to have a healthy economy or you don't attract economic development.

If everything goes to housing, you have enough land for employment uses, then that's a challenge too, or vice versa.

If everything goes to employment and you don't have enough land for housing, that causes the housing affordability issue.

Things are being worked on, it's just going to take time.

There's a lot of potential land coming for potential development through the Cortez Masto lands bill.

There is the Ivanpah Airport land potentially coming.

Those are longer-term answers.

They're 10, 12 years out.

So in the shortening, the intermediate term, we do have this issue of this balance on land resources in Southern Nevada that we have to deal with, and it's something that we just have to really focus on and pay attention.

But it's on top of everyone's mind right now.

-For sure.

-If I can add just one thing.

When it comes to density too, I always try to make this point.

More isn't always better.

I don't always want to build more per acre.

I want to build the right amount per acre.

I just needed to get that out because oh, we'll just give you more density.

There's a limit to where it's not good.

So I just wanted to throw that out there.

-Brandon, I want to follow up with you.

we've got about a minute left.

We're talking about long term, let's talk more about short term.

Of course two big factors that are right on the horizon this week, mortgage forbearances and eviction moratoriums are going to end.

How do you think that's going to affect the market in general here?

-You know, it depends on what report you read.

Some people are saying it's going to be just a massive crisis and others are not, and just looking at our rental portfolio and the amount of people that are actually delinquent on rent or not being evicted because of the moratorium, it's actually pretty small.

So I'm not anticipating a huge thing.

I think if owners and tenants and property managers work together and really communicate through this process, I think we can avoid a catastrophe, so to speak.

And it's really not a bad time in Vegas to buy still with low interest rates, and there's still inventory and stuff.

So it's an interesting market all the way around, but I think if you're going to jump into it, do some research.

-We want to thank our guests, Brandon Roberts with Las Vegas Realtors, Nat Hodgson with the Southern Nevada Home Builders Association and John Restrepo with RCG Economics.

And thank you of course as always for joining us this week on Nevada Week.

Now, for any of the resources discussed on this show, please visit our website at vegaspbs.org/nevadaweek.

You can also find us on social media at @nevadaweek.

Thanks again, and we'll see you next week.

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