Just a few weeks ago, Las Vegas’s economy was riding high and businesses were going strong. Years after the Great Recession (which had hurt Nevada more than any other state), locals could point to billions of dollars’ worth of real estate projects. Tourism numbers were strong, unemployment rates kept dropping, and the Las Vegas real estate market kicked off 2020 with huge boosts in sales after slumping in 2019. All in all, housing market predictions for Las Vegas 2020 were positive – but then the coronavirus hit. Now, with Las Vegas (and much of America) rapidly shutting down to contain the spread of COVID-19, Southern Nevada is starting to feel sharp economic pain. What could this mean for you as a real estate investor in Sin City? Keep reading to understand the effect of the coronavirus on the Las Vegas housing market 2020.
Related: The Impact of the Coronavirus on the US Real Estate Market
Effect of the Coronavirus on Las Vegas’s Economy
It’s clear the COVID-19 pandemic has shaken Las Vegas’s economy in an unprecedented way. The governor of Nevada, Steve Sisolak, ordered a month-long closure of casinos and other non-essential businesses. Bars, movie theaters, gyms, and restaurants statewide have all been shut down in order to stop the spread of the new coronavirus. For the first time since the JFK assassination, the Las Vegas Strip is also forced to shut down including everything from the famous casino resorts to slot machines found in convenience stores. Plus, the city’s main economic engine, which is tourism, has completely gone dark – we’ll go over this and its effect on the Las Vegas housing market later on in this blog.
As you would expect, this is causing an economic slowdown in the state, but specifically in the city of Las Vegas where 2.2 million of the state’s 3 million residents live. When businesses suffer from a pandemic like this one, people will naturally start to worry as unemployment rates climb up. A recent study by the Economic Policy Institute found that Nevada is likely to lose 5.3% of private-sector jobs. How is this going to affect the Las Vegas real estate market? Well, hundreds of thousands of people who could be directly affected by that might have been potential home buyers. This could have a very large impact on the Las Vegas housing market 2020.
Experts are already forecasting a drop in Las Vegas home sales since buyers will have to postpone their purchasing decisions. Numbers from the Las Vegas Association of Realtors show that newly assigned home sales contracts were down a little under 30% in March 1st – 19th this year vs the same period last year. Likewise, their numbers also show that new listings were down 8% this month vs the same time last year. For a Las Vegas real estate investor, the declining demand from home buyers could be good news for you as it means there will be a demand for rental properties.
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Effect of the Coronavirus on the Las Vegas Housing Market
As any real estate investor should know, how the economy is performing highly affects the housing market as well. As we previously explained, job loss and economic slowdown are causing Las Vegas home sales to drop since more and more people are uncertain of the future and choose to stay in quarantine. The impact of COVID-19 on the economy is not just affecting home buyers and sellers in the Las Vegas real estate market 2020, but also home builders. Housing experts are forecasting that real estate projects in the pipeline will either postpone construction work or cancel it altogether. And this is not just in Las Vegas, but around the US housing market.
Related: US Real Estate Market Data Shows COVID-19 Effect
This is definitely going to cause a drop in the supply of properties for sale in the Las Vegas housing market which already is suffering from a low housing inventory. According to the Las Vegas Association of Realtors, housing inventory would decrease to only 1.7 months if no new homes come on the market in 2020. This is significantly below the 6 months of supply that is considered a balanced market. This is an indicator that Las Vegas definitely remains a seller’s market. And while experts predict mortgage rates will remain low this year, they don’t think this will spur more home sales in the Las Vegas real estate market as potential home buyers are now worried about their jobs.
Effect of Coronavirus on Airbnb Las Vegas
One of the things that you can’t overstate is how important tourism is to the Las Vegas housing market. Given all the people across the valley who work in the industry, tourism is the core of Las Vegas’s economy. Now, with several travel bans issued and big gatherings canceled to further stop the pandemic’s negative impact on the US, Las Vegas’s economy is under threat.
Las Vegas is typically home to some of the largest gatherings and conventions in the US. Data from a report by consulting firm Applied Analysis for the Las Vegas Convention and Visitors Authority show that visitors spent over $34 billion in Southern Nevada in 2018 which had directly supported more than 234,000 tourism jobs. However, the city’s lucrative convention business has already taken several blows the past few weeks as more than 30 events have reportedly been canceled.
The impact of the cancellations reaches far beyond the events and attendees. They also have a negative impact on Las Vegas Airbnb hosts. This is something we can clearly see when looking at Airbnb data and analytics. Hosts are now dealing with booking cancelations and, according to Mashvisor’s data for Airbnb investments in the Las Vegas real estate market, the Airbnb occupancy rate fell from a whopping 71.49% in March of 2019 to just 54.68% in March 2020. Since travelers are canceling their reservations, hosts who depend on their Airbnb income are also seeing a drop in revenue. Mashvisor’s Airbnb analytics show that monthly Airbnb rental income for Las Vegas short-term rentals fell from $4,099 in 2019 to $2,723 in 2020.
Related: Airbnb Hosts Feeling the Effect of the Coronavirus
Can We Expect a Las Vegas Housing Market Crash?
Those with fresh memories of the Great Recession of 2008 know that the Las Vegas real estate market was hit the hardest. Now, after the stock market crash and as the coronavirus pandemic is causing a real estate slowdown in the city, many fear that a Las Vegas housing market crash might be near. While those fears are valid, experts say it’s too soon to tell whether or not this is going to dent the Las Vegas housing market as the recession did. According to Eli Segall, a real estate reporter for the Las Vegas Review Journal:
It’s tough to say because we don’t know how long this is going to last. Governor Sisolak has ordered the casinos to be closed for 30 days; that will obviously have a tremendous impact on all business here in the Las Vegas Valley. How that manifests in the housing market is just a little too early to say. But I think it’s safe to say that if these closures continue and we see job losses pile up, the housing market is going to get hit very hard.
The Bottom Line
The Las Vegas real estate market has always been attractive to out-of-state investors who buy homes either as rental properties, to flip, or as second homes. So, another question that they’re asking is would the foreseeable future be a good time to look into buying or investing in Las Vegas real estate? Even under normal circumstances, that really depends on your own personal situation. This includes your finances, job, income, ability to make a down payment and afford monthly mortgage payments, and the type of mortgage rate you get. Again, it’s too early to tell exactly how the coronavirus will affect Southern Nevada’s real estate industry. Our advice is to keep searching for investment properties for sale in Las Vegas – you never know, you might just find yourself a great real estate deal while no one is looking.
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To get the latest coronavirus updates from Mashvisor on how COVID-19 is impacting real estate markets in the US, make sure to keep checking our real estate blog.