Las Vegas survives on visitors and immigrants. The housing market depends upon those escaping California taxes and regulation with thousands in home equity to bid up home prices in Nevada, in general, and Las Vegas, specifically.
The actual numbers, provided by WolfeStreet.com, are; 47,500 Californians moved to Nevada in 2017, while 23,800 Nevadans moved to the golden state. That’s a net 23,700 inflow from California or roughly 2,000 per month last year.
Why this matters is, as builder Toll Brothers indicated in a recent earnings call,
“California has seen the biggest decline. Significant price appreciation over the past few years, fewer foreign buyers in certain communities, and the impact of rising interest rates all contributed to this slowdown.”
In California’s case, foreign migration is largely from Asia. These people come for jobs, particularly tech jobs, education, and opportunity, or to get themselves and some of their assets away from the long arm of their government.
And now the greatest fear of the housing industry in California is that this inflow from Asia is going to slow down. Even a small slowdown, with domestic out-migration as large as it is, could create massive demand problems for the housing market.
With California being Nevada’s primary feeder market, what happens in California won’t stay there, but migrate to Nevada.
In fact, it already has. Eli Segall writes in the LVRJ ,
A total of 7,003 single-family houses were listed without offers at the end of November, up 1.2 percent from October and 54.3 percent from November 2017, according to a new report from the Greater Las Vegas Association of Realtors (emphasis added)
Andrew and Dennis Smith write in their latest Homebuilder’s Research Market Letter,
Resale listing inventory has sharply increased since August of this year. After sitting under two months worth of listings for roughly 17 straight months, our friends at Residential Resources are currently reporting 3.0 months worth of supply in the resale market. While historically a figure of six months has always been considered “normal,” some analysts now say we might need to put that number closer to four months with the efficiencies technology has injected into the home buying process. So, perhaps some might say that Southern Nevada is closer to a “normal” market than previously thought, at least in terms of supply.
Smith and Son also address the topic of builder cancellations,
This topic came back to mind a few weeks ago when we reported a cancellation rate of 29.5 percent across a sampling of 235 active new home communities. This was the highest weekly figure going back to at least 2015. A few days later a large scale builder told us they had their worst month for cancellations in memory, prompting a call from their corporate office.
Nevada went California blue in last month’s election. The Silver state has adopted the Golden state’s housing blues as well.
