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Price Appreciation Driven by Supply and Demand

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Home prices in Clark County are increasing rapidly.  In many ways this market feels like the 2005-2007 market.  Houses listed for sale are generating multiple offers within a few days.  They are generally selling for asking price or above.  People don't seem to care about over-paying, because they assume the house will be worth more in a few months. That said, there are significant differences between this market and the 2005-2007 Market.  in 2007, home prices were unaffordable relative to median incomes and interest rates.  There was also an oversupply of single family homes.  Now homes are relatively affordable, and there is a shortage of all types of housing. In 2007, the median income earner could only afford 77% of the average home. Now in 2016, the median income earner can afford 111% of the average home. Homes are much more affordable today. This is due to rising income and reduced interest rates.  See the chart below That is a major reason that home pri
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Population Growth Outpacing County Expectations

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Two years after the 2015 update to the comp plan, Clark County population growth is almost two years ahead of schedule and growing 1.7 times faster than planned.   At this rate the County will reach the 2035 population target of 577,431 more than eight years ahead of schedule. The County’s population growth has exceeded the County planner’s projections by 10,700 (or 93%) after only two years. The County is on track to completely run out of land for housing within 10 years. Other than that, the Growth Management Act appears to be working quite well in Clark County.
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Affordability Problem

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The home affordability ratio in Clark County dropped seven points last month, from a healthy 106, to 99, which is one point above the average affordability level since 1980.  The drop was driven by an interest rate increase from 3.54% on November 3, to 4.08 on December 1. The red bar at the edge of the chart shows what affordability would look like if interest rates were to increase to 5%.  Keep in mind that interest rates below 5% are a novelty as you can see from the dashed line running through the chart. It remains to be seen what impact this will have on home sale volume or pricing going forward.  October was an amazing month.  The average sale price was $352,600.  87% higher than the market bottom on January, 2012.  And 15% higher than the peak of the 2007 bubble!
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