If you want to buy a house right now or purchase a commercial space for your business, you will have to be patient. The nation’s housing market – Clark County included – is incredibly tight. And now, mortgage rates that have hovered near record lows for the last several years are rising. This week, mortgage rates have soared to over 4% for conventional loans – the highest they have been since before the pandemic. Not to mention, prices for new homes and buildings are at all-time highs, and with little selection, the market is not likely to cool anytime soon.
A Look at Clark County’s Commercial Market
Despite the ups and downs that the pandemic has thrown at businesses everywhere, the commercial real estate market in Clark County remains strong. Adam Roselli, Vice President and Managing Broker for Fuller Group CRE says, “We are experiencing a higher-than-normal volume of sales across all disciplines and the pricing for all product is selling at faster-than-inflationary rates. Leasing activity is also strong with vacancy rates lower and rental rates higher than at most any point in our recent history. There is a strong appetite for development with limited product available and a growing and expanding population pushing demand.”
He believes that increasing interest rates will eventually slow things down, especially as people tighten their budgets and cut spending. But that may take a while.
“Development and sales of owner-occupied commercial real estate will feel strain as high construction and entitlement costs couple with more expensive borrowing costs to make owning and developing less desirable and leasing more enticing,” said Roselli. “This will in turn tighten vacancy rates further which will accelerate the upward pressure on rental rates. There will be some organizations who “right-size” their commercial space which will alleviate some pressure on vacancy and rental rates, but currently the consensus is occupying commercial space will be more expensive in the future than it is today – whether you own or lease.”
Agents of all kinds are also facing a lack of product, which adds another layer of complexity to the market.
Roselli explains, “A 2,500 square foot user wanting a heavy office buildout in a suburban setting will likely find little product that fits their requirement. Incubator business parks in Clark County are effectively full of tenants and are getting gouged with 15% to 20% increases on renewals. Larger industrial users have virtually no opportunity for mobility or growth due to a lack of vacancy. Even retailers are finding most centers full and a lack of product for expansion or relocation. From a sales standpoint, most brokers have a handful of buyers waiting in their pocket for when a new listing hits the market – just to be outbid or beat to the punch.”
A Look at Clark County’s Residential Market
Just like the commercial sector, low inventory and high demand continues in the residential market as well, with little hope of change in the foreseeable future.
Kenneth Johns, Broker for The Johns Group at Windermere explains, “Since COVID, most buyers are waiting six to eight months to find the house they end up buying. Many buyers still write offers on several properties before getting an accepted offer. Sellers are experiencing these same problems when they buy, and this is helping to keep inventory down. The pandemic has caused a ‘risk-off’ market that has reverberated through the entire industry. We would like to see a one-month supply, but current levels are around two weeks.”
With mortgage rates rising daily, Johns believes that while this will reduce some of the demand for housing, it will not allow for a balance quite yet.
“[Increased rates] will slow some of the demand but this will not balance the market until rates are significantly higher,” Johns said. “Pent up demand will need to be exhausted before rates will have a slowing effect on today’s high demand. Historically, high rates have led to a reduction in demand. This, coupled with the recent increases in property values, would eventually lead to an affordability issue and fewer mortgages sold.”
Looking ahead, Johns shared that keeping buyers engaged is difficult right now – simply because there is hardly any selection. The key is to be patient and not give up hope that the right property – either commercial or residential – will come up.
“Lack of inventory makes the process seem like it moves at a glacial pace,” he said. “Our working relationship with our clients has gotten longer. Most of our clients are selling and buying with us. Keeping the relationship fresh, positive, and stress free for clients requires a deeper focus when the relationship lasts almost a year.”