Las Vegas is one of the major cities in the US, with close to 3 million people living in its metro area. Yet, surprisingly for a city of its size and popularity, it has one of the cheapest housing markets in the country. So, why are Las Vegas houses so cheap?
Homes in Las Vegas are cheap due to its overdeveloped housing market, poor job market characterized by low wages, and low property taxes. But that’s changing already. Price of homes in Las Vegas rose by more than 30% in the last year, mostly due to higher demand as people migrate from other cities.
Nonetheless, houses in the city still cost far less than most major US cities, making it one of the most affordable real estate markets. Here, we discuss why Las Vegas houses are cheap and why that’s changing.
Cost of Homes in Las Vegas
The average cost of homes in Las Vegas is currently $410,302. While that might seem expensive, you simply have to compare it with what you’ll get in the major cities in the US, such as Los Angeles, New York City, San Francisco, etc., to see that it’s cheap. Even the current price of homes in Las Vegas is only so because of the rising value of houses in the city. The price of homes in Las Vegas has increased by 30.5% in the past year. This makes it one of the fast-growing real estate markets in the country and is surely a cause of worry for the residents.
Factors Responsible for The Low Cost of Housing In Las Vegas
There are several reasons why Las Vegas has had a cheap real estate market for a long time. These include:
1. Overdeveloped Housing Market
While the cost of housing in America has been increasing because there’s more demand than supply for housing, that of Las Vegas has been stable. What has kept the Las Vegas housing market grounded is that there are more houses than the people who want to own. The vast oversupply of apartments and houses in the city made it possible for anyone buying to get houses for a lower price as supply is more than demand. The number of households in the city can’t fill up the available housing units, leading to a buyer market. The city grew too fast for the expected inflow of people, which drove the prices of homes low. The large expanse of land that the city has also helped ensure there are enough resources for anyone trying to build something.
2. Poor Job Market
Las Vegas doesn’t have a buoyant job market like many major cities of its fame. Unlike places like San Francisco, with an average salary of around $76,364, the average salary in Las Vegas is pretty low at $64,076. There aren’t many high-paying jobs here, which means most people aren’t earning so high as to spend significantly on housing.
Another major issue here is the high unemployment rate. The minimum wage is fairly low in Nevada compared to other states. This generally affects the real estate market in the city in terms of the cost of buying or renting property. Homes for sale are low because if mortgage costs exceed renting the property, many people would just rather rent than own a property.
3. Low Taxes
Nevada has one of the lowest taxes in the country, whether on income or property. It’s one of the seven states without any personal state income tax and one of the five without a corporate state income tax. These low to non-existing taxes keep the hotels and casinos in the city afloat and help them retain most of their profits in the city. In addition, the low taxes mean homeowners don’t have to pay so high for property taxes, making it possible for them to charge lower rents. The city has the 4th lowest tax rates, which is great for anyone who’s earning handsomely.
Why Cost of Homes in Las Vegas is Rising
However, the city’s housing cost is now on fire, leading to rising prices of homes in a one-time cheap city. Single-family homes, in particular, have been selling as if they’re going out of style. The average price of single-family homes in the city for January 2022 was $506,537, while the median price was $435,000. The current prices of homes in the city are further expected to increase significantly in the next few years. It may soon become like other expensive real estate markets unless something changes.
The demand for homes in Las Vegas has increased significantly in recent years as more Americans are searching for affordable cities. People from expensive areas are migrating to Las Vegas and putting additional pressure on housing demand. One of the factors responsible for this migration was the pandemic. Now, the inventory of available homes that made Las Vegas a cheap real estate market in the past has drastically reduced, making the demand higher than the supply. As a result, the price of homes in the city is now at a 14-years high.
As more buyers appear, the builders are also jacking up prices and putting more buyers on the waist list. Gone are the days of dealing with the Las Vegas residents with low purchasing power. Those migrating from other major cities have enough money to afford the homes in Las Vegas, which is surely an average price compared to what’s obtainable in major cities. After several years, the factors that have made Las Vegas one of the best places to live: low cost of living, lower taxes, incredible entertainment, and family friendliness are attracting a richer crowd who can afford the cost of homes.
The current housing boom in the city is similar to what happened in the mid-2000s, with the housing value going very high as cheap money entered the real estate market. It crashed when the bubble burst, leaving many people to sell homes for less, short sales, and more.
The low cost of living in Las Vegas coupled with the poor job market has long kept the housing market in check. But that has changed in recent years as more cheap money flows into the housing market, driving up demand.