I wrote a similar topic about 2 weeks ago, but wanted to follow up with more information and yes, more charts. There are a lot of people that have opinions on this. And like almost everything else, there are two polar opposites in terms of opinion. There is the camp that thinks the market is going to crash and burn, a la 2008, and there are those that think nothing of the sort.

I think we are going to land somewhere in the middle. It would be a mistake for me to pretend we won’t see a market shift, but I tend to think it won’t be the doom and gloom we had a decade ago. Whether it’s Financing differences, affordability differences, or in the case I’m making today - Inventory differences, this market certainly does not look exactly like it did before.

You may have seen this chart before… it’s going around, but for the country as a whole. Being the data geek that I am, I ran a similar chart, but for our Las Vegas area market only. This is also for Single Family Residences only as well. Let me explain the chart.

The Line represents the Months of Inventory, indicated by a point per month, over the last 14 years or so (Jun 2006 is the first data point). As a reminder, Months of Inventory is a calculation that tracks how long a market would take to sell all of the standing inventory of homes for sale if no new home was put on the market. So the lower the number, the ‘stronger’ the market is, meaning things are moving faster. It also goes to say that the higher the number, the stronger the market is for Buyers (more homes than Buyers), and the lower the number, the stronger the market is for Sellers (less homes than Buyers).

Many people feel that 6 months is considered a neutral market, and that is the number they use for a national level. Las Vegas is different, as we all know, and I believe that 4-5 months is considered a Neutral market. Above 5 months; Buyers Market. Below 4 Months; Sellers Market.

Take a look at the last 14 years. You’ll see the chart started in the Red, Buyers Market stages when the market was at the last ALL TIME HIGH (June 2006), it then started to dip as the market actually started to decline. Remember, our last market decline was not a major incident that caused the markets collapse, but the effects of a lot of things all culminating together.

When the market started into it’s 2nd and 3rd year of full blown market bottoming, you’ll see MORE AND MORE homes hit the market. In fact, by July of 2010, there was about 9 months of inventory in Las Vegas! That’s WAY more homes for sale than Buyers wanting to buy. What goes up, must come down, and as we have seen in our long recovery, inventory levels started to stabilize and drop. We had a pop up about 4 years ago, where the market was more “neutral”, and for the last almost 4 years, we have been in a strong Sellers Market. We are now near the bottom. While we will probably see an uptick in inventory levels, I wouldn’t expect a dramatic increase. Remember, if less people are listing their homes, the number of homes for sale won’t drastically climb. I’m tracking inventory on a DAILY basis for our agents and clients, and have not seen a dramatic shift… yet.

Here is another chart I love and it’s showing again how the market is behaving differently than compared to the last time around. The chart on the left is the 6 years of market increases leading up to the highs of 2006. Notice that the LOWEST annual increase of that 6 year period was 2001 (which happened to be during a RECESSION, by the way). The average for increase for this 6 year period was about 9.4%!

Now, pay attention to the right side of the chart. This is the last 6 years of gains. All positive years. But look closer. The HIGHEST year across the country was 2017, which showed a gain of 6.4%, which is still lower than the WORST year of gains in the left side! The average over this 6 year period has been 5.2%, about 45% less than 2000-2005.

Do I have a crystal ball and can I tell you exactly what is going to happen? No, of course not. But I do look at this with a calm demeanor and let statistics help guide my opinion. I do realize we are in unprecedented times. But our system is NOT broken like it was last time. Loans that have been made the last 6 years have been far better than the loans made 2000-2005. There will be those that suffer, and those that have already suffered. But my thoughts are this market turn down will have a quick drop down and then a sharp correction up.

Would love to hear your take on this. Comment Below!

-GZ