Las Vegas Real Estate Investment Update - March 2025 Market Report
In This Report
- Could Tariffs and Market Volatility Hurt Las Vegas Investments?
- Potential Investment Properties
- Market Trends
- About the Fernwood Real Estate Investment Group
Could Tariffs and Market Volatility Hurt Las Vegas Investments?
As of today (3/17), the S&P 500 is down -7.4% from its high about four weeks ago, the Nasdaq is down -11% and the Dow is down -7%. I’m sure these numbers will change from day to day, as volatility reigns in the financial market these days, triggered by the Administration’s uncertain and unpredictable tariff and trade policy. Fear of a recession is also growing. Naturally, people get nervous when facing such economic uncertainty and tend to pause any major financial decisions.
Today, I want to analyze the potential impact on the Las Vegas real estate investment market by tariffs and the consequential financial market turmoil.
What Determines Home Prices and Rents?
I’ve emphasized this before and will keep reiterating it: unlike the financial market, which can be influenced by factors such as earnings, interest rates, sentiment, politics, or even seemingly no reason at all, housing prices and rents are primarily dictated by the straightforward principles of supply and demand.
Demand
Demand is primarily driven by population change and mortgage interest rates.
According to the latest research, Las Vegas's population grew by more than 50,000 between 2023 and 2024. With an average of 2.5 people per household, this growth requires 20,000 additional housing units each year to accommodate these new residents. This growing population translates directly to higher housing demand.
Interest rate
The unprecedented interest rate hike the Fed took in 2022-2023 disqualified many potential home buyers, causing a home price correction. However, in response to the recent tariff turmoil, the long-term (10-year) treasury bond and the mortgage rate fell. Lower mortgage rates mean more people are qualified to buy a home, increasing the demand.
Supply
High mortgage rates discourage existing homeowners from selling and buying new properties, limiting the supply of existing homes. While recent interest rate drops help, they aren't significant enough to substantially increase housing inventory. With ongoing economic uncertainty likely causing potential sellers to hesitate, we don't expect the supply of existing homes to increase.
Tariff Impact on New Builds
New homes are probably going to be most affected by tariffs. Approximately 72% of building products come from Canada, and materials account for approximately 60% of the cost. How much will a 25% tariff increase the price of a $550,000 new home?
I will assume that 80% of the purchase price is the structure and 20% is the land. So, the structure will cost approximately $440,000 (80% x $550,000). If 60% of the cost of a $440,000 structure is materials, the total material cost is 60% × $440,000 = $264,000. If 72% of materials come from Canada, the cost of the Canadian materials is 72% × $264,000 = $190,080. With a 25% tariff, these goods will cost 25% more, or 25% × $190,080 = $47,520. Therefore, assuming a 25% tariff, the cost of a $550,000 new home will likely increase to $601,520. This will decrease demand for new homes since fewer people will qualify, so fewer new homes will be built, increasing demand for existing homes
Fixed Supply
Our research shows that families almost always choose to rent or buy single-family homes in Las Vegas. Our target tenant segment is families with gross household incomes between $60,000 and $85,000. Given current rental rates, these families can only afford properties priced between $350,000 and $475,000.
Due to high land costs (>$1M/Acre), new single-family homes in desirable areas start at $550,000 (soon to be $601,520). So, no matter how many new homes are built, the number of homes priced between $350,000 and $475,000 is static. And, as population growth continues, it is virtually guaranteed to drive up rents and prices.
Does Market Volatility Matter?
Of course, unforeseen events can happen (especially with this Administration 😊). A recession might hit, interest rates could plummet, or the stock market might enter a bear market or stagnate. Rather than panicking about scenarios we can't predict or control, we should focus on what truly matters: making investments based on solid fundamentals and careful risk management.
What are the sound fundamentals of real estate investments?
- A city that has consistently grown faster than the national average (population-wise)
- A city where both rents and home prices have consistently outpaced inflation—for example, our target segment has seen rents rise an average of 8%/Yr and appreciate 10%/Yr since 2013.
- A city that is landlord-friendly and less prone to natural disasters.
- An experienced local investment team to guide you every step of the way.
- Bonus points: A city that is running out of land (Las Vegas); and a one-stop investment service that uses a data-driven approach to minimize your risk by focusing exclusively on homes that attract a reliable tenant demographic who stay on average over five years, pay rent on schedule, and take good care of the property. Our tenant focus mitigates risks because properties don't pay rent—tenants do.
Conclusion
An uber-successful money manager and astute analyst I admire said it very well: Investors face pickles of uncertainty all the time, and it is one of the reasons markets possess “risk premia” – a superior return over time for the enhanced volatility we endure along the way.
As long as we invest based on fundamentals and minimize risks, we will come out ahead over time and need not worry about how the financial market behaves every day, week, and month.
If you're interested in exploring how the current Las Vegas market conditions could align with your goals, please use the link below to schedule a time that works best for you.
Potential Investment Properties
Below is a link to this month's list of candidate investment properties. Our proprietary data mining software selected these candidate properties from thousands of available properties, and this is just the first step in our multi-step validation process, as shown below.
This Month’s List of Candidate Properties
Market Trend
Below are charts from our latest trailing 13-month market report, which includes January data. Remember that this data is only for our target property profile, not the entire metro area. To see all the charts, please click here.
Rentals - Median $/SF by Month
Rents increased MoM, in line with our expectations. YoY is up 3.5%.
Rentals - Median Time to Rent by Month
Median time to rent continued to decrease rapidly in February, now around 27 days. This is in line with our expectations for the time of the year.
Rentals - Availability by Month
The number of homes for rent had a significant decrease MoM, in line with our expectations.
Rentals - Months of Supply
Only about 1.2 months of supply for our target rental property profile. This low inventory will continue to pressure up rents.
Sales - Median $/SF by Month
The $/SF had a marginal increase MoM. YoY is up 6.1%.
Sales - List to Contract Days by Month
Median days on the market dropped significantly MoM, by about 14%, indicating a strong demand early in the buying season.
Sales - Availability by Month
This chart shows the average daily number of properties for sale in a particular month. There is a 11% decrease MoM.
Sales - Months of Supply
There are about 1.3 months of supply for our target property profile. A 6 months supply is considered a balanced market. This limited inventory will likely continue to drive up prices.
About the Fernwood Real Estate Investment Group
We Help Clients Acquire Highly Reliable Passive Income Streams
Here is what our clients have to say about us:
For the last 17+ years, we've helped clients build highly reliable, passive income streams through real estate that they will not outlive. Several are now retired and living entirely on their rental income. Most never invested in real estate before they started working with us, and most live in other states or countries. Below is a two-minute video of the services we provide.
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