Heading into the new year I have gotten a lot of calls with different thoughts on what is going to happen here in Las Vegas regarding the housing market and the mortgage industry. Many of those calls have been from Real Estate agents and past clients who experienced the crash of 2008 and they were asking what I thought would happen. They were nervous about the possibility of another crash and if I thought that was a possibility. Based on those discussions I thought that would be a great topic for our first newsletter in 2023.
Are we entering another crash like 2008? We are due for a market shift or correction for sure. This is based on the fact that we have had huge appreciation over the last 5+ years and that increase is not what we would consider to be normal in what would be considered a stable market. We experienced much higher home value increases and based on that alone we needed to have a shift as that is not sustainable.
In order for us to have another crash, we would need more than a market correction and we would need multiple factors to all work at the same time as a somewhat of a perfect storm and I do not see that happening. We would need inventory to spike considerably and with the current wave of people moving to Las Vegas I do not see that happening. We would also need the rental rates to drop as that may entice homeowners to go back to renting. Over the last few years rental rates have spiked and reversing that trend to the point it would need to be reduced is unlikely to happen. These key elements are unlikely to happen and with the reality that most homeowners currently have interest rates in the 3.25% range it would be difficult to entice them to stop owning and make renting pencil out. Even though interest rates have spiked in the last 9 months the majority of homeowners purchased and locked in their loans before the rate hike came into play which leaves very few people in the situation where they have a high interest rate and a bad equity position.
From a mortgage standpoint I think it is going to be another difficult year for loan officers and mortgage companies. Many were focused on refinances and with those essentially going away, the loan officers and companies that were focused on that segment of the market will continue to struggle and exit the market in 2023. It may be even worse than what they experienced in 2022. Experience and hard work will be the key for loan officers as they battle through another tough year and companies will need to continue to evolve in order to be successful in 2023. If they do not make the necessary changes they will end up being gobbled up by competitors or closing their doors.
At the end of the day 2023 will not be 2021 but it will not be 2008 either. I anticipate the housing market to correct in a way that was necessary and I see the mortgage business being a struggle for anyone who is not experienced or for any companies that were not positioned to be successful in any market. Things will always change and evolve and those who are able to evolve with it will be the ones who will be successful long term. The one thing we can always guarantee will happen is that the market will change and the industry will evolve and we all need to evolve with it and forecast where things will evolve if we want to be stable and consistent.