The modest rise in housing appreciation in Las Vegas means it takes a little longer these days for buying to begin paying off.
Home-sales website Zillow sets the Las Vegas break-even point at 1.5 years. That’s up from 1.2 years in 2013.
But, despite the relatively quick payback, Zillow says renters aren’t buying. The website estimates 82 percent of renters nationwide are ‘long-term renters,’ meaning they don’t plan on getting into the housing market any time soon.
Senior director of economic research at Zillow, Svenja Gudell, said many renters want to get into the market but three stumbling blocks are really holding them back: being able to qualify for a mortgage, having a large enough down payment and finding a home that they like.
“Those three things are making it tough for renters to break into the for-sale market,” Gudell told KNPR’s State of Nevada.
Qualifying for a mortgage is getting easier than it once was. Following the housing crisis and credit crunch, many banks required 20 percent down and demanded buyers show more financial stability.
Those strict rules have loosed a bit, but are still a road block for some buyers, according to Gudell.
“It’s gotten a little bit looser in terms of credit availability but it is still tight. You still need fairly good credit to get a mortgage,” she said.
Besides qualifying for a mortgage, Gudell said renters struggle to get the money they need for a down payment because rents are so high and incomes aren’t keeping pace.
“Since 2000, rents have grown at twice the pace of incomes. And especially when you look at incomes in the middle or bottom end of the distribution,” Gudell said.
So, while it makes sense in the long term to buy a house instead of renting one, many people can’t get past the short-term stumbling blocks.
“Despite it making financial sense it doesn’t always in actuality work out for renters on the ground,” Gudell said.
But the heart of the problem for many could be the scars left from the housing crisis, especially in Las Vegas where many people saw the value of their house plummet by 50 or 60 percent.
“It is hard for a lot of folks to want to enter the market knowing this could happen again,” Gudell pointed out.
Jack Woodcock is the former president of the Greater Las Vegas Realtors Association. He saw the boom and bust in the Las Vegas valley and understands why people are reluctant to jump back in.
However, he said there are several reasons why it is a good idea, including low interest rates
“There is an air of optimism that exists today that didn’t six months ago,” Woodcock said, “Having a part of Americana has always been the objective and we’ll get that back. Everyone still aspires to have that.”
Jack LaVine, a real estate agent who specializes in downtown properties, agrees. He said people understand that buying a home is still one of the best ways to build wealth.
“They know that homeownership is one of the tried-and-true methods to wealth building in America,” LaVine said.
He thinks right now is the perfect time to start building that wealth, whether someone is selling or buying a house because the housing market is balanced.
“We have a stable, neutral market. It’s a good time to buy and it’s a good time to sell,” LaVine said.
Woodcock believes education is part of the problem with people moving from renting to owning. Many people don’t know they can change their Fico score. They also don’t know that getting into a new home can be within reach for many first-time buyers. Plus, they don’t know that finding a good lender that offers incentives can make a difference.
“There are lots of incentives for people to buy but I don’t think the story is getting out to the buyers as well as it should,” Woodcock said.
Jack Woodcock, real estate broker and former president of the Greater Las Vegas Association of Realtors; Jack LaVine, real estate broker; Svenja Gudell, senior director of economic research, Zillow.