A Review of 2023 and a Glimpse of 2024

As we approach the end of another eventful year, we wanted to take a moment to reflect on the trends and developments that have shaped the real estate landscape in the Las Vegas Valley and, consequently, impacted many of clients' investment properties.

Review of 2023 

Overview of 2023: A Year of Surprising Shifts 

The past year has proven to be particularly dynamic, with a notable influx of inventory stemming from unexpected sources. A significant contributor to this trend has been the emergence of a new category of property owners: the "accidental landlords." These individuals, primarily motivated by their existing mortgage rate of 2.5-3% want to hold onto their properties due to the allure of these historically low interest rates. While their initial intent may not have been to become landlords, these owners now find themselves as landlords owning rental properties to maintain these favorable rates, inadvertently contributing to the increase in rental inventory.

The "Flipper" Effect: Unintended Consequences 

Another noteworthy trend in 2023 has been the presence of "flippers" who, unable to quickly sell their acquired properties, have chosen to enter the rental market. These landlords, driven by market conditions and the desire to capitalize on their investments, have brought a staggering number of additional rental properties into the market.

Las Vegas Valley's Growing Landscape: A Boom of 15,722 New Housing Units 

In addition to these individual decisions impacting the rental market, the Las Vegas Valley itself has experienced significant growth. Between August 2022 and August 2023, an impressive 15,722 new housing units were added to the local inventory, further shaping the competitive landscape in which your investment properties operate. 

All the above have created a rental market with more inventory than our broker, Jenni McKenna, has ever seen in her 30 years of being a Realtor® which in turn has created less demand for each rental. With less demand and more inventory over the last year, we have struggled with finding the “sweet spot” when re-renting a property, and we can see by the numbers that it is taking more time to secure that high-quality renter. Over this last year, McKenna Property Management has strongly encouraged lease renewals with minimal adjustments to the rent to keep the tenant in place at time of renewal.

Crack Down on Short Term rentals: Adding More Properties to the Long-Term Market 

More changes in the Las Vegas rental landscape are due to the new regulations making it difficult to own short-term rentals. In the last few years, purchasing and operating short-term rentals (vacation properties) became all the rage, but in recent months, new regulations put in place by Clark County have placed scrutiny on short-term rentals. The owners of these short-term rentals are now having to convert them to long-term rentals, creating even more inventory for the rental market. 

Preview of 2024 

As we stand at the threshold of a new year, it is essential to provide a candid preview of what lies ahead for the Las Vegas Valley rental market in 2024. To borrow a phrase from Game of Thrones, "Winter is Coming,", signifying a challenging period ahead for the real estate landscape in our region. In reality, winter is already here.

The Coming Season of Change 

Over the next 12-24 months, we anticipate witnessing a shift in the rental market, marked by the prospect of declining rents. This projection is not made lightly; it is based on a careful analysis of various factors, most notably the current effects of inflation on fair market rent. To illustrate the impact, consider the average rent for a 1-bedroom property in Clark County, which currently stands at $1,196 per month. This means that a minimum wage worker earning $11.25 per hour would need to clock in a staggering 82 hours a week to meet the standard qualification of earning three times the rent. This example is indicative of a broader trend affecting rental properties across different price points.

The Caboose on the Real Estate Train 

In the intricate dance of real estate dynamics, the rental market often functions as the "caboose" on the real estate train. The recent flatness in the real estate market, persisting for over 20 months, has set us firmly on this track. As seasoned observers, we understand that changes in the real estate market will inevitably reverberate into the rental sector within 18-20 months.

Our Strategic Focus for 2024: Renter Retention 

As we prepare for the challenges that lie ahead, our primary focus for the coming year will be "renter retention." We recognize that in a shifting market, maintaining stable occupancy levels and cultivating positive tenant relationships are crucial to safeguarding your rental investments. Our team is dedicated to implementing proactive measures to retain valuable tenants.

If you find yourself in need of a property manager to help you weather the upcoming rental market, look no further than McKenna Property Management. In the coming year, we are rolling out new programs to our clients, both tenants and property owners, to help create a positive and profitable rental market not detailed above. Additionally, we have the industry know how to make sure that your rental property or rental portfolio remain a sound investment for you in this difficult market.