Here’s what you need to know about rising interest rates and water.

Today I want to discuss two important topics for Las Vegas residents. First, should you wait to buy a home due to rising interest rates? Second, what’s happening with water in our city?

To answer the first question, let’s take a look at the numbers. The average home in our area is priced at $480,000, the cap for an FHA loan is $435,000, and the average buyer is offering an extra $10,000 or $15,000 to cover potential appraisal gaps. The average homeowner spends three to five years in their house, but for the sake of this example, we’ll assume that $10,000 was paid for the appraisal gap, and this homeowner only stays in the property for three years. 

If we take the $10,000 paid for the appraisal gap and divide it by 36 months, the monthly cost will be $277. To figure out the mortgage, we’ll take the $435,000 FHA cap and use the interest rate to get a monthly payment. However, interest rates have been rising lately. When the rate increased from 3.3% to 4.3%, it raised the monthly payment in this situation by $241. Now, rates are even higher. 

More inventory means more opportunities for buyers.

This may seem like bad news for buyers, but it isn’t all doom and gloom. As rates increase, demand slows down, and inventory increases. This means you may not have to offer so much to cover an appraisal gap. Your mortgage payment may have increased by $241 due to increasing rates, but now you can probably skip paying the $277 per month your appraisal gap would have come out to. 

The second thing I want to talk about today is water in Las Vegas. The local government is putting new laws in place to change what homeowners are allowed to do. For example, new homes built after April 1, 2022, are not allowed to put down grass or have spray irrigation. 

If you want to sidestep this law by buying an older home, it might not work. New laws from 2021 regulate median and sidewalk areas in communities. So if you drive through a nice gated community and see lovely grass everywhere, just know that it could be on its way out soon. 

If you have questions about today’s topic or anything else related to real estate, please call or email me. I am always willing to talk!