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Oct. 24, 2007
Copyright © Las Vegas Review-Journal

HOUSING INDUSTRY: Home sales still dropping

September total at lowest level since 2000

By HUBBLE SMITH
REVIEW-JOURNAL

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Home sales continued to plummet in September to their lowest levels in years, and median prices for both new and existing homes edged downward from a year ago, Las Vegas housing analysts reported Tuesday.

"Our September numbers are in and they're not pretty," Home Builders Research President Dennis Smith said.

He counted 1,399 new home sales, the lowest monthly total since January 2000. The year-to-date total of 15,475 is down 44.3 percent from a year ago.

Larry Murphy of SalesTraq showed 1,328 new home closings during the month, a 52 percent decline from the same month a year ago. The median price was $312,639, down 3.3 percent.

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    • Existing home sales were down 50 percent to 1,466 in September and existing median home prices declined 8.9 percent to $263,075.

    Murphy said his minister at Shadow Hills Baptist Church on Sunday invited real estate agents, mortgage brokers, residential construction workers and anyone else affected by the housing downturn to a night of free hamburgers at the church.

    "That's the perception of the public, and perception is reality," Murphy said.

    Home builders are offering substantial incentives ranging from bonus commissions for Realtors to $50,000 to $100,000 in free upgrades and custom options, he said.

    A number of builders have slashed prices, starting with KB Home and Meritage earlier this year. Lennar Homes dropped prices by 25 percent in about 30 new home subdivisions and Pulte was advertising a 15 percent cut in prices over the weekend.

    Tom McCormick, president of Las Vegas-based Astoria Homes, said he sold 30 new homes during the weekend of Oct. 12-14 after discounting prices by 10 percent to 27 percent in eight neighborhoods. The homes went for as low as $170,000, or $112 a square foot.

    "People were very curious about whether there were any buyers in the market. We found there are actually buyers in the market," McCormick said. "Price fixes everything and maybe we found the price where homes sell at a good clip. We were the first to rise, the first to fall and we'll be the first to come out of this and maybe this is a turning point."

    The effects of these price reductions will be reflected in the coming months, Murphy said.

    "We have not yet reached the bottom of this market in either new homes or existing homes," he said. "The short-term outlook for this market is not good. It will take another 12 to 18 months before we will see any significant improvement, in my opinion."

    He noted that the resale inventory is at an all-time high of 27,000 homes and nearly half of them are sitting vacant. For most of the year, inventory represented a 12-month supply. Looking at the dismal 1,065 closings on the Multiple Listing Service, Murphy now calculates an inventory of nearly two years.

    Foreclosures are four times higher this year compared with 2006. As the banks take back these properties, they will be added to the already swelling inventory.

    However, the housing market stands to benefit tremendously from the $30 billion development boom on the Strip, Murphy said.

    Rick Waltjen is one of those buyers who's waiting for the housing market to bottom out. He's been watching it closely for two years, specifically inventory levels that have risen almost weekly for the past six months.

    "There is absolutely no sign of the market bottoming out yet," Waltjen said. "Everyday there are more price reductions. The inventory continues to climb. When the inventory begins to decrease, that's when I'll be persuaded to buy."

    The sad thing in Las Vegas is people won't accept reality, Debi Averett of Phoenix-based Housingdoom.com said. They buy houses they can't afford, put payments on credit cards and pray the market will come back or live in hope that an uneducated buyer will come by and pay more than market price for their house, she said.

    "The sun comes up, it goes down. House prices go up, house prices go down," Averett said. "If you know and understand what's happening, it's not a negative, just a reality to be dealt with, and, with luck, profited from."

    The "albatross" that's going to be hanging around the neck of Las Vegas for a long time is the number of vacant homes on the market, broker Bob Reeve of Red Rock Canyon Realty said.

    "I think that a key piece that people conveniently ignore when telling us that we are at the bottom or close to it is that we have never been in a market where 40 percent of the homes are vacant," he said. "Just drive around. Why would any buyer buy a boarded-up mess with a dead yard?"

    The experts talk about burning off the oversupply of resale inventory, but a huge portion of that vacant inventory is going to be permanent, Reeve said.

    Smith of Home Builders Research sorted through 1,544 recorded resales in September, bringing the yearly total to 20,563, a 38.7 percent decrease from a year ago. He reported the resale median at $262,377, down 8 percent.

    "The resale segment is still looking for the bottom of this cycle," he said, "but we are encouraged that there appears to be some stabilization in the lending community, which should help consumer confidence."

    Builders have continued to cut back on new home permits, pulling just 620 in September. It's been a steady decline since May 2004 when 4,501 permits were issued. For the year, permits are down 39.3 percent at 11,526, Smith reported.

    Contact reporter Hubble Smith at hsmith@reviewjournal.com or (702) 383-0491.



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    Joe Friday wrote on October 24, 2007 11:09 PM: Ditto on Money Manager's comments.

    Back during the "irrational exuberance" we had 40-45% of the homes being sold to "investors"...more like "stupid speculators". Now we have 40-45% of the MLS listings vacant...surprise, surprise!

    Since the demand was inflated by 40-45% it doesn't take a rocket scientist to figure how much the pricing was inflated.

    We have had a 20% decline in pricing already and predictions of another 15-20% are getting rather commonplace. The condo I rent sold for $355k in February of 2005. Same model recently sold for $313k, one for $305k, and get this, the last sale was at $250k! Sellers are just getting desperate and there will be more as people get squeezed to sell.

    What the realtor ilk don't appreciate is that the stupid buyers are GONE and those of us who are interested in buying and have the resources to do so are no dummies. We will just sit here paying our cheap rent (with our money invested and earning a good return)until the market hits bottom.


    Money Manager wrote on October 24, 2007 05:32 PM: With 30 yrs experience in buying and selling large portfolios of real estate,I urge every reader of the last 6 months real estate articles be very cautious in buying a single family home at this time. Even the real estate industry "insiders" have given up trying to sugar coat the market bubble bursting! This market was and still is way overvalued caused by rampant "investor" speculation, developer pricing greed and frankly lending fraud. Every real estate and economic independent "outside" analyst review says that prices need to drop 50% from the 2006 peak. Home prices have adjusted about 20% if you take into consideration that many larger developers have been dropping their base pricing on new homes. However, resales of existing homes have not come down since sellers have not been willing to acknowledge that SFR market has imploded and demand falling as fast as it went up during the 2002-2006 period. Thus, noone should be paying anywhere near current asking prices as prices will need to fall another 30 to 40% to bring pricing equilibrium and seriousw buyers back into the market. Please look carefully at the overall economics of the current situation and you will see that Las Vegas is in for a long recovery period. If you buy now, you will suffer depreciation of your equity over the next 18 to 24 months at a minium according to the UNLV School of Business in its latest projection published this week.


    me wrote on October 24, 2007 02:16 PM: question so right now is and isn't a good time to buy??
    is because price are lower?
    isn't because property value is depreciated


    lucky wrote on October 24, 2007 11:42 AM: I always wondered how a stock clerk at CVS was able to live in a $400,000 house. I felt bad thinking that I could barely afford my $200,000 house. And I make decent money! Then in our neighborhood, we started getting the 5 families in one house deal going on. That's nice...5 families in a 1400 sq foot home. 5 familes with 2 cars per couple....
    Yeah, our area is going down the drain because it LOOKS like a poor sty.
    Yet, they wont loose their homes, becuase, heck, the have 5 incomes coming in!
    Who cares. In 40 years most of us will be dead and gone anyway and this wont mean nothing to no one.


    John wrote on October 24, 2007 11:11 AM: Sorry...that's 19,000 over $200,000.


    John wrote on October 24, 2007 11:10 AM: Prices on a lot of the vacant homes aren't going to come down because the builder put too much into them and they're way out of most peoples' price ranges. They built these $400-500k mini-mansions for the Californicators who sold their shack in East LA for $800,000 and found out they can buy a whole lot more here. Since the builders have overestimated the number of people who can afford such a house, they leave the rest of us in the $150-250k range in the lurch. Of the 25,000 homes listed in Las Vegas, 11,000 are over $300,000, 19,000 are over $300,000. The average wage in Las Vegas is $12.50 per hour. How can someone making $12.50/hr afford to live here?


    RANDY wrote on October 24, 2007 10:26 AM: THE ONE THING IS QUITE CLEAR ABOUT THIS HOUSING MARKET. THERE ARE WINNERS AND LOSERS. THE WINNERS ARE THE ONES WHO BOUGHT THEIR PROPERTIES BEFORE THE MARKET BALLOONED AND SOLD IT DURING THE THE PEEK. THE LOSERS DID THE OPPOSITE. THE WINNERS REFIE'ED THEIR MORTGAGE LOANS TO A FIXED 20 OR 30 YEAR NOTE WHEN IT WAS POSSIBLE AND CHEAP. THE LOSERS WENT TO AN ADJUSTABLE MORTGAGE AND NOW CAN'T GET REFIE'ED. THE WINNERS CAN RENT THEIR PROPERTY FOR A MONTHLY PROFIT OR AT WORST, AT COST. THE LOSERS ARE IN NO SHAPE TO RENT THEIR PROPERTY BECAUSE THEY WAITED TO LONG TO MAKE THE CALL. I'M WAITING FOR THE BARGAINS. THE LENDING INSTITUTIONS ARE GOING TO AND HAVE TO WORK WITH THE PEOPLE WHO ARE IN OVER THEIR HEAD. OR, IT WILL GET EVEN UGLYER THAN IT IS NOW. PEOPLE NEED TO CALL THEIR LENDER AND START THE BALL ROLLING BEFORE THEY LOSE THEIR HOUSE. DON'T WAIT. THE BANK WILL WORK WITH YOU. IT'S IN THEIR BEST INTEREST TO KEEP YOU IN THE HOUSE. AS THIS CYCLE WORKS THRU, THE LENDERS WILL MAKE MONEY LATER. LENDERS NEED TO FIGURE THAT 5 TO 10 YEARS FROM NOW, THEY WILL GET ALL THEIR INTEREST PLUS MORE . DON'T GET GREEDY.


    Joe Friday wrote on October 24, 2007 10:06 AM: Ok,let me understand this...spend $10,000 to save $2,500 or so? You are only ahead if the house went up in value by more than $7,500.

    Fools rushed in where wise men didn't tread. They will slowly die on the vine.


    JD wrote on October 24, 2007 09:36 AM:

    The tax savings, which is a fraction of the deduction, only works to your advantage if the value of the home increases, not decreases.

    In this market, especially due to recent new home repricing, have lost a lot of value to those who bought in 2004- 2007. I have already seen price cuts for new homes of more than 35%, some up to 50%.

    The $2000 to $4000 in tax savings can't overcome 100K in lost value in a year or two.

    Even if prices stayed flat, you still have a loss of value due to inflation.

    You can only come out ahead if prices rise faster than inflation.


    Positive wrote on October 24, 2007 09:26 AM: Trisha - well said ...

    Why rent ? - Unable to save to buy a new home, so someone must rent ..

    Why own ? - well when I have a deduction of well over $10,000 in mortgage interest ........ Huge monthly advantage !


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