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Mar. 27, 2008
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HOUSING: Analyst senses slump's bottom

Resale prices will rebound by 2009, observer says

By HUBBLE SMITH
REVIEW-JOURNAL
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Signs mark homes for sale on Dunnottar Avenue in the Anthem Highlands development in Henderson on March 18. Local housing analyst Dennis Smith said Wednesday at Las Vegas Housing Outlook 2008 that local new-home sales are down 49 percent for the first two months of the year and existing-home sales are off 37 percent.
Photo by Sara Tramiel/Review-Journal



Home Builders Research President Dennis Smith presents Las Vegas Housing Outlook 2008 on Wednesday as part of Southern Nevada Housing Day at the Las Vegas Convention Center.
Photo by Gary Thompson.

There's been a lot of talk about the Las Vegas housing market reaching the bottom, backed by statistics showing an increase in February home sales and stabilized inventory.

Median existing-home prices have fallen to $237,000, below the $240,000 threshold that local housing analysts predicted would be the low point. Las Vegas made national headlines again this week with a 19 percent decline in the January Standard & Poor's/Case-Shiller home price index, tied with Miami for the biggest drop among 20 cities measured in the index.

New-home sales in Las Vegas are down 49 percent for the first two months of the year, existing-home sales are off 37 percent and home building permits have plunged 70 percent, housing analyst Dennis Smith said Wednesday at Las Vegas Housing Outlook 2008.

"Obviously we've got tight credit and qualifying requirements," the president of Home Builders Research said. "Those are factors, too. I could go on and on. I think we're close to the bottom, but it's going to be an extended bottom."

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    • Any recovery won't be in the shape of a "V" but a flat-bottom "U," Smith told about 7 00 builders, developers, mortgage brokers and real estate agents at the Las Vegas Convention Center.

    He predicted that median new-home prices will finish the year at $274,000, about $1,000 more than February's median, though it will dip further between now and then. He thinks 2009 will show a 2.2 percent increase to $280,000 and 2010 will be about the same, with prices conservatively climbing to $286,000.

    "We had many years of 1.5 percent to 2 percent increases and that's what we're going back to," Smith said.

    Resale prices, which are down 5.2 percent so far this year, will rise again by about 1.3 percent in 2009 to $240,000, he predicted.

    Bernard Markstein, director of forecasting and analysis for the Washington, D.C.-based National Home Builders Association, sees a modest rebound in this year's second half with some pick-up in sales activity. New-home sales have bottomed out and builders have cut back on new starts, he said.

    "It almost couldn't get any worse. I hate to say that," Markstein said at forum. "The tough times are not over, but we may be reaching the bottom. Of course, affordability remains an issue, but prices are starting to adjust."

    Tighter lending requirements have acted as a drag on the housing market, he said. That can be a problem in terms of getting buyers.

    Almost all of the foreclosure problems have been with subprime and adjustable-rate mortgages, not with fixed-rate mortgages, Markstein noted, yet lenders are tightening up across the board.

    "What's going to get us out of this? Demand needs to stabilize and improve before there is a recovery," he said. "Again, we're talking about a modest rebound. We don't want to get back to 2004."

    U.S. Sen. Harry Reid, D-Nev., who spoke to a group of Hispanic real estate agents in Las Vegas last week, said he's glad that Congress bailed out New York investment bank Bear Stearns Cos., but there also needs to be legislation to help desperate people in danger of losing their home to foreclosure, not speculators.

    "We have to try to keep people in their homes," Reid told the Review-Journal. "Otherwise, we're in big trouble. Two main things drive the economy -- road building and house building. Both of them generate high-paying jobs."

    Reid said he'd like to see mortgage revenue bonds, which are only legal now to buy new homes, extended to resales and foreclosures. He would also like to use community development block grants, or CDBGs, for state and local governments to go into a neighborhood, buy foreclosed properties and set up programs for people to buy them as primary residences.

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

    EXISTING-HOME SALES
    YEAR NUMBER
    2000 29,515
    2001 34,427
    2002 38,621
    2003 49,792
    2004 64,168
    2005 58,522
    2006 41,892
    2007 24,838
    *2008 19,000
    *2009 21,500
    *2010 24,000
     
    NEW-HOME SALES
    YEAR NUMBER
    2000 20,520
    2001 22,940
    2002 22,502
    2003 25,230
    2004 29,472
    2005 38,957
    2006 36,156
    2007 19,773
    *2008 15,000
    *2009 16,500
    *2010 19,000
    * Projected
    SOURCE: Home Builders Research


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    mark pannent wrote on April 22, 2008 01:05 PM: The problem in Vegas is the same problem in the rest of the country.A criminal republican administration that is more cocerned with making the rich into ultra-rich and turning the country into a conserative bastion of religious nuts. We have to kick these republicans punks out of office and keep them out. The Democrats coming in next will restore sanity in this country, and get they enconomy back where it was under our great president Bill Clinton.


    Dan wrote on April 01, 2008 10:50 AM: Hey Banker, I think you should pull yur head out and stop purveying the "end of the world as we know it" crap. There are way too many of you guys that see a campfire and want to turn it into a forest fire. If you have been in finance for 35 years you should have seen that real estate is cyclical. The economy is cyclical. Did'nt you learn anything over those 35 years? The money is not gone, this is not a MAJOR HOUSING DEPRESSION, it's a correction. Learn some economics and stop trying to creat mass panic, you owe it to your industry!


    Da Truth! wrote on March 30, 2008 07:10 AM: Oh man, you have to read this quote from the KVBC website

    http://www.kvbc.com/Global/story.asp?S=8075298&nav=15MV

    -------------------------
    Dennis Smith believes the number of resale homes in Southern Nevada is going to keep prices down. So these type of homes will need to sell off before the market turns completely around. And that will take some time, but that's creating opportunities for home buyers in the short term.

    "I can't tell you when the prices are going to stop going down, but right now they're as low as they're going to get," Smith said.
    ----------------------

    Ok, they're not going to stop dropping and they're not going to get any lower. Logic anyone? How much does this guy charge for his "research reports", they must be totally enlightening. ;-)


    Da Truth! wrote on March 30, 2008 06:44 AM: 2.5 months of new home supply? Yeah, I guess if you only look at standing inventory. How many months are in progress or could be started IF they had an order? That's the true measure of supply with new homes. Nice try, Sam.

    With inventory where it is right now, there's no reason to expect prices to stop falling. When sales increase and/or inventory decreases to a point where there's about 9 months of inventory, then prices will stabilize. Until then, prices will continue to go down especially as foreclosures make up a larger and larger portion of homes for sale.

    Econ 101... get some!


    sam wrote on March 28, 2008 09:04 PM: Dennis Smith did predict the severe decline and stated housing prices will decrease.

    Builders are selling far more homes than they are pulling permits. As a matter of fact, there is only a 2.5 month supply of new homes on the market.

    Invesorts that are holding homes for several years are buying a lot of homes right now.

    This too shall pass.


    pablo sanchez wrote on March 28, 2008 12:01 AM: so, "housing analyst" dennis smith is making predictions about a housing rebound. if he's so good at predicting, why didn't he warn people about the housing implosion that's going on now?


    L Yun wrote on March 27, 2008 10:41 PM: Did you every notice the comments on articles like these are way more insightful and intelligent than the original piece???


    D Lereah wrote on March 27, 2008 10:39 PM: If retailers worked liked the NAR they would compare Xmas sales with sales the past January and declare a whopping increase. Year to year sales show a huge decrease.When is the media going to stop reporting NAR spin as NEWS????


    Banker wrote on March 27, 2008 07:46 PM: Mr. Vaugham, Broker. You are either a shill for the housing/GLVAR wideboys or fail to see the grim reality of this major housing depression. My Friends, its all about the fact that the money is gone! Yes, no more easy money to loan out on cookie cutter stucco defective cracker box homes! The Fed has been pouring Billions into the financial markets for over the last 6 months, bailing out massive amounts of over leveraged Banks. If they had not acted in a panic last weekend to bail out Bear Stearns, the total financial market would have collapsed! My collegues in the banking/financial services area are terrorfied and scared to death of a rela world wide confragation and melt down in the credit markets! If anybody is stupid enough to pay current prices for any of these over valued "fraudulantly appriased" homes then I guess there are more greater fool out there. Most of these high end sales you are seeing are with funny money deals using offshore sources and involve Euro or Petro dollar backed buyers. One local source at Neveda State Bank told me that he would trust any valuation placed on homes sold in the last five years! That is why lenders are doing two appraisels on properties and are tighting loan to value ratios. All I can say is get a grip on your butts, cause its going to be very rough ride for the next 3 to 5 years, all of it down I am sad to say! And By the way, I have been around the finance business for over 35 yrs. This is now some serious shit we are dealing with here today!


    Jason Voorhees wrote on March 27, 2008 07:13 PM: Realtors never stop of telling everyone to buy. They just change the way they present the same sales pitch.


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