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Apr. 19, 2008
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Study: Few can afford homes in LV

Local housing analysts say findings already obsolete

By JENNIFER ROBISON
REVIEW-JOURNAL
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A billboard pushes homes for sale in Day Dawn Crossing near Grand Teton and Durango drives. A study says fewer than 20 percent of Las Vegas residents can afford to buy homes.
Photo by Ronda Churchill.

A week-old study assessing housing affordability in Las Vegas is already well past its prime, local analysts say.

The 2008 Colorado College "State of the Rockies Report Card" found that just 18.9 percent of the Las Vegas Valley's housing stock is attainable to workers earning the area's median wage, which was $14.03 an hour in June, according to the Nevada Department of Employment, Training & Rehabilitation.

Affording a two-bedroom apartment at fair-market rents in Clark County required pay of at least $15.01 an hour, the report card added.

Those figures translated into a D+ for overall housing affordability in Clark County.

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    • There's just one hitch: The report card's data hail from the first quarter of 2007. And given the swift blast of air hissing out of the Las Vegas Valley's housing bubble, that makes the report card's findings obsolete, experts say.

    Jeremy Aguero, a principal in Applied Analysis, estimated the proportion of local homes affordable to median wage earners is likely closer to 36 percent, or about twice the share the Colorado College report card cited.

    "Those numbers don't comport with what our market looks like today," said Aguero, whose firm performs economic studies and research for businesses and governments. "To suggest that only 18 percent of our homes are available to local buyers is a dangerous, deceiving statistic."

    Among Aguero's quibbles with the study: It fails to consider the sheer volume of homes in foreclosure here. More than half the single-family homes sold locally in March were foreclosures or short sales, according to the Greater Las Vegas Association of Realtors. Those homes are selling at $120 to $125 per square foot -- well below the $185 per square foot parts of the market averaged at its peak in 2005.

    Aguero's researchers say they're seeing more houses priced below $200,000 than they've seen in at least 18 months.

    A search on Friday of the National Association of Realtors' online Multiple Listing Service found 13,630 condominiums, townhomes and single-family homes on the market for $250,000 or less. A similar Review-Journal search in December 2005 found just 2,657 residential properties priced at $250,000 or below.

    The Colorado College study also leaves out the equity the city's hundreds of thousands of homeowners have built, Aguero said. Most buyers who bought before 2005 or 2006 owe less on their home than it's worth. Throw in transplants from pricey housing markets in California, and many buyers in today's market aren't relying on income alone to buy homes.

    Renters are catching some breaks these days as well, said Kevin Keefe, a senior associate in the Las Vegas office of Marcus & Millichap Real Estate Investment Services.

    Investors who bought condo conversions at the height of the market can't unload them in today's downturn, so they're renting them out, Keefe said. The glut of rental properties has softened the city's apartment market. Average occupancies have dropped from around 97 percent in mid-2007 to roughly 93 percent today, he said. That means rents have stabilized as well, at a valleywide average of about $700 to $800 a month for a one-bedroom apartment.

    On top of steady rents, more landlords are offering concessions to lure tenants. Apartment owners are dishing out a month or two of free rent and waiving deposits. Condo owners are discounting rents altogether. Rather than the 5 percent and 7 percent annual rent gains experts forecast a couple of years ago, rates could jump just 2 percent to 4 percent in the next year, Keefe said.

    Trends in the broader economy could be offsetting some of those improvements in housing affordability, though.

    First, unemployment in Las Vegas rose to 5.6 percent in March, up from 4.3 percent in the same month a year ago. So some households have lost earning power, which in turn erodes their home-buying potential.

    And though wages are up slightly, the typical number of hours worked has fallen or flattened. Leisure-sector workers statewide are taking in $14.97 an hour, up from $14.69 an hour a year ago, but they're working 34.1 hours a week, compared with 35.3 hours a week a year ago, said Jim Shabi, an economist with the state's employment department. Construction workers are making $966.38 a week now, compared with $950.42 a year ago. Their hours are stable at 37.5 hours a week now, compared with 37.7 hours a year ago.

    And consumers everywhere find it tougher to qualify for home loans, even on properties they could have afforded a year ago. Companies that insure mortgages have placed the entire Silver State on their lists of restricted markets, where they're demanding pristine credit histories and downpayments of at least 5 percent to 10 percent.

    Still, the affordability picture is mostly better now than it was when Colorado College's data were gathered, locals say.

    The 65,000 service workers belonging to the state's largest union, Culinary Local 227, all earned 3.7 percent raises in 2007 thanks to a new contract, and they maintain free health insurance and pensions as well, noted Culinary Political Director Pilar Weiss. That's helped them move forward economically, she said.

    Added Aguero: "We haven't seen a hugely material change in the foundational elements of the economy. Does that mean homes here are affordable to everyone? Certainly not. But if you look over the long history, I think Clark County is better off today than it was 12 months ago, or even 24 months ago."

    Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.

    AFFORDABLE HOMES

    From most affordable to least affordable, here are the key cities in the Intermountain West ranked by the percentage of homes attainable for workers earning the median household income.
    METROPOLITAN SHARE STATISTICAL AREAOF HOMES
    Pueblo, Colo.76.3%
    Colorado Springs, Colo.68.5%
    Denver-Aurora, Colo.64.5%
    Greeley, Colo.63.2%
    Fort Collins-Loveland, Colo.61.5%
    Pocatello, Idaho59.7%
    Great Falls, Mont.57.0%
    Ogden-Clearfield, Utah53.9%
    Boulder, Colo.53.7%
    Albuquerque, N.M.45.4%
    Yuma, Ariz.42.8%
    Tucson, Ariz.33.4%
    Salt Lake City, Utah31.6%
    Boise City-Nampa, Idaho30.6%
    Phoenix-Mesa-Scottsdale, Ariz.30.0%
    Provo-Orem, Utah29.3%
    Prescott, Ariz.28.1%
    Flagstaff, Ariz.23.2%
    Reno-Sparks21.2%
    Carson City20.0%
    Santa Fe, N.M.19.5%
    St. George, Utah19.3%
    Las Vegas-Paradise18.9%


    SOURCES: Colorado College, National Association of Home Builders, Wells Fargo Opportunity Index


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    Get Real wrote on April 23, 2008 02:16 AM: Outta Here:

    Anything to back up your stats?

    Median incomes for Las Vegas are higher then the national average.

    Reading some of these comments (including yours), I can't argue with you concerning the larger then average uneducated population.

    Of course, this is the wrong place for intelligent discussions. Allowing anonymous posting just attracts the truly stupid.

    As the old saying goes, You don't know how Stupid somebody is until they open up their mouth.

    In this case..it's not until they can post an anonymous comment on the Las Vegas Review Journal.

    Please.. Get Outta Here and move to Utopia.





    Get Real wrote on April 23, 2008 02:02 AM: At least Vegas (Nevada) is not strapped with pensions and big governement such as some cities... there are cities out there that are going to get whacked and are doing everything to raise taxes to pay for the "automatic" pay increases for their government employees.

    Als...Studies like this don't take into account the number of retirees that live or will move to Las Vegas due to low property taxes and no state income tax compared to where they live now.


    Get Real wrote on April 23, 2008 01:59 AM: Johnqpublic:

    "The most interesting part of the article is that the Culinary Union is the only thing keeping even more local workers from poverty. Maybe we need the whole city to join the Culinary Union. It sure seems that employers are willing to underpay as much as possible unless forced."

    http://www.lasvegasnow.com/Global/story.asp?S=8166335&nav=menu102_7_5

    Automatically giving pay raises when revenues are down means the money has to come from somewhere.


    rightarm wrote on April 21, 2008 07:46 AM: mike, i agree with cj, you are an idiot. anyone who takes pleasure in the current situation must have their motives called in to question. you are the definition of miserable, taking pleasure in the misfortune of others. the housing crash is everyone's problem, as long as the values continue to fall. if you are in such a great position (which i doubt) then why gloat about it? you know what they say about that....

    and

    themainproblemis......what planet are you on? people moved to vegas thinking they could suppliment their income with gambling winnings? that is absurd. i've never heard such a ridiculous assumption. where on earth did you ever get that idea? you must not live here.


    robert wrote on April 20, 2008 08:32 AM: Don't worry..NACA is coming. www.naca.com

    and by the way..rentals are going up and not down.


    Whateverusaydear wrote on April 19, 2008 11:02 PM: Actually, Sherry, casino workers not being able to afford homes is not accurate. The price of home affordability has zero to do with "skills" and everything to do with the inflated real estate prices (that are falling fast by the way).

    I've lived in Vegas for decades... homes were affordable until the 2000s when speculation, greed and people buying more house than they could afford based on the mistaken belief that the inflated prices would go up forever.

    And don't worry: prices WILL continue falling until they're more in line with the wages of these "unskilled" workers and educated folks like teachers who were also affected by the prices fueled by speculation.

    I like looking at the HUD repo lists: prices in the $200,000 range only a few months ago for detached homes have fallen WAY down into the mid-$100,000 range, and condos are even worse (don't take my word for it; go to HUD's Nevada site and track the prices as well as lengthening repo lists each week).

    Expecting casino workers and construction workers AND TEACHERS to buy into the American dream isn't silly - especially for couples who have their credit act together and the savings... just watch the prices continue to fall.

    You don't think the current prices are realistic and going to stay at the current level, do you?


    Sherry wrote on April 19, 2008 09:42 PM: The point of the article is to make people feel sorry for low wage earners. You cannot expect to make the money to afford a home until you have skills that allow you to make the income.
    Expecting casino workers and construction workers to make such wages is silly.


    The Main Problem Is wrote on April 19, 2008 09:17 PM: The casinos control the wages that is why they are low. On top of that there are more available workers than there are jobs which creates low wage enviornment. Most of the casino jobs envolve tip hustling to supplement income. Casino is a shady business dependent on suckers and with a lot of shady people working in them.

    People moved to Las Vegas with the idea that they would supplement their income with gambling winnings (ROFLMAO). The fact is that the casinos are the only real winners.

    The houses (cracker boxes) are overpriced and have been for years even before the housing bubble sprang a leak.


    Outta Here wrote on April 19, 2008 05:31 PM: I can't believe the prices people paid for homes out here. What were they thinking? Las Vegas has some of the lowest wages in the country, the worst schools, high crime rates, corrupt cops, a largely uneducated population, thousands of illegal aliens...who was going to buy these $500,000-$1,000,000 homes? Were they expecting an invasion of retirees? Were they expecting people to flock here for the $8 an hour casino jobs? Did they even bother to read the demographics? Of course not. Many didn't bother to read their mortgages. If they did, however, they would have seen that based on wages, the median home price in Las Vegas should be no more than $140,000. And that, my friend, is where prices are headed in the next two years.


    Furious wrote on April 19, 2008 05:10 PM: Affordability isn't the issue today, though homes are still overpriced. The issue is buyers. Mortgages are only available to the most credit-worthy applicants with full documentation. And those applicants know that home prices will over-correct before they stabilize. They also know the glut of available homes will continue into the forseeable future. So, why buy, especially when rents are coming down? Let's face it, the pool of greater fools ran out in 2007. The rest of us are just biding our time until 2010.


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