Houses are selling below replacement costs. Supply is being consumed in a market that really does have limited lot supply, the San Diego-based analyst said at his housing seminar.

Standing inventory of new homes is down to about a one-month supply and home builders have cut new permits to about 6,900 this year. Resale inventory is at a seven-month supply, well below the national average of 10 months, Sullivan said.

Foreclosures will remain a problem in the coming year and the key to resolving it is what happens with home prices, he said. If prices stabilize and the banks are able to keep people in their homes, foreclosures will ease.

Sullivan said there are "stakes in the sand" that will bring about corrective action. The cornerstone is the $700 billion Troubled Asset Relief Program or TARP.

"Government intervention shows us we're here to help. Ha, ha. But really, we are," Sullivan said.

John Ritter, chief executive officer of Focus Property Group, said everybody was making money in Las Vegas during the heyday.

"I think everyone right now is confused," the developer said during a panel discussion.

"The market went from bad to worse, from worse to horrible and from horrible to 'Holy crap.' We're in a period right now where no one knows where value is going. The sense is it's going to get worse before it gets better," he also said.

Twelve months ago, Morgan Stanley swung a deal with Lennar Homes in which finished lots were traded for 60 cents on the dollar. Builders were turning down offers of 40 cents to 50 cents on the dollar and now they're going back to those investors willing to take the offer, but investors are saying, "No deal. Now it's 30 cents," Ritter said.

Ritter said his 1,700-acre Kyle Canyon Gateway development has been taken back by the bank and his 2,000-acre Inspirada development in Henderson has been put on hold. Focus, which paid $510 million for the Kyle Canyon land, was sued by Wachovia Bank in October for defaulting on payments.

Those aren't the only master-planned communities in trouble. Lake Las Vegas was the first to file for bankruptcy and General Growth Properties, owner of Summerlin, is probably headed that way, Ritter said.

While Las Vegas is struggling now, the region matches up well against other parts of the country, Sullivan Group Vice President Ken Perlman said.

For the first time in 25 years, employment growth has turned negative, down 0.3 percent in September from the same month a year ago. Still, Las Vegas added 52,500 jobs a year since 2005.

Population growth is going to average 50,000 people a year through 2012, Perlman said, and that's going to buoy the market for a while.

Foreclosures have driven down median home prices, but the rate of decline is slowing.

There were just 402 new home sales in September, less than 10 percent of the 4,365 new home sales in May 2005.

"Surviving is the name of the game," Ritter said. "We survive. We all learned that if we thought we had control over the marketplace, we were dead wrong. We all encouraged each other to go out on a limb."

Bruce Tripp, vice president of acquisitions for KB Home, said the valley's largest home builder reacted to the downturn early and lowered prices. KB Home sold or dumped a lot of projects, including 40 acres in Henderson planned for a mixed-use development with attached housing.

Perlman reported the new home median price at $251,000 in September and resale median at $189,000.

Home prices will slip further and more foreclosures are coming, Tripp said. It's going to be tough to sell homes in the next year or two.

"I'm amazed at how the private guys (builders) can hang on," he said.

"I'm a finance guy. The publics have the ability to write things off. We conserved a lot of cash. We've got $1.3 billion in reserve and another $1 billion line of credit. The privates don't have the ability to lower prices and write down their lots, but the banks are going to want their money back," he also said.

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