REAL ESTATE: LV new-home sales hit new low - Business

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Feb. 19, 2009
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REAL ESTATE: LV new-home sales hit new low

Analysts pessimistic as construction stalls, foreclosures multiply

By HUBBLE SMITH
LAS VEGAS REVIEW-JOURNAL

Housing in Southern Nevada

The housing market is so down in Las Vegas, it's got the analysts depressed.

Dennis Smith of Home Builders Research and Larry Murphy of SalesTraq both reported 284 new-home sales in January, the lowest monthly total on record and a fraction of the number sold during the market's boom in 2005 when nearly 40,000 new homes closed escrow.

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"They're not good," Smith said of new-home sales. "I anticipated the number to be very low, but when you see the number, it's very shocking."

Homebuilders are not going to start new projects unless they can make a profit, which is difficult if not next to impossible in today's business environment, Smith said. They have to compete not only with foreclosures, but with other builders selling homes for less than $100 a square foot.

"I can't wait for it to change because it will get better," Smith said. "I'm tired of talking to people who are losing their jobs. It's depressing. I'm sure it's astounding many economists how broad this recession is that started with housing."

Concerned that he may have missed something in his tabulations, Murphy said he counted new-home sales three times to make sure the number was correct. It's down 66 percent from the same month a year ago.

The median closing price for new homes was $233,000 in January, down 15.3 percent from a year ago, SalesTraq reported.

Sales of existing homes continue to post huge increases from the year-ago period, largely due to foreclosures, which account for about two-thirds of resales.

Home Builders Research showed 2,536 resales in January, a 70 percent increase from 1,488 in January 2008. The resale median price is $155,000, the lowest price since January 2003, Smith said.

"There's a number that's also shocking," he said. "Anybody who stops and thinks about it says, 'Holy cow, it's a mess.' Half the homes are priced under $155,000."

Again, foreclosures are putting downward pressure on home prices. Murphy said a key statistic is that 67 percent of existing-home closings in January were bank-owned homes with a median price of $139,000. The remaining closings had a median price of $170,000.

Although some analysts have said the Las Vegas housing market is near the bottom, the data suggest it could sink further, Murphy said. The job picture is cloudy and there's no way to reasonably forecast the market with any degree of certainty, he said.

He thinks new-home sales could drop to 6,500 for the year, while existing-home sales pick up to 32,000. Banks are still taking back more homes than they're selling, so foreclosure inventory has yet to peak, Murphy said.

Nevada Assemblywoman Barbara Buckley, D-Las Vegas, presented a plan to the Legislature to encourage banks to work with distressed homeowners. President Obama has announced a $50 billion package to help homeowners avoid foreclosure. Citibank is considering a 30-day moratorium on foreclosures.

"Maybe there's relief on the way, but I'm skeptical," Murphy said. "Everybody agrees that the first $350 billion we gave to the banks was used to shore up their balance sheets. They didn't loosen lending and help stop foreclosures."

Brian Gordon, a principal at Las Vegas business advisory firm Applied Analysis, said low home prices in Las Vegas are not sustainable in the long term. It's a function of supply and demand, he said.

"The market's sitting on a ton of inventory that sellers are looking to unload," Gordon said. "New construction has all but halted. Their ability to compete in price is limited when you look at the resale market. Bank-owned prices are approaching $75 a square foot."

The combination of falling home prices and low mortgage rates has created an environment in which housing affordability is now better than average in most areas, California real estate consultant John Burns said.

Pulte Homes is offering 4 percent fixed-rate financing on several communities in Las Vegas this weekend, with new-home prices starting in the $120,000s.

"Phoenix is the most unique market in the country right now," Burns said. "Any renter with a stable job and the desire to become a homeowner and live in Phoenix for a long time should be buying a home right now because affordability has never been better."

In 2006, owning a typical detached resale home in Phoenix cost $600 more a month than renting a nice apartment, Burns said. Today, owning is $118 a month cheaper.

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

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. Oleg Malashevich wrote on March 11, 2009 10:18 PM: Nice.....its what we all need...I will buy as much as I can :-) Bobby wrote on February 19, 2009 10:51 PM: The 300k houses during the boom and amd the HOA's of 300.00 per month didn't have anything to do with this mess did it? snackler wrote on February 19, 2009 07:48 PM: Goverment forcing lenders to lower their standards is just plain BS. High oil prices, high food prices, housing bubble, housing crash, economic crash, the roads all lead to Wall Street. The housing crash triggered the world wide recession but it was Wall Street greed and financial engineering that caused it. The excellent CNBC documentary "House of Cards" should be a must view by everyone. See it more than once so it all sinks in. It lays bare the Wall Street practice of no holds barred gambling with other peoples money to make outrageous fortunes no matter what the cost to the rest of us. It will also show how many rich people are prospering from the collapse they helped cause. Wall Street has been playing all of us for suckers with the housing bust only being one of the many ways they screwed us. Larry wrote on February 19, 2009 07:24 PM: With all of this gloom and doom on this message board, there is something positive here to consider. I think we all are learning some very valuable lessons through all of this mess. We will be wiser with our money ,and not spend our money so foolishly, when we get out of this recession/depression. We will be more productive and harder workers. We will value faith and family more than materialism. We will become a better society after all of this turmoil. Better days are sure to come and we will appreciate them more when they get here. zippy wrote on February 19, 2009 06:10 PM: Hey ~ I thought they said last week that we were at an all time high? I'm so confused. Is anybody reading this article saying "DUH!!!!" What a waste of space to even print this drivel. Free Nevada wrote on February 19, 2009 05:41 PM: "...or would we like to buy cars and buy houses in foreclosure and give them to people that actually might have a chance to prosper down the road and reward people who can actually carry the water instead of drink the water..." d wrote on February 19, 2009 05:04 PM: Existing home sales are up, of course when the bank takes over the property and is on the assessor page as the owner, the transfer of ownership and a made up number for the right off is considered a sale. The Bank owns it that is fudging the numbers. This creates the aura of urgency to buy from the realtors telling people these are going like hotcakes and holding onto offers creating false bidding wars among their colleages and their clients. More Fraud from the realtors like in the past bdm wrote on February 19, 2009 03:03 PM: Real Estate in Vegas was all about speculation - if you look at the real value of these 1200 square foot homes sitting on a postage stamp lot, its hard to imagine it cost more than 40K or so to build them - especially when most of the builders use non union types who can barely speak English. I also remember the gloating stories in the newspapers, TV, you open the Real Estate section and it was one BIG section obviously paid for by Real Estate interests. There were no discussions then about all these pitfalls... How dellusional! American wrote on February 19, 2009 02:53 PM: Well, well, well, all these shills at GLVAR and the NAR idiots have finally owned up the reality of the times! Hello, McFly Hello! We are in a Depression! Oh no says the talking heads and the ObamaNation folks! But yes we are folks! it just being masked by Trillions of dollars in Government bailout funds. Oh, but you say things will get better! Hell no, it will be a decade of pain and suffering for most Americans and a lost generation ofpoor souls burdened with the stupidity of public and private sector greed. What is needed is a new American Revolution to take back this country from the 1% pinheads, the stripepant boys, the empty suits and skirts! It would be very "instructional" to those shyster politicans if a few of them whre strung up along Pennsylvania Ave as a warning to others that this nonsense will stop! Do it by the force of the ballot box or by force of arms, but it must happens to save our way of life! Oh Boy wrote on February 19, 2009 12:33 PM: Check out these 2 links. Very pertinent and informative about what will happen in 2009 and 2010. It's going to get much worse before it gets better. Housing Time Bomb http://www.cnbc.com/id/28898377 This 60 minutes broadcast talks about the 2nd wave of ARM resets that will mature and come due in 2009 and 2010. It's only a few minutes long. http://www.youtube.com/watch?v=5IeixTAzhjE Read All Comments