Now that the housing bubble has burst, many of those builders are stuck holding the bag.

That's the story line for housing markets in Nevada, California, Arizona and Florida -- states that posted the greatest price appreciation and sales growth during the boom years. They're farthest from recovery, hampered by a large overhang of empty homes on the market and plummeting prices.

The outlook for Las Vegas' homebuilding industry remains grim at best, housing analyst Dennis Smith of Home Builders Research said.

"It's very grim, as in reaper," Smith said. "In particular for private builders because of many factors, and one big factor is financing. They can't get financing to build new projects. That has to change."

New-home sales are down 62 percent to 1,853 through May and median prices have fallen 23.5 percent from a year ago to $212,990, Home Builders Research reports. New-home permits declined 51 percent to 897 through May, though some would say that's 897 too many.

Smith doesn't expect traditional single-family new-home sales to increase this year and doubts that the number will ever reach the 39,000 escrow closings posted in 2005.

"I hope I'm still alive when that happens," he said. "I don't think we'll ever see that again."

The housing market collapse played an integral role in Southern Nevada's economy, driving homebuilders out of business or forcing them into bankruptcy.

Rhodes Homes, Kimball Hill and Toussa Homes, which built under the Engle name in Las Vegas, have all filed for Chapter 11 bankruptcy protection. Las Vegas-based Astoria Homes went into what President Tom McCormick called a "hibernation" period, essentially shutting down operations.

Concordia Homes of Nevada closed its sales offices last year and refunded deposits on homes that had yet to start construction. Concordia Land, an affiliate of the Henderson-based homebuilder, filed for Chapter 11 bankruptcy in June.

Southwest Communities Development, a subsidiary of Dallas-based Lennar Homes, has agreed to sell its remaining lots in Las Vegas for $8.5 million.

Las Vegas' housing market is probably best exemplified by Astoria entering hibernation, said Larry Murphy, president of local research firm SalesTraq.

"It's like a bear that goes to sleep for the winter," he said. "He gets his heartbeat down to nothing and his temperature down and hibernates until things get better."

Homebuilders will come back when the market changes, said Marta Borsanyi, principal of The Concord Group, a real estate consultancy in Newport Beach, Calif.

"They're all cutting down on overhead. They have tiny operations and they're trying to back out for a while," she said. "They'll get fine after three or four years from whenever they shut down, as soon as they sell off what they have."

Sales for private builders in Las Vegas have slid to their lowest numbers in years. Signature Homes, American West and Storybook had 22, 16 and six new home closings, respectively, during the first four months of the year; Astoria sold eight new homes.

"Things are terrible and there's no sign of a bottom," said Whitney Tilson, principal of New York investment advisory firm T2 Partners. "We've shorted stocks for homebuilders because we think demand for new homes is nil. There's no material need for new housing."

Tilson said the country is still in the "middle innings" of the bursting of the great housing bubble.

Homebuilding executives from more than 200 companies reported that sales remained weak in May and prices continued to tumble, a survey by Irvine, Calif.-based John Burns Real Estate Consulting shows.

"Builder contacts in a few locations are telling us that traffic and sales are off in the first weeks of June and they suspect the end of the spring selling season may be near," said Jody Kahn, vice president of the consulting firm. "We're also being told more often that appraisals are not supporting the home price. That's a significant additional challenge."

Many private builders have sold their standing inventory, but are unable to finance new starts, which may be dragging down sales rates in some locations, Kahn said.

National publicly traded builders such as Pardee, Pulte, KB Home and Richmond American have closed out new-home subdivisions in the Las Vegas Valley, reducing the number of actively selling subdivisions from more than 500 during the peak to fewer than 300 today.

For years, Smith has been talking about the dwindling number of private builders. Will any of them still be around when the economy rebounds? Or will national builders with deep pockets be the only ones left standing -- though some of them are wobbling, too?

"They won't be the only ones standing," Smith said. "There's always going to be room for the privates. There will be smaller projects that the publics don't want to deal with. Private builders are not going away completely because homebuilders are a resilient group and they'll find a way to get back into the market.

"Those that are left standing are going to be good builders that have weathered the storm and have the confidence of their lenders to get through this. We have to assume that affordable financing will become available because if it doesn't, we'll definitely see the demise of the private builder."

Some builders have changed their approach in Las Vegas, constructing smaller, more energy-efficient homes. The homes are selling for less than $100 a square foot, a number unseen since the late 1990s.

Storybook cut the price in its Los Libros subdivision seven times in the past 12 months, from $260,000 to $130,000, or about $57 a square foot.

Price cuts have also worked in other markets. A builder in Texas put up a billboard advertising new homes for $599 a month and captured 30 sales a week in three communities. There are no pictures of beautiful homes or happy people enjoying lifestyle amenities on the billboard, not even a logo to spur name recognition.

The target buyer is someone coming out of an apartment who is focused first and foremost on a monthly payment, John Burns Real Estate Consulting Vice President Lisa Marquis Jackson said.

"The people selling homes for this builder know how to speak the language of their buyers," she said. "In this case, money talks."

KB Home conducted a customer survey and found that buyers wanted functionality, efficiency and affordability in their homes. KB is selling a 1,670-square-foot home in its Manchester Park community for $139,900, or $80 a square foot, about the same price as the average foreclosure home.

"We've got to adapt," said Jim Widner, president of KB Home's Nevada division. "We can sit back and whine about foreclosures and prices or we can take proactive steps to deliver a product that competes with foreclosures."

The new-home market suffers a distinct pricing disadvantage against existing homes, Steve Bottfeld of Marketing Solutions said. The average price of a new home is $106 per square foot, compared with $77 per square foot for an existing home.

"It hasn't left the starting gate and won't until there is less of a price discrepancy," Bottfeld said.

The decline in new-home sales is largely a function of the size of the resale inventory, now above 21,000, and a dramatic drop in new home construction, said John Restrepo of Restrepo Consulting Group in Las Vegas.

The elimination of unsold inventory is critical to the return of price stability in Las Vegas, as is recognition that not all purchases are of equal value to the market, he said.

"What's needed are more purchases by homeowners, not just purchases by investors and speculators," Restrepo said. "Homeowner purchases will gain strength as the job market improves."

Keith Schwer, director of the Center for Business and Economic Research at University of Nevada, Las Vegas, said any transition to a healthier climate for homebuilding won't be easy.

There's uncertainty over mortgage interest rates, unemployment and the government's economic stimulus efforts. Although housing prices are returning to more affordable levels, the situation is far from settled, Schwer said.

"Too many (people) feel that prices will decline further," he said. "And too many are insecure about their job and their household income, suggesting no quick recovery."

The housing supply-demand picture remains weak for this year and 2010, Schwer said. The overhang of foreclosures and high percentage of households owing more on their mortgage than the value of their property point to continued difficulty for the Las Vegas housing market, he said.

"All in all, we see a continuation of the housing slump into 2010," Schwer said. "The prospects for Las Vegas are not all that different from the national forecast, though we believe that Las Vegas and other bubble cities will recover more slowly than the national average."

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491. Business Press reporter Tim O'Reiley contributed to this report.