By HUBBLE SMITH
REVIEW-JOURNAL
Las Vegas ranked 90th in the nation for home appreciation in the second quarter with an 11.87 percent increase from the same period a year ago, the Office of Federal Housing Enterprise Oversight reported Tuesday.

That’s slightly better than the national average of 10.06 percent.

The Washington, D.C.-based OFHEO’s house price index showed quarterly appreciation of 1.17 percent nationwide, or 4.68 percent annualized rate, the steepest deceleration in prices since the index of 275 U.S. metro areas was established in 1975.

“These data are a strong indication that the housing market is cooling in a very significant way,” OFHEO Director James Lockhart said in the report. “Indeed, the deceleration appears in almost every region of the country.”

Nevada, usually among the top 10 states in home appreciation, slipped to No. 19 in the second quarter with an 11.44 percent increase from a year ago.

Home prices have more than doubled in the last five years in both Las Vegas and Nevada, though they only crept up 0.57 percent and 0.26 percent, respectively, from the previous quarter, OFHEO reported.

“Their methodology is good because it’s consistent across the country, but it’s bad because it uses mortgage information,” Larry Murphy of Las Vegas-based SalesTraq said. “They look at what the average and median mortgage is and they compare how big the loan is, so they have to assume everybody’s making the same down payment and the loan-to-value ratio is the same. Re-fi’s (refinances) also show up in their methodology and they acknowledge that because they do it in every market.”

OFHEO analyzes the combined mortgage records of Fannie Mae and Freddie Mac, which form the nation’s largest database of conventional mortgage transactions. The conforming loan limit for mortgages purchased in 2006 is $417,000, the office reported.

SalesTraq showed a new home median price of $337,272 in July, up 16.3 percent from the same month a year ago, and existing home median price of $289,000, up 3.2 percent.

Patrick Lawler, chief economist of OFHEO, said possible causes of the decrease in appreciation rates are higher interest rates, a drop in speculative activity and rising inventories of homes.

There were 20,609 available resales on the Multiple Listing Service in July, compared with 10,929 a year ago, for a current supply of nine to 10 months, according to SalesTraq.

“The very high appreciation rates we’ve seen in recent years spurred increased construction,” Lawler said. “That coupled with slower sales has led to higher inventories and these inventories will continue to constrain future appreciation rates.”

Data issued last month provided evidence that the housing boom is over. The Commerce Department reported that sales of new homes dropped in July by 4.3 percent, the largest amount since February, while the inventory of unsold homes climbed to a record high. And sales of previously owned homes fell 4.1 percent in July to a 2 1/2-year low, according to the National Association of Realtors.

Sales of both new and existing homes set records for five consecutive years as the housing industry enjoyed a boom powered by the lowest mortgage rates in four decades. But rates have been steadily rising this year as the Federal Reserve tightens credit conditions as a way to slow the economy and keep inflation under control.

Analysts expect home sales to drop by some 10 percent this year. Existing home sales in Las Vegas are down 16.7 percent at 26,213 through July, according to SalesTraq.

The interesting figure for Tony Silva of Realty One Group is total dollar value for home sales in July, which the Greater Las Vegas Association of Realtors reported at $744.8 million, down 23.5 percent from the previous month and down 35.7 percent from a year ago.

“I think for the market to stabilize here in Vegas we’re going to have to see prices drop 8.5 percent this year,” Silva said.

“Everybody forgets about salaries. You have to see a 4 percent increase in salaries with an 8.5 percent decrease in prices for the economy to balance itself out,” Silva also said.

Companies are going to have to compete for white-collar workers because they won’t be able to steal people from the Los Angeles job market when home prices are no longer such a good deal here, he said.

HOUSE PRICE APPRECIATION