Las Vegas Homes News

Oct. 18, 2006
Copyright © Las Vegas Review-Journal

Median home price same as a year ago; fewer permits being filed

By HUBBLE SMITH
REVIEW-JOURNAL

Housing prices have flattened out, and new home permits have dropped substantially, a reflection of the soft housing market in Las Vegas, housing experts say.

The median price of a resale home in September was $285,000, exactly the same as it was a year ago, Dennis Smith of Home Builders Research reported Monday.

Smith has suggested for several months that prices would be flat at best and possibly turn negative toward the end of the year.

“We’ve reached the flat part, and now we’ve got three months to see if it’s going to stay that way or get worse,” he said. “Get ready for some negatives, but probably not more than a negative 4 (percent) to 5 percent.”

Resale prices will not plummet 20 percent to 30 percent like some analysts have predicted, Smith said.

“Those who continue to argue vociferously that Las Vegas’ prices will suffer a steep decline this year are doomed to disappointment,” real estate consultant Steve Bottfeld of Marketing Solutions said. “It hasn’t happened yet and probably won’t happen over the next three months.”

Another reflection of soft consumer demand is the 21.5 percent decline in new home building permits for the year. Home builders pulled 1,367 new permits in September, the lowest count since December 2001, or 56 months. The year-to-date total of 18,978 is off by 5,215 from a year ago.

“Builders are not building as many houses, which means inventory is being adjusted downward,” Smith said. “That’s been reflected for a number of months. Until you see permits going upward, this is going to be a soft market.”

Susquehanna Financial Group home building analyst Stephen East said absolute inventories continue to grow at slower rates, while prices show a decline that could continue a few more months.

The U.S. median selling price in August was $225,000, down 1.7 percent from the same month a year ago. East said it’s a necessary and long overdue change in pricing movements.

“Yes, pricing went negative, but year-over-year comparisons in September and October could flip between positive or negative given that prices were down, then up in the same months of 2005,” he said. “We are encouraged by the trend of decelerating growth in inventories, but what is really needed is declining inventories for housing’s road to recovery.”

East noted that existing home sales were down 12.6 percent from a year ago at 6.3 million in August. September 2005 marked the first of five monthly declines in sales, so comparisons should be better in upcoming months, he said.

Sales in the West fell by 22 percent, yet pricing edged up 0.6 percent. “This is a prime example of the stickiness of home prices and the reason we are not bearish on the pricing side of housing,” East said.

Andrew Pugh of sellfastlv.com said it’s true that median sales prices have not dropped in Las Vegas, but sales volume has dropped significantly.

Home Builders Research reported 2,847 new home closings in September, a 22.3 percent slide from 3,665 in September 2005. Existing home sales fell to 3,069, down 40.7 percent from 5,179. The median price of a new home was $321,160, a 7.7 percent increase from a year ago.

SalesTraq, another Las Vegas-based housing research firm, put the median new home price at $323,000, also up 7.7 percent.

“Unfortunately, median price is a very inaccurate measure of value as there are huge variations in homes,” Pugh said. “If only three houses sell in October for $321,000, $320,000 and $55,000 will the (Review-Journal) report that home values are rising since the new median is $320,000? Perhaps using price per square foot or another measure that gives price in relative terms would be more meaningful.”

Also, homes that sold as new last year are being sold as resales, he said. “Since the new home median is roughly 10 percent higher than the resale median, one would expect the resale median to increase even if prices of existing homes remain unchanged,” Pugh said.

Regarding days on the market, the Greater Las Vegas Association of Realtors likes to note that 60 percent of homes are selling within 60 days of being listed for sale.

“Of course, days on the market will only go so high as it doesn’t take into account the homes that didn’t sell at all and most agents relist a property after 90 days to make it look fresh,” Pugh said.

Barbara Lee said her home in the Seven Hills community has been sitting on the market for 2 1/2 years, first listed at $625,000 when the market was bubbling. The problem, she said, is other people in the neighborhood who had to sell undermined her by listing at $600,000 to $610,000.

“Now the market’s bad and I’m just disgusted with the Realtors in this town. My agent told me, ‘Give me six months, and I can sell your house.’ That was four months ago and he hasn’t brought one single person. I’ve taken the sign down. I just give up,” Lee said. “I’m going to try to sell it myself after my contract ends. My whole point is Realtors just put their signs up all over town and hope somebody’ll pick it up in the MLS or drive by and see the sign, and they make a nice crisp commission without lifting a little finger.”

Smith of Home Builders Research said there was a big change in consumer demand between the first and second quarters. Net sales in new subdivisions, or new contracts for homes, were down in every area of the valley, from 26 percent in the east submarket to 38 percent in North Las Vegas.

“We expect the fourth quarter will be a continuation of the bad numbers before some improvement appears during the first quarter of 2007,” Smith said.

NET SALES OF NEW HOMES
Submarket	First quarter	Second quarter	Third quarter
East	363	321	238
Henderson	805	1,000	637
North Las Vegas	1,210	1,406	868
Northwest	948	1,106	741
South	382	493	318
Southwest	2,232	2,239	1,484
Source: Home Builders Research