Feb. 22, 2007
Copyright © Las Vegas Review-Journal

Observer recounts bumpy housing year

By HUBBLE SMITH
REVIEW-JOURNAL

A worker frames a house Wednesday at Palisades Estates in Las Vegas. Recorded sales of new homes in Las Vegas totaled 36,156 last year, down 7.2 percent from 38,957 in 2005, an analyst said. Photos by Gary Thompson. A worker finishes a house at Palisades Estates on Wednesday. At Las Vegas Housing Outlook 2007, housing analyst Dennis Smith said he expects the valley to tally 37,000 new home sales this year.

When someone asks housing analyst Dennis Smith how the Las Vegas market is performing, he has to ask what segment they’re talking about.

Sales declined for both new and existing homes and for apartment conversions in 2006, while high-rise and mid-rise sales increased, the president of Home Builders Research said Wednesday at Las Vegas Housing Outlook 2007.

“This market is too segmented to describe it in one sentence,” Smith told 1,200 people attending his annual presentation at the Las Vegas Convention Center.

Recorded sales of new homes totaled 36,156 last year, down 7.2 percent from 38,957 in 2005. Without apartment conversion and high-rise sales, the number dropped to 29,493. Resales fell 28.4 percent, to 41,892 from 58,522.

The “traditional” single-family home is losing market share, Smith said. Detached home sales sank to 62 percent of the market in 2006, compared with 85 percent just a few years ago.

Age-restricted housing is going to be flat at 6 percent of the market and apartment conversions settled into a 12 percent share. Attached dwellings such as condos and townhomes account for 10 percent of sales and high-rise units are 9 percent of the market, headed for 10 percent, Smith said.

“Closing numbers will look like a hell of a year for high-rises, but remember those contracts were written in 2004 and 2005,” he said.

Smith compared new prices and resale prices at luxury condo projects such as Turnberry Place, Manhattan, Metropolis and Park Avenue. Some were higher and some were lower.

Resales at Turnberry, for example, averaged $1.3 million compared with $900,000 new, whereas Park Avenue resales averaged $285,000 compared with $327,000 new.

Newport Lofts is coming on line downtown and basically sold out at $500 a square foot, a pretty good price, Smith said. The mixed-use Juhl project is about half finished with a unique design and 100 different floor plans, he said.

“One thing interesting about downtown projects is the one bedrooms are basically sold out. They’re being bought not just by investors but people from California who come here to do business once a week,” Smith said.

Real estate consultant John Burns of Los Angeles said the housing market has never turned as quickly as it has in the current cycle.

Housing should have slowed in 2002, but the Fed dropped interest rates, using the housing market to boost the economy, he said. Prices soared and investors came into the market.

Investors moved from Sacramento, Calif., to Las Vegas and then to Phoenix as each of those markets peaked, Burns said.

Sacramento home prices had the greatest appreciation from 2001 to 2005, going from about $180,000 to $380,000, or 112 percent. Las Vegas went from a little more than $140,000 to almost $300,000 during that time and Phoenix rose from $140,000 to $240,000.

Smith said there are two ways to look at 2006.

“Thank God it’s over or it could happen again,” he said. “I think 2007 is going to be a flat year overall. The tendencies are going to be flat. I’m looking at 37,000 (new home) sales. I don’t think it’s going to be worse than last year, but it’s not going to be a whole lot better.”

He projects a 3 percent increase in traditional home prices, not including high-rises and apartment conversions, to about $340,000 this year and a 6 percent increase to $360,000 in 2008.

First American Title Co. of Nevada Public Relations Director Richard Lee said home builders such as Astoria and Richmond American are redefining single-family housing. Astoria is breaking ground in June on 1,200 attached townhomes in its Tapestry subdivision in Centennial Hills Town Center; Richmond American is building “attainable housing” with four-story detached homes.

“We’ve got another Japanese invasion,” Lee said. “Toyota homes are on the way. They’ve got a project in San Antonio.”

With the rapid appreciation of home prices and the chunk of investors who came to the market, Las Vegas is going through its process of the real estate cycle, Jed Dealy of Wells Fargo Homebuilder Finance said.

“What we look at as a bank is inventory,” he said. “What’s it like? Is it increasing or decreasing? Vegas is high, but probably will come down at the end of the year.”

Wells Fargo provided $18.1 million in acquisition, development and construction financing to Pinnacle Homes for 78 single-family detached homes in Las Vegas.