LV home sellers may face backlash, regulators say
By VALERIE MILLER
BUSINESS PRESS
April 06, 2006
Southern Nevada could see a standoff between home buyers and sellers that lasts for a couple years or more, according to regulators concerned about declining affordability. The Federal Deposit Insurance Corporation raised the scenario as part of its latest quarterly state profile released Tuesday.
A regional survey found that the number of people who believe this is a bad time to buy a home is at its highest point in 15 years. The disconnect between home prices and valley residents' income may soon come to a head, FDIC Chief Economist Rich Brown pointed out. He didn't expect to see any sort of a bubble burst, however.
"We have done studies of booms and busts, and after a boom prices may go sideways while incomes catch up," said Brown, who added that he didn't expect to see that happen before the end of 2006. John Anderlik, the acting regional manager for the FDIC's San Francisco office, maintained the local housing market is strong. "We are beginning to see signs of moderation. I wouldn't say they are extremely worrisome conditions," he noted. "Inventories are rising in Nevada, but we are not seeing a significant decrease in prices in the future. But it is certainly reasonable that home prices will have to level off as incomes catch up."
As home prices appreciated another 18 percent in 2005 (albeit a much lower pace than its torrid 37.1 in the third quarter of 2004), the Las Vegas Affordability Index continued to plummet. It now sits at 72, which is down from the 75 registered in three months ago. "That means a family making the median income can only afford 72 percent of the median home price," said Anderlik. "The state's index was over 100 just few years ago." Anything over 100 is considered affordable. A year ago, the Las Vegas index sat at 78.
To add to consumers' money crunch, fuel costs are expected to continue to rise in a state where 95 percent of the homes are heated by natural gas and electricity. The good news is that the Silver State still leads the nation in growth and bank loan portfolios remained strong.
"Delinquency rates remain low," Anderlik said. That's not an exaggeration. FDIC state profile figures note an overall 0.35 percent past-due loan rate. Nevada ranked first in loan growth, seeing its construction and development loan portfolios grow at a 48.8 percent clip. It improved slightly from its 42.8 growth pace in 2004, and was the fastest growing loan type for Nevada institutions.
Regulators, who have expressed concern in the past over Nevada's high concentration of commercial real estate loans, now say each bank has to make the call as to how much is too much. "These are institutions generating a lot of construction loans, and in boom times, that is recipe for profitability," Brown said.
If you are planning to relocate in the Las Vegas area, contact us for a prompt response to any questions you have about the Las Vegas real estate market. We invite you to visit our website to view updated daily listings of Las Vegas homes at Free Las Vegas Homes MLS Search
