Economic slowdown, Y2K may hurt LV home sales

Phil Levine

Thursday, Oct. 28, 1999 | 11:03 a.m.

The new millennium may bring with it a minor national recession, resulting in a slowdown for Las Vegas' home building industry.

That cautionary note was sounded Wednesday at a seminar examining results of a third quarter survey of 500 potential Las Vegas new home buyers.

Conducted by Las Vegas-based Marketing Solutions, the survey randomly questioned 20 home shoppers at each of 25 new home communities. Company officials say the survey has a margin of error of less than 5 percent.

"All the data we have suggests there will be a slight recession by the third quarter of next year," said Steve Bottfeld, executive vice-president and senior analyst at Marketing Solutions. The survey predicts a decline in economic optimism, combined with consumer fears over Y2K-related power disruptions, will trigger the recession.

"Not surprisingly, the main factors driving the slowdown are higher interest rates and the issue of the Y2K (computer glitch). However, the good news is that Las Vegas should be spared the worst of any recession," Bottfeld said.

The survey also predicts the boom in Las Vegas residential housing will "slow significantly in the fourth quarter of this year."

With or without an interest rate hike in November, the survey said it will be "alarmingly quiet" in Las Vegas' new home market between Thanksgiving and early January 2000. The holiday season is traditionally a slow period, but will be even more sluggish this year because of Y2K concerns, said Bottfeld.

The September survey found one in five potential new home buyers believe that Y2K computer problems will cause a "major disruption" of everyday life. Even more troubling for new home builders and real estate agents: 11.2 percent of respondents said they wouldn't buy a home because of Y2K fears.

"Our focus groups revealed that Y2K is prompting some people to worry about the reliability of (electric) power," he said. "We also heard concerns that foreign Y2K disruptions could have a ripple effect in Las Vegas. That comes at the same time that confidence in the economy is declining."

Although the survey found that overall consumer economic confidence remains high, Bottfeld said it's still "among the lowest in recent memory."

According to the survey, 57 percent of respondents expect the Las Vegas economy to improve. However, that optimism is tempered by growing concern over rising interest rates.

"About 78 percent of those we asked said they expected interest rates to rise," said Bottfeld. "However, we're not seeing the sense of urgency that existed in the second quarter. At that time, people felt more as though they needed to get into the market to beat rising (interest) rates."

According to the survey, several other changes are also reshaping Las Vegas' home building sector. They include:

An increasing number of consumers are relying on the Internet for help in their search for a new home. The survey found about two out five respondents accessed a real estate site.

Another bad portent for Realtors: the number of new home buyers relying on Realtors declined to 31.6 percent, off three percent from the previous quarter.

However, the survey provided real estate agents with at least one encouraging result. The report found Las Vegas remains the domain of single-family dwellers: as of last quarter, about three out of five respondents lived in single family homes.