Sizzling LV economy to produce a record 50,000 home sales

Phil Levine

Thursday, Jan. 20, 2000 | 11:19 a.m.

Las Vegas' residential market enters the new millennium riding a wave of consumer demand that has yet to crest.

In its Fourth Quarter 1999 New Homebuyers Survey, Las Vegas-based research firm Marketing Solutions predicts ongoing immigration -- coupled with a strong local economy -- will continue to drive new and resale home demand in Metropolitan Las Vegas.

"Growth is coming both from outside and inside this (housing) market," said Marketing Solutions' Executive Vice-President Steve Bottfeld. "In addition to the thousands of new people moving here each year, since 1998 we've seen the move-up (home) market become a more important force."

Illustrative of that growth, the survey predicts Las Vegas' resale home market will reach 31,500 sales this year, up sharply from an expected year-end total of between 25,000 and 27,000 sales for 1999.

Demand for new Las Vegas homes will also remain strong in 2000. Bottfeld said 20,100 new homes will be sold this year, off 3 percent from 1999's expected total sales.

"That means 2000 will likely be the first year total home sales will top the 50,000 mark in Las Vegas," he said.

The quarterly survey questioned 20 new home shoppers at each of 25 new home communities, for a total of 500 interviews. Company officials say the survey has a margin of error of less than 5 percent.

The survey said another factor driving new home demand is continued consumer confidence.

"More than half of those surveyed continue to believe the economy will improve in the next six months," said Bottfeld. "(Consumer) confidence bottomed out last summer because of Y2K concerns, and has been rising ever since."

The survey found one in five respondents think the local economy will "improve a lot" this year, while one-third of Las Vegans believe the economy will slightly improve. That level of consumer confidence has remained constant for the last six quarterly surveys.

There is, however, one foreboding cloud rising over the housing market horizon: higher interest rates.

Bottfeld said home buying traditionally increases in the face of rising mortgage rates. Still, a big jump in interest rates will likely pour cool -- if not cold -- water over the area's red-hot housing market.

He predicted interest rates will reach between 8.25 and 8.45 percent this year.

However, Scott Gragson predicts the changing face of Las Vegas' new home market may mitigate the impact of rising interest rates.

"It (high interest rates) was more of a problem five or six years ago, when we were mostly building entry-level homes (in Las Vegas)," said Gragson, a real estate broker with Colliers International. "People who can afford luxury homes are less affected by higher interest rates."

Gragson also noted that several master-planned communities -- including Summerlin and Green Valley in Henderson -- now have few lower-cost, entry-level homes to offer.

Still, a softening in demand for entry-level homes spurred on by higher interest rates may also benefit the multifamily market.

"If people decide to rent instead of buy because of higher (interest) rates, you could see an increased demand for apartments, and that would be good news for apartment builders," said Gragson.

The Marketing Solutions survey also found continuing evolution in the ethnic and demographic background of Las Vegas' home buyer.

The survey said the number of Hispanic home buyers is nearly double the level of two years ago; Bottfeld said minorities now constitute about 30 percent of Las Vegas' home buying market.

The age of the average Las Vegas home buyer is also changing: the survey found the median age of new home seekers dropped to below 38 years old, portending an increase in 'Generation X' home buyers.

The Internet is also reshaping the way homes are sold locally.

The survey found nearly two out of five respondents accessed an Internet new home site, with luxury home buyers most likely to use a computer to search for a home.

Overall Internet use grew in this market at a rate of 1 percent per month over the last three years, stabilizing at its current level of just under 60 percent of new home shoppers.