Low rates expected to prop up LV home-selling industry

Grace Leong

Friday, Oct. 19, 2001 | 10:10 a.m.

Real estate analysts say the terrorist attacks of Sept. 11 may have magnified a slowdown in new home sales in Las Vegas that typically starts near the holiday season. But they say low mortgage interest rates and population growth in the area have helped mitigate the decline.

The tally of new home sales for September is not yet completed, but they're expected to total 1,700 to 1,800 compared to 2,174 in August, said Dennis Smith, president of Home Builders Research Inc.

The October numbers are expected to be down as well.

Smith said the slowdown in home sales is being magnified because Sept. 11's events occurred near the holiday season and the months of November and December are typically seen as the "holiday funk" for housing sales.

"It's bad timing because we were already entering into a slow time," he said. "Barring any further problems, we won't see much improvement until after the holiday season at the end of January, when people are back in buying mode."

Smith said there are some signs of recovery. Although new home sales plunged 42 percent to 185 in the week of Sept. 23 from 318 in the week of Sept. 9, he said new home sales for the week of Oct. 14 rebounded to 240.

Cancellation rates, another barometer of consumer interest -- which typically average 22 percent -- rose to 38 percent in the weeks following the Sept. 11 attacks, but recovered to about 32 percent last week, he said.

Counts of potential homebuyers touring homes plunged 40 percent in the first two weeks following Sept. 11, but have gradually improved to near normal levels, he said.

One factor mitigating the slowdown is an absence of unsold housing inventory prior to Sept. 11 due to strong demand. But Smith said there will be some inventory build-up in October due to the increase in cancellation rates.

"Builders will be offering some incentives to get rid of any standing unsold homes, and by the end of the first quarter of 2002 we should be back to less than one month of standing inventory," he said. "Home sales are typically the slowest in the fourth quarter. Home sales for this year's fourth quarter will likely drop about 25-30 percent, which is comparable to the drop we saw two years ago."

Smith prefers to compare this year's fourth quarter to 1999 instead of 2000 because last year's sales were unusually strong.

"The bombing won't likely cause a sharper drop in fourth quarter sales because interest rates now are probably at their lowest levels since 1998. Also, the housing industry didn't grind to a halt, we're still building houses, it just slowed from a record pace," Smith said.

Monica Caruso, the Southern Nevada Home Builders Association's director of public affairs, agreed.

"For the weekend of Sept. 15 and Sept. 22, the local home building industry did see a very slight drop in customer traffic but that's due to people being glued to their TV sets, and not going anywhere."

While she doesn't have any estimates for September's new and existing home sales, she said there are promising indications of consumer interest because she projects new-home permit counts in September to reach 1,745, up about 16 percent from last September.

Tom McCormick, president of Astoria Homes, is also optimistic.

Astoria just launched sales for its ninth master-planned development, Villa Villagio in Seven Hills. Villa Villagio is a 119-home project at the foothills of the Black Mountain Range in Henderson.

He said customer traffic dropped about 30 percent in the immediate aftermath of the Sept. 11 attacks, but said there wasn't a significant reduction in the number of homes sold.

McCormick said Villa Villagio sold 11 of 13 homes offered in phase one of its sales over the weekend.

"The drop in sales traffic was probably because people who didn't need to shop for a home either spent time with their families or were watching the news unfold."

"The same factors that prompted people to buy are still here and the lower interest rates make it that much easier to buy now," he said.

Caruso said new home sales in the Las Vegas area for the first eight months of 2001 climbed 12 percent to 14,780 from the same period last year, while existing home sales in Las Vegas from January through August rose 19 percent to 23,600 from the same period last year.

She said the average price of a new home is $195,000.

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