Las Vegas’ new home prices rising steeply

Jennifer Shubinski

Friday, Dec. 13, 2002 | 11:07 a.m.

The median new home price in the Las Vegas metropolitan area is expected to top $200,000 by the end of 2003 -- creating an even greater need for affordable housing, market analysts said.

"Before long it's going to be hard to find any sub market below $200,000," Meyers Group Principal Timothy P. Sullivan said Thursday at a quarterly presentation on the Las Vegas housing market. "In the south sub market (Lake Mead Drive area) it's going to be above $300,000 in the next two to three years."

The rise in new home prices is a supply and demand issue, Sullivan said.

"We've had demand exceed supply for quite a while here," he said.

Another factor is many people who have owned a home in the Las Vegas market for eight to 10 years have a large amount of equity in their homes and are upgrading to larger homes.

"Buyers are wealthy because they are older; or they are families that need more space," he said.

Interest rates are also expected to rise next year, resulting in fewer home sales, Rick Piette, manager of Premier Mortgage Lending Group, told a group of housing executives, builders and lenders.

"Consumers may not buy homes if rates move up, or they will think they better get on the train now or they will not be able to afford the ticket later," he said.

Stephen M. Miller, Department of Economics chair at UNLV, said that while the area's housing market will continue to be strong because of the influx of people, he agreed that a hike in interest rates could hurt some home buyers.

"Affordable housing is going to be hard to find," he said.

About 53 percent of Las Vegans can afford the median existing home price of about $140,000. That's compared to 22 percent of households that can afford an existing home in Southern California, Sullivan said.

"That's great news for this marketplace, but we're not far behind," he said.

New home prices in Las Vegas have appreciated 7 percent in the past year to $184,000, third quarter 2001 to third quarter 2002.

Over the last seven years, new home prices in Las Vegas have risen 40 percent, the Meyers Group reported.

Sullivan said the slow but steady increase has been one reason why there is such a demand for housing in Las Vegas.

"It's helped keep people in the market, unlike Southern California which has priced people out," he said.

In San Diego new home prices rose 23 percent in the past year and 123 percent over the last seven years, to $468,000, the Meyers Group said.

Sullivan said the days of steady increases in Las Vegas' home market are gone, and expects "double digit" percentage increases in Las Vegas home values in the near future.

"In the next five years, watch resale homes. I don't know if prices are going to double, but they will increase faster than we can imagine," he said.

And as houses become more expensive, lot sizes will become smaller, with a quarter of all homes on lots 4,000 square feet or less by 2004, Sullivan said.

The market the home builders need to fill is attached housing, such as duplexes and condominiums, as home prices become out of reach for many.

"We're not building as much attached product as we should," he said. "We need attached housing in this market. ... We need it and the market wants it."

Kenneth S. Perlman, senior consultant with the Meyers Group, said builders should start looking toward urban areas, siting downtown Las Vegas as a perfect place to build.