Experts: LV home sales to remain strong

Jennifer Robison

Friday, May 31, 2002 | 10:52 a.m.

Analysts at a real estate research firm are optimistic about the Las Vegas housing market, despite the uneven economic performance of the last year.

Tim Sullivan, an analyst in the local offices of the California-based Meyers Group, said homeowners' equity, a troubled California housing market, demographic shifts and positive local job growth are coming together to ensure brisk new and existing home sales over the next two to three years.

Sullivan said Thursday that homeowner equity is "fueling the housing market locally and nationwide."

The median new home price in the Las Vegas Valley was $134,000 in 1996; those median prices shot up to about $175,000 today. A homebuyer who got into the market at the lower end in the mid-1990s would have tens of thousands of dollars in equity, Sullivan said.

"That's a 25 percent increase (in median price)," Sullivan said. "That would enable someone who bought a home in 1996 to move up to a home that costs $235,000, or maybe even one that costs close to $300,000."

In addition, he said issues surrounding Southern California's housing market continue to drive Las Vegas' housing market.

Sullivan said the median price of a new home in Orange County, Calif., is $510,000, while the median price of a new home in San Diego is $411,000.

Las Vegas' $175,000 median new home price compares favorably.

Sullivan said California's affordability index -- the percentage of residents who could afford a new home -- is below 30 percent. That index drops to 19 percent in the San Diego area.

He said Las Vegas has a 57 percent affordability index.

"They have quality-of-life issues and income tax issues, and they have 31 million residents who are an hour away (from Las Vegas) by plane. California will continue to be a feeder market for Las Vegas."

Also key to sustaining the brisk pace of local home sales are demographic shifts, Sullivan said.

"Implications for the move-up markets are very good," with dramatic increases over the next five years in the number of 45- to 65-year-olds -- the population group most likely to purchase upscale new homes and second homes.

Positive job growth in the valley will also propel the housing market, researchers said.

Jeff Meyers, chief executive of the Meyers Group, said just 20 of the country's 75 metropolitan market statistical areas (MSAs) are expected to post positive job growth this year; Southern Nevada is one of them.

Meyers also said only 10 states will enjoy positive job growth this year.

He said Nevada is among them.

Sustained job growth and other factors appear to have new and existing home sales in 2002 poised to surpass sales figures from 2001.

Numbers released last week by SalesTraq, a local home-building industry research firm, showed Las Vegas-area new home sales are more than 2 percent ahead of last year's record-breaking sales tally of 22,000 new units sold.

New home sales for the first four months of 2002 totaled 7,067 units, compared to 6,898 units sold in the first four months of 2001.

Also, sales of existing homes for the first four months of 2002 total 11,123 units, up 16 percent from the first four months of last year, when existing home sales totaled 9,538 units.

Sullivan said the Southern Nevada market is not without its challenges.

Construction defect litigation and a resulting lack of insurers willing to offer construction insurance is decimating the litigation-prone attached-home market, he said.

"That makes the market less affordable," said Sullivan, referring to the relatively low prices condominiums and townhouses often command.

Sullivan also said a possible shortage in housing supply could cause problems for the local market.

Some submarkets around the valley are down to a two-year supply of housing at the valley's current growth rate.

"If we get down to a year's supply, builders will have to start paying more for land as land speculation rises. We need more supply, and we need it quickly."

Sullivan said he also is concerned about slower growth in the local resort sector.

"We still have positive job growth, but we haven't seen the expansion of casinos that we did before. We have to ask how we replace that (growth). We have land available for economic growth over the next 10 years, and long term, there are opportunities to change the market -- to make it a manufacturing center, for example. But it won't change overnight.

"We might be on our own in generating growth in the next few years."