War, rates factor into home-buying decisions

Jennifer Shubinski

Tuesday, April 8, 2003 | 11:09 a.m.

Real estate experts say homes are still selling in Southern Nevada despite the war with Iraq and a slight increase in mortgage rates -- but they're warning those factors could lead to a local slowdown.

Traffic at new housing subdivisions in the Las Vegas area fell the week of March 24, the first full week of war with Iraq, said Dennis Smith, president of Home Builder's Research Inc.

The drop in traffic at actively selling subdivisions in Las Vegas could mean that new home sales will soften in the weeks to come.

"The extent of the war's influence on traffic counts and sales velocities in Las Vegas are primary concerns for many builders and lenders," Smith said. "Any softening, no matter how slight, will be magnified by some because of the robust sales numbers we have enjoyed and come to expect."

Smith reported 58.4 buyers per subdivision the week of March 24. That is down from the previous two weeks, when traffic was recorded at 61.9 and 67.2, respectively, Smith said.

"It has dropped a little the last two weeks," he said. "Is it the effect of the war? It could be."

Despite the drop in traffic, Smith said net sales per subdivision have remained at about 2.4 sales per week. That is out of a survey of 200 active subdivisions in the Las Vegas valley, he said.

The build-up to war didn't seem to have an affect on new home sales in the Las Vegas area.

In February there were 1,651 new-home recorded sales, or escrow closings, compared to 1,548 in January -- a 6.6 percent increase.

And previously owned homes continue to sell in record numbers in the Las Vegas valley, Smith said.

Recorded resales for February totaled 3,057, a 3 percent increase over January, which had 2,968 recorded resales.

"I think the upward movement of mortgage rates is getting some people off the fence, as it always does," Smith said. "The only thing that will slow sales is a prolonged war."

Mortgage financing company Freddie Mac reported that 30-year fixed-rate mortgages averaged 5.91 percent for the week ending March 28, an increase from 5.79 percent the previous week. Last year at this time, the 30-year fixed-rate mortgage averaged 7.18 percent.

Mortgage lenders said they haven't seen a decrease in loan originations since the war began.

"We were slammed (the previous) weekend with buyers, and a lot were from California," said Donna Johns, senior loan officer with Aspen Mortgage and president of the Southern Nevada Mortgage Bankers Association.

Johns said mortgage rates fell during the 1991 Gulf War and she expects them to stay at current levels during the war with Iraq.

Brad Malkin, manager at Realty Mortgage, said many people are buying homes now, despite the war.

"I think the interest rates will start to climb when the war is over," he said. "Given that, people are buying now, to protect that lower rate."

Malkin said rising interest rates are a bigger threat to the home-selling industry than is the war.

Rick Piette, owner/manager of Premier Mortgage Lending Group and New Home Resource, which offers a homebuyer "move up" program, said the slight increase in mortgage rates has created an urgency among buyers, making it hard to tell if the war is having any real effect on home buying.

archive