Existing home prices jump in July

Jennifer Shubinski

Monday, Aug. 23, 2004 | 10:37 a.m.

The median price of existing Las Vegas Valley homes surpassed the new home median price in July by more than $8,500 -- an anomaly that is tied to the method of measuring prices and that should be short-lived, experts said.

As the price of existing homes soared during the first six months of this year, they inched up closer to new home prices that have historically been thousands of dollars above the price of existing homes.

In July the median price of a new home was $238,957, while the median cost of a resale home was $247,490, Home Builder Research Inc. reported.

"This strange occurrence might last for another month, but we don't believe much more than that," Dennis Smith, president of Home Builders Research Inc., reported in his monthly newsletter. "It is something we will probably never see again."

In June the median price of resale and new homes was almost identical, at $240,000 and $241,750, respectively.

The median price of a new home in July 2003 was $203,546 and the median resale price was $170,000.

The reason for the aberration is really a timing issue because the data is a lagging indicator of the market, Smith reported.

The new home data actually reflects prices from homes that were put on the market in early 2004 but finally closed escrow in July. Smith reported there was a run up in prices that began in late February and continued through the end of June, but that those new home prices aren't reflected because many of the sales haven't closed escrow.

Resale homes also experienced a large increase in prices, but they show up on the books first. It usually takes 30 days to 60 days to close escrow on an existing home, therefore those prices will be reflected first, Smith reported.

The huge leap in resale prices -- more than 46 percent year-over-year -- and the surpassing of median new home prices also illustrates the "total lack of inventory of new homes during the first half of 2004," Smith reported in his newsletter.

"Consumers turned to the resale segment, which generated a tremendous demand for anything that was for sale," he said. "This obviously drove up the resale prices to the point where they were almost on par with new homes."

While the supply couldn't keep up with the demand for new homes in the Las Vegas market first half of this year, there were still 2,371 recorded new home sales in July, bringing the total number of new home closings during the first half of the year to 16,335 -- an increase of 3,136 recorded sales over the same period in 2003.

"Each month we remind folks the 2004 figures are being compared to a record year," Smith reported. "This makes the 2004 numbers even more exceptional."

Despite the impressive new home sales numbers, that again actually reflect activity from the first of the year, Smith and other local real estate experts have reported a recent slowdown in sales and price increases from the frantic days of buying and selling just a couple of months earlier.

Existing homes are taking longer to sell and in many cases are not fetching prices over the asking price. Many of the homes investors bought simply to turn around and sell are sitting on the market vacant.

Some new home builders have reported their long waiting lists for homes have disappeared.

Smith reported there is the chance that there could be a coming "glut" -- albeit a small glut -- of new homes in the market for homes priced $400,000 to $600,000.

But it would take a serious downturn in the national economy for a serious over-supply situation to occur in Las Vegas in the near term, he said.

Terry Connelly, William Lyon Homes vice president of operations, Nevada, said he saw a slight drop in sales over the past couple months, but he blamed it on seasonal conditions.

"It has ticked back up to where it was earlier in the year," he said. "We contribute that to new releases, new phases and the still strong demand and favorable interest rates."

Jim Widner, KB Home Nevada division president, said there is more supply on the market, both on the resale side and in new home communities.

"Builders have brought more communities online," Widner said. "I've seen no drop in demand."