Tuesday, Jan. 20, 2004 | 11:19 a.m.
Three housing industry economists on Monday projected a brisk pace for home building in the United States in 2004 after a banner year for sales last year.
The chief economists of the National Home Builders Association and mortgage lending giants Fannie Mae and Freddie Mac concurred at a session at the opening of the association's four-day International Builders' Show at the Las Vegas Convention Center that stable interest rates, an improving employment picture and an inflation rate that appears to be in check will contribute to a favorable outlook for 2004.
"Buying a house is a lot like buying a car lately," said David Berson, vice president and chief economist of Fannie Mae.
"Housing had its zero-percent financing phase last year when interest rates fell to 5 percent," he said in reference to incentives car companies have offered to move inventory. "While we expect interest rates to rise some, we could have a fourth record year for home sales."
And when the economy heats up nationwide, the local outlook usually is a scorcher, two local industry observers said.
"There's no reason to really argue that sales will be any less than what they were in 2003," said Dennis Smith of Las Vegas-based Home Builders Research, which recently concluded that Southern Nevada had record home sales for the year.
"We had 25,230 recorded new home sales," Smith said. "That's a huge number. I thought we'd do well if we had 24,000. I, like everybody else, underestimated the strength of this market."
Keith Schwer, director of the Center for Business and Economic Development at the University of Nevada, Las Vegas, concurred that 2004 should be a strong year for the local housing market, noting that tourism statistics are climbing.
"Travel and tourism are the major part of our economy," Schwer said. "Anything that drives employment creates jobs and the more jobs that are created, the more the basis for homebuilding. When you have a job, you have to live somewhere, so that's why an improvement in the tourism economy translates into a more robust housing market."
Smith said Californians -- not just the ones who are moving here -- are driving the real estate market in Southern Nevada.
"People from California are jumping into the real estate investment market to compensate for some of their losses in the stock market," Smith said. "This isn't just a Las Vegas phenomenon. Housing is also doing well in Phoenix and just about every place along the Colorado (River), Bullhead City and Lake Havasu City, (Ariz.)."
Smith said California real estate investors also have discovered Mesquite.
"The reason for that: golf," he said.
Out-of-staters also are contributing to the boom in luxury condominium sales in Las Vegas, Schwer and Smith agreed, as wealthy investors look to buy second homes or vacation residences.
"Turnberry (Place, which also is partnering to build luxury condominiums on MGM Grand property) is a reflection of demand outside of the area," Schwer said. "It's increasingly a part of the lifestyle of people on that end of the economy to purchase homes in resort areas."
The industry economists said the bulk of the industry growth would be in new single-family residences. They said Americans are continuing to move from apartments to homes, which could lead to increased rental occupancies in 2004, and the manufactured housing market should continue to sag in the year ahead.
David Seiders, chief economist for the Washington, D.C.-based National Association of Home Builders, said heading into December, the nation's home builders were on a pace to have 2 million housing starts for 2003 and favorable market conditions should provide the opportunity for a repeat performance this year.
"For some time, the housing sector has been protected from profound problems in the national and global economies by a major shock absorber -- the interest rate structure in the United States," Seiders said.
He said the American home building industry has endured terrorist attacks, corporate governance scandals and the Iraq war, thanks primarily to the Fed's management of interest rates. But a major global crisis could damage the home-building industry, Fannie Mae's Berson said. He listed terrorism and an "oil shock" of high prices as the most likely potential problems on the horizon.
Home Builders Research's Smith noted several parallels between the national outlook and the Southern Nevada scene, including the severe damage to the local building industry if a tragedy occurred.
"Because of the nature of our economy, we have either one extreme or the other with nothing in the middle," Smith said. "We haven't had an extremely bad market in 18 years and most of the people who live here have never seen a down market."
With the high number of people buying second homes and investment properties, Smith says if the market changes drastically in the next two or three years, "you're going to see a ton of for-rent signs" in front of Las Vegas homes.
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