Analyst: Las Vegas resale home surge likely to subside

Jennifer Shubinski

Wednesday, March 2, 2005 | 10:57 a.m.

While the Las Vegas Valley continues to have a strong residential real estate market, the days of hyper-appreciation are not likely to come back any time soon, a market analyst said.

Local real estate experts Dennis Smith, president of Home Builders Research Inc., and Richard Lee, vice president of First American Title Co., on Tuesday gave their yearly presentation about the Las Vegas housing market.

The pair spoke to about 2,000 industry professionals at the 2005 Southern Nevada Housing Day, a merger of the Las Vegas Housing Outlook and the Southern Nevada Home Builders Association Builders Show.

"The days of 50 percent price increases are gone," Smith said.

Smith told the audience he expects the number of resale home sales to drop this year for the first time.

"I have never (before) projected a downward trend in resales," he said.

Smith reminded the crowd that while there may be a decrease, it's a decline from a record year (2004) when 64,168 existing homes closed escrow. He expects about 58,000 resale homes to close escrow this year.

"It will still be a good year; 58,000 resales is still a lot," Smith said.

Prices for resale homes, which led the nation in appreciation, are expected to increase slightly, between 2 percent and 3 percent, reaching a projected $255,000, he said.

The reason the resale market cooled is in part because of the increase in the number of resale homes on the market, Smith said.

The number of single-family homes listed through the Multiple Listing Service in January was 13,803, the Greater Las Vegas Association of Realtors reported. That is a decline from last year when more than 16,000 single-family homes were listed for sale during late summer. But both numbers are an increase from last spring, when fewer than 4,000 homes were listed.

Smith maintains the number of single-family homes on the market could again increase when investors, who still own properties in Las Vegas, start to put them back on the market because of a variety of issues, including higher property tax bills.

"It will be a long time before the resale supply is back in control," he said.

Annual sales of new homes are projected to reach 34,000 sales this year, an increase from 2004 when 29,472 new homes were sold, Smith said. That increase is because of the 6,000 apartment-to-condo conversions expected to close this year, he said. Apartment-to-condo conversions are included in new home sales because they are classified as a "new" product.

If apartment conversions are subtracted from the projected new home sales, the sales of new homes actually is projected to decrease slightly over the previous year, he told the audience.

Smith projects that the new home median price will go up about 8 percent to $313,509.

"A lot of builders think it will stay below that," he said. "I am still seeing small price increases, but 8 percent could be aggressive."

Lee, with First American Title, told the crowd that land supplies continue to be an issue in the Las Vegas. According to Lee's annual analysis with RGR Development & Real Estate Services, the valley has 327,274 acres remaining within the Bureau of Land Management disposal boundary.

Subtracting out for land that cannot be used for residential development, the valley has about 11 years left of developable residential land.

The limitation of land is causing developers to build denser and different types of products and neighborhoods, he said.

"Exactly what is going to happen, I don't know, it's crazy," he said. "The way we think about our city needs to change."