Homebuilders seek a little help from their government

By Buck Wargo

Saturday, Aug. 29, 2009 | 2 a.m.

The turnaround in sales of existing homes has spurred hope that Las Vegas’ housing market is recovering, but local homebuilders remain on the outside looking in and are calling on the federal government for help.

The group, represented by the Southern Nevada Home Builders Association and the National Association of Home Builders, is urging Congress to extend tax credits for first-time homebuyers that expire Dec. 1, pass legislation that will help them recoup taxes, support their efforts to get financing and help streamline the appraisal process.

The 409 sales of new homes in July were 309 fewer than in the previous July, according to SalesTraq, whose numbers show Las Vegas is on track to sell fewer than 5,000 homes this year.

In 2008, 9,965 new homes were sold and, at the peak of the market in 2005, 38,075 new homes were sold.

Existing-home sales topped 4,600 in June and July.

One reason for the big difference between the number of new- and existing-home sales is price — the existing-home market is depressed because of the inventory of low-priced foreclosure homes.

The sale-price gap between new and existing homes was $81,549 in July, said Dennis Smith, president of Home Builders Research. Before 2003 the gap was $20,000 to $30,000, he said.

That has many builders waiting for the market to turn around. Some are even turning to rehabilitating houses to generate income.

Homebuilders want congressional action to boost the housing market and the economy, said Bill Hoover, president of Pageantry Cos. and the 2009 president of the Southern Nevada Home Builders Association.

To paint how bad the housing market is, Hoover pointed out that 561,000 homes are expected to be built nationwide this year compared with 603,000 built in 1940, when the country’s population was half of what it is now.

To boost the industry, its lobbyists are asking that the $8,000 tax credit for first-time homebuyers be extended a year and be offered to all buyers. That would result in 80,000 housing starts and create more than 350,000 jobs, Hoover said.

“We need this credit to keep the fragile recovery from falling backward,” said David Crowe, the National Association of Home Builders’ chief economist. “The first-time credit has been helpful in stopping the damage and given some light at the end of the tunnel. But that tunnel is so long, and it’s dark and deep, and it will take a while to get out of this.”

Mick Galatio, owner and president of Desert Wind Homes in Las Vegas, said the tax credit has provided some momentum for builders, but the fear is that it will end, leaving buyers reluctant to get new homes that won’t be completed by the Dec. 1 deadline.

“There are a lot of people sitting on the fence, and we need to get the next wave of people wanting to buy new homes,” Galatio said.

It’s important to extend the credit to other buyers because it allows repeat buyers to trade up and keep the momentum going, Crowe said.

Senate Majority Leader Harry Reid told In Business Las Vegas this month the tax credit will be extended, but it isn’t likely to include other buyers.

Another big housing market issue is lowball appraisals that hurt sales of new homes, Hoover said. One large builder said it is losing as much as 30 percent of its sales because appraisals are as much as 25 percent under contracted values. That kills the deal because the buyer has to come up with a bigger down payment, he said.

Some builders have cited cases where two appraisers’ values differed by 28 percent, Hoover said.

Galatio said appraisers are comparing foreclosures with new homes and aren’t counting many upgrades to new homes that add to their value.

Builders aren’t calling for legislation to deal with this problem, but are asking the federal government to influence the appraisal industry, Crowe said.

Builders are also complaining about tight credit and are calling on Congress to force lenders to loosen up. Regulators say they are encouraging banks to lend, but lenders complain regulators are restricting them, Crowe said.

Builders depend on banks to get loans to purchase property and build homes, but banks aren’t willing to lend money even if there is a willing buyer in some cases, Crowe said.

“That will be a serious problem in sustaining a recovery,” Crowe said.

The result will be a limited supply of homes that would drive up prices when there is a recovery, he said.

A version of this story appears in this week’s In Business Las Vegas, a sister publication of the Sun.