Total decline in median price of homes could top 50 percent

By Brian Wargo (contact)

Monday, Feb. 2, 2009 | 2 a.m.

How much further will Las Vegas home prices fall?

It’s the pressing question on the minds of homeowners, concerned about the property value they are losing, and of potential buyers, who are waiting on the sidelines before they purchase.

Moody’s Economy.com projects the total decline in the market will reach 52 percent by the end of the first quarter of 2010, says Mike Helmar, director of industry services and an economist who oversees Nevada forecasts.

“We don’t have much good news for you,” Helmar says. “We do have them continuing to go down.”

The firm listed the median price of Las Vegas homes reaching a peak of $320,000 in 2006’s first quarter and projects it dropping to $153,000 by 2010. In its most recent data, Economy.com had home prices falling 35 percent from the peak through the end of the third quarter of 2008 and projects another 25 percent to 27 percent after that. Its fourth-quarter numbers weren’t available to see how far prices had fallen.

Firms calculate existing home prices using different methods. SalesTraq, for example, has the median price of existing homes falling 45 percent to $157,250 from a peak of $288,000.

Helmar said most of the remaining decline will occur in 2009, with 2010 being relatively flat. The reason is that foreclosures show no sign of slowing and will continue to press down prices. Many adjustable-rate mortgages have yet to reset, he says.

Many buyers who got cheap loans during the housing boom have lost homes and aren’t in the market to buy another one despite the lower prices, he says. The recession is causing job and income cuts, and people are unwilling to buy. Speculation has ceased, as have second-home purchases, he adds.

“Everyone talks about affordability and interest rates being low,” Helmar says. “That’s all well and good, that people might be able to afford homes, but the banks aren’t lending whether they can afford it or not. It is very hard to qualify for a loan. Until the financial crisis is over, lenders won’t be willing to lend again.”

Las Vegas has counted on jobs and population growth to fuel the housing market, but the weak economy has put a damper on that, Helmar says. Casinos are cutting jobs and construction jobs have been eliminated.

“If you have a weak economy, you will not be getting the visitors,” Helmar says. “They may go to the new place, but they are not going to the old one.”

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