real estate:

New-home sales plummet again with no signs of improvement

By Brian Wargo (contact), In Business reporter

Fri, Feb 27, 2009 (2 a.m.)

Real Estate in Crisis

Las Vegas counts on Obama housing rescue (2-27-2009)
Report: Las Vegas home prices at July 2003 levels (2-24-2009)
Economist: Vegas housing market to recover in 2010 (2-23-2009)
How Obama's mortgage relief plan pencils out (2-21-2009)

The Las Vegas new-home market tumbled again in January and many builders remain on the sidelines, a local housing expert said this week.

Dennis Smith, president of Home Builders Research, said the 284 sales in January was the lowest one-month total since he started tracking the Las Vegas housing market in 1988.

And that weakness shows no sign of changing and will humble the housing industry, Smith said.

Clark County issued 90 permits for new homes in January; North Las Vegas issued 33; Henderson, 22; and Las Vegas, 34. The 179 permits were 11 more than were issued in December, but that small amount of future activity is a bad sign for developers, contractors, lenders, title companies and land owners, Smith said.

“When you go down the builder list of permit rankings, it really stands out how few starts there were during the year,” Smith said. “There were some large production builders that pulled less than 25 permits for the year. Until demand and prices improve, most of the larger production builders have no plans to increase production. Why should anyone expect homebuilders to build and sell them at a loss?”

In 2008 Pulte/Del Webb pulled the most permits at 806, Smith said. It was followed by KB Home, 592; Richmond American, 514; Lennar, 445; DR Horton, 384; Woodside, 379; Ryland, 250; Pardee, 235; TCR, 216; and Beazer, 203.

The median price of new homes in January was $234,173 when mid-rise and high-rise units were included, Smith said. Omit those and the median price was $235,000, a 14.6 percent decline or $39,827. The price levels in January match April 2004, he said.

Although new-home prices keep falling, Smith said builders are focusing on smaller homes and those priced under $250,000. In January 72 percent of the new-home sales were priced under $300,000 and 30 percent were less than $200,000. There was only one home priced above $750,000, Smith said.

In the existing-home market, the 2,536 sales in January were 452 fewer compared with December. The drop isn’t surprising because there is usually a rush to close loans at the end of the year and January is typically one of the weakest months. He said he’s impressed that January was as strong as it was.

The monthly totals have hovered around 3,000 and so this could be where the market settles for many more months unless the government stimulus and housing bailout spark more sales, Smith said.

When it comes to predicting the Las Vegas housing market, analysts must look at demand from outsiders who are looking to move here or buy a second home, Smith said. That makes it unlike predicting growth or declines in other markets. Phoenix continues to be a main competitor along with Florida, the Gulf Coast, San Diego and Los Angeles, he said.

Phoenix has an advantage because its housing prices are lower and its economic base is much broader, Smith said. Because Las Vegas has a limited supply of land, prices will eventually rise as builders buy lots.

The median price of existing homes was $155,000 in January — the lowest since January 2003, Smith said. Although foreclosures declined over the holidays because of a moratorium by Fannie Mae, Freddie Mac and other lenders, they remain steady, Smith said.

No corrections are imminent even with a government stimulus package, but it should help improve conditions, he said.

Discussion: 4 comments so far…

By nightmare

2/27/09 at 7:46 a.m.

Suggest removal

This story is missing the obligatory quote from a realtor to say that now is the best time ever in the 4.5 billion year history of earth to buy a home in Las Vegas, and that if you don't buy at least one house here in the next month that you are going to regret it forever.
By jfnance32

2/27/09 at 9:07 a.m.

Suggest removal

If you and your spouse have solid income and not worry about losing your jobs or getting our salary cut, you have money to make a down payment, good credit, planning to stay in Vegas for at least 10 years then you should buy a home.

The problem is there are not too many of those folks.

Home prices will continue to go down.

Because of all the Federal bond debt that will flood the market soon, interest rates will start to take off.

So now is getting close to the sweet spot. You can wait for home prices to decline some more but you should buy this year or next year.

The problem is that people are losing their jobs or getting their salary/income reduced. This round of layoffs will continue until fall of 2010.

This will continue to weaken demand for housing and will throw more housing into foreclosure.

So housing prices will continue to decline.

But interest rates will soon start going up.

Do the math for your 30 year mortgage payment and figure out when the cost of rising interest rates will over take the fall in housing prices.

Just FYI, do not get an ARM. Interest rates will go through the roof in a few years.
By pmmart

2/27/09 at 11:38 a.m.

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While it is true that the new home builders aren't building homes at the pre-crunch rate it doesn't follow that there is a shortage of homes on the market , or that there isn't a market for these "used" homes .. Over building is a huge part of the problem with LV real estate and the builders can take a big step in reducing the downtime by taking a break from "spec" building and allowing the market to work.
By Babyboomer

3/1/09 at 9:26 a.m.

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Once the dust settles and prices bottom out you still have a new issue to address....finding "qualified" and I mean "qualified" buyers. With that in mind, the need for smaller and cheaper is where it will go with few exceptions

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