Analyst: Tough housing outlook

By Buck Wargo

Friday, Jan. 23, 2009 | 2 a.m.

One of the valley’s leading housing experts said the Las Vegas market will continue its poor performance in 2009 and may be a couple of years away from a recovery.

Dennis Smith, president of Home Builders Research, predicted the existing-home market won’t see many more sales in 2009 and 2010 than in 2008 and the new-home market will have fewer sales in each of the next three years than in 2008.

“There is not much good news to talk about,” said Smith, who spoke Jan. 16 at the annual housing conference day sponsored by the Southern Nevada Home Builders Association. “I think we are at the bottom of this cycle, but it is going to be a long bottom.”

Smith blames the recession and accompanying job losses, the credit crunch and foreclosures for the housing woes. Even the opening of CityCenter with its casino, condominiums and hotels won’t be enough to help the housing market this year or next, he said.

“CityCenter should help, but it will not be the savior that everyone thought it would be a year ago,” Smith said. “Yes, it has new jobs, but they are having trouble selling units. I don’t care what you are reading.”

Smith calculates 30,491 existing homes sold in 2008, an increase of more than 6,800 compared with 2007. He expects that number to increase to 32,000 in 2009 and 34,000 by 2010.

The biggest jump, however, won’t be until 2011 when he expects sales to reach 38,000 — a level that won’t come close to the record of 64,168 sales in 2004 and 58,522 a year later.

Smith is predicting prices will continue to fall in 2009. He said the resale median price fell 35 percent in 2008 to $162,999. That will drop to $158,000 this year, a decline of 3.1 percent, before increasing 6 percent to $168,000 in 2010.

Smith saved his most dire predictions for the new-home market. The 10,464 closings of all product types in 2008 will fall to 7,000 in 2009, he says.

Even when there is some improvement, with his prediction of 8,250 sales in 2010 and 9,500 in 2011, that is still fewer sales than in a weak 2008, he said. None of those numbers approaches the more than 36,000 sold as recently as 2006.

“It is going to be soft the first half of the year because we aren’t building any homes,” Smith said. “There are no permits, and if there are no permits, there are not startups and then no closings.”

In the single-family home market, Smith predicts 6,500 closings in 2009, down from 8,994 in 2008. That number won’t get back to its 2008 level until 2011 when 8,500 closings are expected, he said. In 2005, at the height of the market, 30,829 new homes sold.

Smith projects builders will take out 5,000 permits in 2009, down from the 6,129 in 2008. That number will pick up to 6,500 in 2010 and reach 9,000 by 2011, he said. There were more than 30,000 permits for new homes issued in 2004 and 2005.

Smith remains sour on the high-rise and condo-conversion markets. Lenders aren’t providing loans to many high-rise buyers and the condo-conversion market continues to face competition as housing prices fall.

“The apartment conversion market is dead in the water because of the competition from the rest of the products,” Smith said. “What brought apartment conversions into the picture was a lack of affordability, but that is not an issue today.”