Big drop in prices boosts home sales

By Buck Wargo

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

Fueled by foreclosures and a 37 percent drop in median price to $205,893, the existing-home market ended 2008 with 31,727 sales, 38 percent more than in 2007.

Combined with declines in 2007, the median home price has fallen 45 percent since February 2007 when it was $288,000.

SalesTraq’s year-end statistics released this week showed an improving resale market while the new-home market remains dismal.

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

According to SalesTraq there were about 7,000 more existing-home sales in 2008 than in 2007.

The median price for 2008 dropped $69,107 from $274,000 in 2007. The year ended, however, with prices continuing to plummet.

The median price of the 3,140 homes sold in December was $157,250. That’s more than a $13,000 drop from November — and more in line with the median home price of $155,548 in 2000.

Foreclosures continued to drive down home prices with no end in sight. In December 2,173 homes were repossessed to bring the year’s total to 25,227, a 234 percent increase from the 9,246 homes repossessed in 2007. The number of foreclosures has exceeded 2,000 a month since April.

Sixty-five percent of the resale homes sold in December, 2,031, were owned by banks, with a median closing price of $150,000.

The remaining 35 percent of homes sold had a median closing price of $183,000, according to SalesTraq. At the end of the year, banks had possession of 15,376 homes — the most since the housing crisis began — which means they are likely to keep cutting prices to generate sales.

Economists weighed in on the Las Vegas housing market Tuesday during a news conference at the 2009 International Builders’ Show at the Las Vegas Convention Center.

Frank Nothaft, a chief economist for Freddie Mac, said Las Vegas still has an excess amount of inventory that it most work through, which continues to put pressure are price declines.

David Berson, the chief economist for the PMI Group, said the probability of Las Vegas home prices being lower in two years is greater than 90 percent – among the highest in the country. Despite that, Berson said Las Vegas’ housing market’s future is better than most.

“The underlying demographics are good for the next five to 10 years,” Bernson said. “There will be people moving here and that will soak up that demand over time.”

The good news for the housing market is that sales remain brisk as prices drop. The 3,140 sales in December were more than double the 1,553 recorded in December 2007, and the fourth highest monthly total in 2008 despite the weakening economy and credit crunch.

The supply of existing homes was 21,045 in December, a mark that has held steady most of the year. There is a current supply of 7.7 months, according to SalesTraq.

The lower prices are attracting a lot of first-time buyers looking for affordability and investors buying homes as long-term investments and rental properties.

The rapid drop of existing-home prices continues to wreak havoc with the new-home market. In December, 665 new homes sold, the third weakest month of the year.

In 2008, 9,741 new homes sold, a 49 percent drop from the 19,446 sold in 2007. New-home prices fell over the course of 2008, but they began to stabilize at the end of the year as builders cut back on construction and acknowledged they couldn’t continue to build homes at such low prices and make money.

There were 368 active subdivisions in December, which continued the decline for the year. In December 2007, there were 538 active subdivisions. That boosted the average sale per subdivision at 1.81 in December, up from 1.6 in November.

The median price of new homes in December was $240,880, a little more than a $3,000 decline from November. The median price of a new home was $280,000 in December 2007, according to SalesTraq.

The 148 permits issued to homebuilders in December were the fewest of any month in 2008. The year ended with 5,550 permits, down 53 percent from 12,836 issued in 2007.

The high-rise and mid-rise markets remained weak in December with 24 closings. That’s a gain over the 13 in November, but the condominium market has seen closings continue to fall since the financial market meltdown began in September.