Fears of $100,000 median-priced home subside

By Buck Wargo

Friday, July 31, 2009 | 3 a.m.

The chances are growing less likely that Las Vegas median home prices will fall to $100,000, but no one should expect prices to shoot up anytime soon despite a lack of inventory, according to a Las Vegas housing analyst.

Speaking at the Crystal Ball housing seminar July 23 at Texas Station, Larry Murphy, president of SalesTraq, a housing research firm, said that fears of a $100,000 median-priced home appears to have subsided with prices stabilizing during the second quarter.

The median price of existing homes sold in Las Vegas during the first quarter fell 16 percent, but by the end of June that 16 percent decline remained unchanged, Murphy said. The median price was $148,000 in January but was $125,000 at the end of June.

“It appears prices have stopped falling,” Murphy said. “It’s possible that prices could fall further and hit $100,000 by the end of the year, but I don’t think that will happen.”

But Murphy warned of a false bottom and said that even though prices won’t fall to $100,000, they still have room to drop.

The price will settle depending on what happens with foreclosures the rest of the year. As he told In Business Las Vegas last week, Murphy repeated that he expects another wave because of the high jobless rate and people walking away from their homes. A lender moratorium on foreclosures ended in March, which should also add to the supply, he said.

Murphy said the anecdotal evidence from Realtors is that they are getting more assignments from lenders to put more foreclosed homes on the market. That comes at a time when multiple offers for homes have started to disappear because of the limited supply of attractive foreclosure homes, he said.

Murphy joked that the best prediction he can make about Las Vegas housing prices at the end of the year is to ask him on Dec. 29 because it’s a difficult market to predict these days.

“This market continues to defy logic and send mixed signals,” Murphy said. When demand for homes picks up as it has, prices are supposed to drop, he added.

Back in December 2007, no one could have predicted that home prices would have fallen 34 percent in 2008, Murphy told about 100 people in the real estate industry.

Even the luxury market hasn’t been immune from the housing slowdown, as some had once suspected, Murphy said.

“Not one corner of this market has hidden from the economy, including the luxury market,” Murphy said. “The luxury market is hurting right now.”

Through the first half of 2009, there were 100 new and existing home sales of $1 million or more, Murphy said. That’s about a 50 percent drop from 2008, he added.

The under-$200,000 market continues its resurgence like it did in 2008, Murphy said. He said his prediction in 2006 and 2007 that the under-$200,000 home is on its way to extinction was clearly wrong. There were about 17,500 such sales in 2008, and so far this year there have been more than 17,000 through six months, Murphy said. He expects the number to reach 35,000 by the end of the year.

“I am taking it off the endangered species list,” Murphy joked.

There have been more than 22,000 existing home sales through the second quarter, and Murphy predicts Las Vegas will have 40,000 by the end of the year, slightly below where the market was during the 2006 boom.

Through the first six months, there have been a combined 24,000 in sales of new and existing homes, with existing homes making up 90 percent of the total, Murphy said. There should be about 45,000 sales by the end of the year, which is similar to the 2007 number.

Murphy predicted that the new home market will sell fewer than 5,000 homes by the end of the year, about half of what the industry did in 2008. Builders sold 19,000 homes in 2007 and 35,000 homes in 2006, he said.

Surprisingly, prices of new homes continue to decline, Murphy said. The median price was $209,382 at the end of the second quarter, down 23 percent over the past year.

Murphy said he’s surprised that prices have continued to fall because he didn’t think builders would be able to make a profit. He said prices might come down a little more because builders are constructing smaller homes. Some are simply writing off land costs to keep building without worrying about making a profit.

Despite the drop in prices, there is about an $85,000 gap between the price of new and existing homes, which is one of the largest gaps Murphy said he has seen this decade.

Builders have pulled 1,531 permits through the first six months of 2009 and should end the year at about 3,000 Murphy said. Builders pulled 5,551 permits in 2008.