Analyst predicts new-home recovery in 2012

STEVE MARCUS / LAS VEGAS SUN FILE

The Concord Group, a national real estate consulting firm, says foreclosures of existing homes, like these in Henderson, are making it hard for builders to sell new homes. The company thinks the local new-home market will recover within three years, later than some local experts predict.

By Brian Wargo (contact), In Business reporter

Mon, May 25, 2009 (2 a.m.)

Real Estate in Crisis

Price of existing homes drops to '98 levels (5-22-2009)
Underwater mortgages mount (5-22-2009)

Many analysts have weighed in on a possible recovery of the existing-home market.

Now, a national real estate advisory firm is handing out predictions about when the new single-family home market will recover in Las Vegas: in three years, during the first quarter of 2012.

That’s a little longer than some local analysts project.

Concord Group Principal Richard Gollis said the prediction is based on the latest analysis of unsold inventory and expected changes in employment.

The recovery of the new-home market in Las Vegas will be slower than markets in California such as Ventura, San Jose and Orange County — where recovery is expected by the first half of 2011, Gollis said.

Las Vegas’ recovery, which is defined as one new-home sale per week, per project and low single-digit appreciation, will match the timeline given for Southern California.

The firm projects Southern Nevada will have a quicker recovery than Phoenix, which won’t recover until the fourth quarter of 2012, and Reno, with its new-home market predicted to improve in the fourth quarter of 2014.

The new-home market remains weak in Las Vegas with only 1,463 sales through the first four months of this year, a 61 percent decline from the same period in 2008, according to SalesTraq, a Las Vegas research firm. There were more than 38,000 sales in 2005 at the height of the market and more than 35,000 in 2006.

Gollis said the key components of the projections are demand for housing, job growth, inventory of new homes and finished lots. What’s interesting about Las Vegas, he said, is that its housing market tracks job growth tied to gaming revenue. And the gaming revenue tracks the nation’s gross domestic product, he said.

The new-home market in Las Vegas has been hurt by foreclosures that have brought down the price of existing homes to $125,000 and made it difficult for builders to compete. That price is $101,000 less than the price of a new home, according to SalesTraq.

Gollis said it will take at least 18 months to two years to burn off the inventory of foreclosed homes.

“When we are talking recovery, we are not saying prices will increase dramatically or that there will be any big surge in sales,” Gollis said. “What we are saying that is in two to three years, developers should be delivering new lots in the market to satisfy the demand for single-family (home) sales.”

Based on a two-year entitlement and lot delivery cycle, Gollis said his firm projects an increase in land development nationwide in the third and fourth quarters of this year. There are developers out there now, even in Las Vegas, looking for deals to bring new, lower-cost homes to the market, he said.

“What we are saying is that developers need to start thinking now of how to retool their communities and recharge their products and how they are marketing them in advance,” Gollis said.

Some local analysts said they expect a recovery in the new-home market as defined by the Concord Group study to take place sooner than three years.

Steve Bottfeld, executive vice president of Marketing Solutions, said there is not enough information out there to make a realistic judgment about the timeline of the recovery of the new-home market.

But Bottfeld said his best guess is that any recovery could come by the end of 2010 or beginning of 2011. The reason is that the number of subdivisions is declining, and there could be 150 by the middle of 2010. Having one sale per week per subdivision would net about 600 sales a month.

“I don’t consider that a recovery,” Bottfeld said. “By the time we get to the Concord Group’s timeline, we should be twice that, and I don’t consider that a full recovery.”

Signature Homes founder Richard Plaster said he is more optimistic about a recovery in the new-home market: no later than 2011. Any recovery won’t start until foreclosures drop, Plaster said.

Plaster said Signature took out 12 permits last month but doesn’t expect to take out any the rest of the year because of the slowdown in the new-home market.

Dennis Smith, president of Home Builders Research, said he expects to see the projection of one sale per week per subdivision before 2012.

“I think it is going to be two years from now before there will be that type of demand,” Smith said.

Discussion: 28 comments so far…

By rejco100

5/22/09 at 3:50 p.m.

Suggest removal

It's funny how these Expert's Crystal Balls can NEVER predict the Powerball numbers!
By LasVegas2009

5/22/09 at 4:15 p.m.

Suggest removal

I predict that it will snow in December! I don't know where it will snow. I don't know how much it will snow but I know it will snow. blah blah blah
By tvegas

5/22/09 at 4:52 p.m.

Suggest removal

Some idiot is paying these guys for this stuff.
By its2hot

5/25/09 at 3:40 a.m.

Suggest removal

Just another Analyst with their mouth flapping their mouths.

It will not be 2012, if these idiots where in the businesses and looked at the vacant land that is developed with lots not on the market then compare how many single family homes are in foreclosure and add who is facing foreclosure then they would see that we are 6 to 8 years out.

Come to Mountains Edge, thousands of lots ready, shut down no being built upon. Go to Summerlin, Howards Hughes properties, thousands of lots shut down, Southern Highlands, Triple 5 (Roma Hills) Insparada, etc" etc" etc" I speak with inside knowledge, no knew lots being developed until the surplus lots and foreclosures are sold.

I would like to see Las Vegas Sun writer do their homework before writing such a ludicrous article.

What they need to address is the commercial properties and other properties that have balloon payments due in the near distant future. These economic crises will far exceed what we're facing now and will cost taxpayers trillions upon trillion to bail this these properties.
By Future_2012

5/25/09 at 5:38 a.m.

Suggest removal

The three year out "prediction is based on the latest analysis of unsold inventory".

So there is more inventory than buyers.

I hope they don't pay for this work product
By Sabibaby

5/25/09 at 6:48 a.m.

Suggest removal

I think what these analyst are meaning is that it will be another two years to hit bottom.

You can only go so low, at some point housing will recover albeit slightly. In better terms, housing won' t continue to degrade. This doesn't mean the economy will be flurishing.

its2hot, I agree with what you say about Option ARM and Prime Loans, including Commercial properties conditions worsening but they will find a bottom and probably hang out there for five years. Like the article says, it will be a slight recovery. What one needs to be concerned with durring this period of time is how many properties destingrate with out proper upkeep.

Will it be cheeper to by a house in Las Vegas than a car?
By Sinatra711

5/25/09 at 6:57 a.m.

Suggest removal

3 yr predictions? This is hilarious! They can't even predict what will happen next month, let alone in 3 yrs. What a joke.

I love reading articles like this for entertainment. Unfortunately, most people will read this and believe it as gospel.

S711
By DMCVegas

5/25/09 at 7:57 a.m.

Suggest removal

Interesting read, but totally flawed because it's not taking some other factors into play.

1. Commercial Real Estate: As it is right now, we're running too high a vacancy rate. That's not even going to count the massive Commercial R.E. Bubble that's on the horizon. CNN's estimates were that over 600 Banks will go under by year's end. That kind of damage isn't going to allow banks to loosen their lending standards, and will keep buyers out of homes.

2. Employment Rates: Places like City Center opening do NOT create 15,000 new jobs. The majority of positions will be filled by employees transferring from other properties. And if you work in the gaming/hospitality sector, you know that the resorts are NOT going to backfill 100% of all vacant positions left behind. So now, we aren't going to see as much growth as predicted. And that's not even figuring in staff reductions (M Resort anyone?).

Also with the budget shortfalls we're experiencing and the proposed tax measures to "solve" it, Nevada isn't going to be a very friendly place for businesses to operate. That too will cut the bottom line for employment numbers even further. Both for sheer labor numbers, as well as the creation of high-paying jobs that would allow more money to be contributed to the local economy, let alone to pay for these houses that are supposed to be sold.

3. Infrastructure. Simply put, we don't have it. The agricultural lobby isn't going to allow the Imperial Valley to shut down to save water, and watch out if they pair with Northern Nevada and Utah AG. There goes all the water that Las Vegas needs to keep expanding. And that's just counting fresh water, never mind that the sanitary sewer system in LV needs a complete overhaul to handle the additional volume of waste by all these houses that have been built, and that developers are hoping to build in the future.

Yes, 3 years is a fair estimate, but not for any significant economic recovery where builders can once again have free reign to develop the desert into oblivion. That's just what it would take in order to dump all homes for sale, if they can. One thing that many people have commented about in many of these comment sections is how many abandoned homes in their neighborhoods are not being listed by the banks. "Bank Owned" doesn't mean "tax exempt". I'd estimate that sometime in the near future, we're going to see a massive flood of bank-owned houses, and that's just going to drive prices down even further.

Las Vegas as a Resort Destination will eventually recover. But Las Vegas as a community will not. A new community will spring up, sure. But it'll be a mix of low-class hoodlums living here on Section 8 in the abandoned sprawl, and wealthy people locked in burbclaves protected by armed guards. The middle class is packing it's belongings up right now, and heading out of town in rental trucks to more hospitable areas.
By cardtel

5/25/09 at 8:04 a.m.

Suggest removal

Mr. Wargo,

I admire your courage as a journalist that does his homework and tells it like it is.

Thank you.
By stevem

5/25/09 at 9:01 a.m.

Suggest removal

for real...

how big IS the pile of cash bottfeld drops off at the r-j and sun each month for them to keep giving this "expert" free press?

as much as i love both "vegas, baby" and "las vegas" ( 2 very different things ) it's pretty obvious this town is in the dumper probably for good.

the national economy has to rebound before enough people feel they can blow $800 - $1,000 for a vegas weekend.

there's too many people in this country that have been out of work for too long. if YOU had been out of work for 5, 6, 7 months would you be ready to head to vegas as soon as you can?

no, you have bills to pay.

don't listen to the "p.r. types" saying "vegas will be the first town to rebound"...it won't.
By vc

5/25/09 at 9:58 a.m.

Suggest removal

If they make enough predictions they will eventually be correct.
By neiman1

5/25/09 at 10:30 a.m.

Suggest removal

I know, let's raise taxes and keep paying salaries and retirements out of the fund. Let's keep looking to build new city hall's and pretend everything will be OK. That way we wont know how sick we are until everyone is broke.
By azbycx0918

5/25/09 at 12:43 p.m.

Suggest removal

Those of you predicting armageddon for Las Vegas are ignoring one very important fact; Las Vegas has over 350 days of sunshine per year. With such a nice climate, there will always be a demand for housing in Las Vegas. Of course, prices will drop dramatically from the peak, but eventually prices will reach an equilibrium where enough buyers will conclude that the price is right to purchase a home.

I don't agree that only section 8 hoodlums will want to live here either, rather it will more likely be retirees who have sufficient savings to purchase their home outright and want to live in a warm, sunny climate. There are too many positive aspects in Southern Nevada for it to collapse like other cities that have lost their primary industry. I think that those of you who are giving up on Las Vegas are only reacting to the current difficult situation and are ignoring all the aspects of Las Vegas that attracted people here in the first place. Once this crisis passes, Las Vegas will surely become a desirable place to live again.
By Babyboomer

5/25/09 at 12:51 p.m.

Suggest removal

My tea leaves tell me an entirely different story.I saw the one eyed cat in the moon light on the 3rd Wednesday....wonder what that means ?
The only thing I can say for sure is a prediction like this coming from Las Vegas...someone laid some money down on this bet,for sure !
By revtomperl

5/25/09 at 12:58 p.m.

Suggest removal

So glad I own no property.
By Sabibaby

5/25/09 at 1:22 p.m.

Suggest removal

azbycx0918, Don't forget Lake Mead is running out of water!

If you believe one hundred teen degrees is a great climate you're out of your mind. It is an energy intensive climate where everything needed to sustain life must be imported.

LAS VEGAS cannot sustain a population of 2 Million plus people.

We as a society need to start using our brains and understand our limitations.

Las Vegas as a resort town works...as a metropolis with suburbs?
By Gregory

5/25/09 at 3:08 p.m.

Suggest removal

RE: DMCvegas and Axbycx0918 and

Excellent posts hypothesizing what kind of resident will fill these vacant homes in Southern Nevada in the future.

As baby boomers get older as consumers, the large Strip Corridor resorts which continue to create more traffic congestion with new development, and long walks because of the scale of properties, are going to have to find solutions for people flow as the American customer AGES.

There are a lot more old people in this country than young, and that trend will grow. Our young coming on are majority-minority, as well, and like any new generation will surely see the country in a different way than today's adult generations.

Older Americans probably WILL find Southern Nevada attractive with sunshine, entertainment and low tax structure.

But, healthcare infrastructure is poor, outcomes are not good in important specialties. So they will turn to social services nets, which are poorly funded, no real help there.

MOreover, after all the ups and downs of the Wall Street-Corporate American-Greenspan economy since Reagan, how much savings will baby boomers have to spend, as their healthcare also becomes rationed. After 25 years of consumerism, how much MORE will they WANT to spend?

The country has been too conservative regarding government spending, and too liberal regarding personal spending. We have been very slow to change with the world, and the opportunities other countries have taken to raise the standard of living for all citizens in a sustainable way, not just the few who already had the most.

Change is now inevitable in this country too.

Currently, Southern Nevada remains a corporate town with one engine, the Strip Corridor.

Funny how so many downtowns which flourished in the 50s and 60s gave way to urban sprawl and regional malls because downtown property owners continued to fight each other for every dollar at the margins, nobody sacrificing land for parking and guest convenience, nobody with a real master plan for the community around downtown.

The Strip Corridor today is a little like downtown USA in the 50s and 60s, but what happens when the 70s, 80s and 90s arrive?

Where is diversification to other engines, and what resources will an older, broke resident demographic bring to the table?
By Sabibaby

5/25/09 at 3:19 p.m.

Suggest removal

Unfortunately the majority of baby-boomer have lost their retirements. I'm not sure too many will be moving to paradise anytime soon. Most will be working until the day they die. Retirement is a paradigm of the past 40 years.
By 2UALL

5/25/09 at 3:23 p.m.

Suggest removal

Thank god for analyst's!!!!!!!
Or whoever it is that you thank in times like these!!!!!!!
By ascudder

5/25/09 at 4:14 p.m.

Suggest removal

I will be retiring next month and can't wait to get to Nevada (Mesquite). I have lived in Colorado for 60 years and am tired of the cold. Right now I have winter clothes on and it is Memorial Day Weekend. My bones and muscles ache here in Colorado and I feel much better in Nevada with the heat.

We didn't lose our retirement - we actually made a little money in secured assets.

I think the slowdown of growth is good for Las Vegas. The growth was getting out of hand.

Long Live the strip - it provides entertainment for old folks living in boring communities such as my predicament. My dad (93 years old) lives in Summerlein, Las Vegas and is having a blast!!!
By stevem

5/25/09 at 8:40 p.m.

Suggest removal

if there was always a demand for housing in las vegas, then we wouldn't be in this situation.

that's the kind of thinking that got us in this mess.

remember all the p.r. types were saying "vegas is recession proof"?

well, it's not.

we will need people moving to vegas in mass numbers for it to ever get better. that's what made this town huge in 2000 - 2005.

i don't think vegas is as popular as it used to be. remember when there were so many movies set in vegas or about vegas? that was like free advertising, and aside from the new "hangover" movie there hasn't been a "vegas" movie in a long time.

there used to be a new resort opening just about every year like clockwork for years and years and that gave people a reason to come and see what's new and think about it...what was the last NEW resort to open up?

encore and palazzo don't count. those are just "do-overs" of existing resorts.

the last strip resort to open up was planet hollywood...and that was just a re-working of the aladdin.

the "theme" resort is cheesy and corny now in 2009.

we might get a little bump when city center opens, but opening up one generic hotel / casino after another isn't going to get people to visit las vegas.
By James_P_Reza

5/25/09 at 11:36 p.m.

Suggest removal

So many Las Vegas haters just love to jump on the bandwagon and predict The Death of Las Vegas (as if that song hasn't been sung before).

I don't know when the housing market will recover, I just know that this city was built by dreamers and doers, not haters and complainers. So many complainers were among those who moved here since 1994, thereby putting a layer of unhappy souls atop the pioneering spirit that makes the "real" Las Vegas the most dynamic city in the world.

Las Vegas has always been a place where anyone could come and with a little perseverance and hard work, earn a good living regardless of their educational or social background. Some people are turned off by that equalization, and some are unable to achieve it now thanks to rapid increases in population.

But Las Vegas will survive this temporary downturn. Of course it will be a different city afterwards; its amazing adaptability is key to its longevity. Those who don't like shifting sands are better off putting their energy toward relocation, rather than wasting time posting their tiresome rants here.
By odeman

5/25/09 at 11:54 p.m.

Suggest removal

Yes living in the desert is energy intensive, but living in the snowbelt isn't? I'll bet my utility bills for the year will be a lot cheaper in Las Vegas than here. The farther north you go from here the higher the energy bill. In some of the snowiest areas there is so much snow they regularly hire professional shovelers to clean the snow off roofs to avoid collapse. If you think this is an easy job try standing on a pitched icy roof and shovel 10 inches of snow. It may be 100+ during the day in the desert in summer, but summer nights in Vegas are fantastic. I've spent lots of time outside in Las Vegas when it's been in the hundreds and it is far more pleasant than the 85 degrees and high humidity we have here. Around here temps don't get above freezing for months at a time. I'm 100 miles north of Chicago and we hit -33 last winter. Some areas can go weeks without getting above 0! Roads are snowy and icy most of the winter. From our last 70+ degree day in the fall to the first 70+ degree in the spring the average is over 200 days. The extreme cold is hard on the body and on the cars. If there is anything that will kill Las Vegas it's the water problem. That's what keeps me here shoveling white manure instead of enjoying the desert sunshine. Not every senior lost his shirt in the market so it is realistic to say many would give Las Vegas a look. Las Vegas is a beautiful place so enjoy it while you can.
By csingham

5/26/09 at 10:37 a.m.

Suggest removal

It will be in 2012 ...when we all are killed off.

I don't trust anything that is even printed with the words "Local Analyst"....wait ....didn't they see the over inflation of homes by the builders?

A vegas real estate analysis is about as good as getting advice from a bartender. Sure they might know a thing or two, but really are you going to trust your money to the guy #@(3'ing up your sense of judgement
By Charlienlv

5/26/09 at 1:01 p.m.

Suggest removal

What people also forget, as azbycx0918 referred to, the people who will be retiring in the next 5-10 years ( and there are A LOT)who will very likely be heading this way because of the reasonableness of the housing prices. I have a friend who lives in a very nice, adult community and there are absolutely NO foreclosures in the community and housing prices are stable, ie a 2000sq ft home for about $450,000-475,000.

Unfortunately, I do believe there will be more Section 8 housing but then - the ways things are going, Section 8 may not carry the stigma with it as it has in the past.

And I hate reading stories about more housing being built!! My guess is we have a 10 year surplus of housing available- and NOT enough jobs for people to get for them to move here. So these experts are smokin' something and I wish they'd pass it around to the rest of us so we can see the rainbow (and the dollar signs) and smell the flowers, too!!!
By Charlienlv

5/26/09 at 1:06 p.m.

Suggest removal

stevem
There have been several other movies made in Vegas in the past 5 years. Look it up.
By stevem

5/26/09 at 1:29 p.m.

Suggest removal

name 3 of them, charlie.
By Sabibaby

5/26/09 at 2:21 p.m.

Suggest removal

I'm not from Vegas so please excuse my doomerish views. This is one video that scares me for my family who lives there.

Have a look -> http://www.youtube.com/watch?v=rFTZ3flsi...