Analyst: Las Vegas home prices will increase 3 percent this year

By Buck Wargo

Thursday, Feb. 4, 2010 | 12:47 p.m.

A Las Vegas housing analyst said today he expects sales of existing homes in 2010 to mirror those in 2009 and predicts prices will increase by more than 3 percent by the end of the year.

Dennis Smith, the president of Home Builders Research, said in a seminar held over the Web that existing home prices will rise by $4,000, or 3.3 percent, from $123,000 at the end of 2009 to $127,000 by the end of 2010. It will jump another 5.6 percent to $134,000 by 2011, Smith said.

Prices have fallen nearly 60 percent from the peak of the market.

“I am not expecting prices to take a big jump for a long time,” Smith said. “Anybody who thinks home prices are going to appreciate markedly in the next couple of years is not listening to what’s happening out there,” Smith said.

Smith predicts the existing home market will have 45,000 sales, keeping pace with the 44,885 in 2009 in one of the market’s best years. By 2011, however, Smith said he expects sales to fall to 44,000 because of higher interest rates.

Investors continue to buy up foreclosures properties and shut first-time buyers out of the marketplace. Smith said those buyers will turn more to the new-home market.

Las Vegas had 4,968 sales of single-family homes in 2009, and that should increase slightly to 5,400 in 2010 and increase to 6,000 in 2011.

The first half of 2010 should have stronger new home sales because of the $8,000 tax credit for first-time buyers and $6,500 credit for other buyers is set to expire by June 30, he said.

“The second half is up in the air because we can’t assume they will extend the tax credit again,” Smith said. “We won’t have a big increase but it is an increase. That suggests we have reached the bottom of the new-home segment.”

As for new-home permits, Smith projects 4,400 will be issued in 2010, up from 3,850 in 2009. By 2011, builders will take out 5,100 permits, he said.

Smith said he can’t predict when the market will return to 10,000 permits. Builders took out 32,879 permits in 2004.

“I don’t know when we will get back to normal,” Smith said. “We have to change the definition of that.”

Smith said the median new-home price should increase to $220,000 by the end of 2010, a 2.8 percent gain over the $216,000 price in 2009. The new home price was $244,090 in 2008.

Smith said he’s not expecting a flood of foreclosures in 2010 and suggested the market can absorb those it is getting because of strong demand from investors.

According to newly released data from First American CoreLogic on foreclosures for the Las Vegas, the rate of foreclosures among outstanding mortgage loans was 8.53 percent in December, an increase of 4.34 percentage points compared to December of 2008 when the rate was 4.20 percent. Foreclosure activity in Las Vegas is higher than the national foreclosure rate, which was 3.16 percent for December 2009, representing a 5.37 percentage point difference, the firm reported.

The mortgage delinquency rate has increased. First American CoreLogic data for December 2009, shows that 21.08 percent of mortgage loans were 90 days or more delinquent compared to 11.91 percent for the same period last year, representing an increase of 9.17 percentage points.