Real Estate Quarterly:
Home prices should decline more before rising slightly in 2011, housing analyst says
Fri, Oct 29, 2010 (3 a.m.)
Las Vegas home prices will end the year deteriorating 3 to 4 percent from 2009, but housing analyst Larry Murphy said prices may appreciate slightly in 2011.
Murphy, president of research at SalesTraq, told a group of Realtors and industry executives Oct. 21 at his quarterly Crystal Ball seminar at the View 215 that the housing market has bottomed out.
The median price for existing homes sold for 12 months of 2009 was $125,976. That has fallen to $120,650 through the first nine months of 2010 — a 4.2 percent decline. Home prices have dropped about 60 percent from their peak of just under $290,000 in 2006.
“The prices in our market while still deteriorating, it’s deteriorating slowly,” Murphy said. “Things have stopped getting worse at a tremendous pace. Now it’s getting worse at a slower pace.”
Murphy said home prices could increase 1 to 2 percent in 2011 at the most and be even at the worst.
Existing home sales are on pace to fall short of 2009 totals. Through the end of September, there were 38,140 sales compared with 52,015 for all of 2009, Murphy said.
Only the new home market is on schedule to improve on its numbers in 2009, but not by much. It had 4,371 sales through the end of September and should surpass the 5,244 for all of 2009 at that pace.
Builders have taken out 3,656 permits through the end of September, just below the 3,776 for all of 2009, Murphy said.
The average price paid for new homes for the year is $103.68 a square foot, but Murphy said more than half of the new homes today sell for less than $100 a square foot. One builder, Harmony Homes, has sold homes for $59 per square foot, he said.
“Who would have thought that was possible a short time ago?” said Murphy, who credits builders being able to buy lots at depressed prices.
In January 2009, the average price paid for new homes was $122.15 per square foot.
Las Vegas appears to have overcome its problem with dwindling inventory on the market, Murphy said.
The number of homes on the Multiple Listing Service has gone from 10,000 in the first quarter to 15,000 — a 50 percent increase, Murphy said.
That includes 3,250 foreclosure listings and 7,200 short sale listings, Murphy said. By his latest calculations, Murphy said 12 percent of the homes built in the last four years have been foreclosed upon.
The median price paid for homes sold through short sales was $124,900 in September compared with $117,000 for those sold in foreclosures. Murphy said the gap is lowering and there may be less incentive for banks to allow homeowners to do short sales in the future if they don’t get as much as a return.
“What’s happening today is all of the prices are being compressed,” Murphy said. “Everyone’s property value is affected by their neighbor’s value. There’s not that much difference in the end, but banks are taking a hair cut either way.”
Murphy said he fears, however, that a moratorium on foreclosures Bank of America put on in Nevada and other states that could spread to other lenders and depress the housing market. Lenders put a moratorium after concerns were raised that paperwork used in foreclosures in other states didn’t have information verified.
“If this moratorium goes into affect, the whole home financing industry is at risk, and we’re all at risk,” Murphy said. “If we don’t allow the foreclosures to continue, we’re just forestalling the problem.”
In response to one question about land availability, Murphy said Las Vegas has about 50,000 lots that are mapped with the ability to put homes on them. Given, the housing industry is building 5,000 homes a year that would taken 10 years to work through that supply and shorter when the economy improves.
“Eight years ago, we thought we would run out of lots by now,” Murphy said. “It’s not nearly as dire a shortage as we first thought.”
Sales in this tough housing market
Bob Mirman, CEO of California-based Eliant Inc., who handles consumer research for homebuilders, told salespeople that the key to increasing their sales is to exceed expectations with their customers and parlay that into referrals.
Mirman said it’s about delighting customers to bring business to your doorstep.
In 2008, 24 percent of clients who bought homes resulted from referrals. That fell to 19 percent in 2009, he said.
Mirman told salespeople to be proactive and provide information and answer questions that people have before they are even asked. Don’t make promises that can’t be kept and always make them so that they can exceeded, he said.
The goal is to exceed expectations 95 percent of the time in dealing with customers, he said. It’s important to get people to trust you, he said.
The anxiety people feel about buying a home is very high falls right behind fears of dealing with a natural disaster, he said.
“Forget about the word satisfaction,” Mirman said. “Those people don’t refer business to you. They’ll only do that if they’re delighted. You have to exceed expectations.”
Ken Baxter, the founder and owner of Performance Marketing America in Las Vegas, told salespeople it’s important to stay positive in a challenging market, follow the fundamentals and that persistency pays off.
“It’s important to get back to basics when business is not so great,” Baxter said. “If you believe in your product, everything will work out.”
Baxter said salespeople need to understand the growing importance of social media to boost the power of word-of-mouth advertising. When 62 percent of Facebook users make $60,000 or more and 32 percent earn $100,000 or more, that’s can be ignored, he said.
Even Twitter is useful because it allows salespeople to get the information out about new products, incentives and special events, he said.
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