Thursday, Jan. 13, 2011 | 2:05 a.m.
What the Las Vegas housing market has going is it’s not Cleveland, Kansas City or even Rochester, New York.
Two economists along with executives of the Greater Las Vegas Association of Realtors said during a housing summit Wednesday that the Southern Nevada housing market this year is likely to mirror 2010 in terms of sales and prices.
The good news is the market is poised for rebound in 2012 and beyond because of its affordable prices and attractiveness to retirees and foreigners looking to buy in exotic locations like Las Vegas.
No one is projecting a big rebound in 2011 because the national and local economy remains weak, and the Las Vegas unemployment rate is still above 14 percent.
Sales of single-family homes, town homes and condos fell about by about 3,000, or 7 percent, to 43,877 last year. The latest median price for homes sold in December was 3 percent below the end of 2009.
“There is no reason to think 2011 will look better than 2010,” said former GLVAR President Rick Shelton. “Sales might be up 2 percent or down 2 percent. As long as we have got nearly 15 percent unemployment and unstable economy, there’s no way there will be any type of substantial increase in our sales.”
John Restrepo, an economist and principal with Restrepo Consulting, said a 3 percent price drop is better than the 33 percent in 2008 and 22 percent in 2009, and the market is in a better spot than it was a year ago.
“Things have gotten better, and I like to say the patient has gotten out of intensive care but not out of the hospital. It’s going to be a long haul out of this recession,” Restrepo said. “The secret going forward is going to be jobs, jobs and jobs. We are losing less jobs than we were, but losing less isn’t a recovery.”
Lawrence Yun, the chief economist with the National Association of Realtors, said the economy is improving nationwide and businesses are poised to hire. Las Vegas will benefit from that improvement along with gains in the stock market that have increased wealth, he said.
Yun said predicting what’s going to happen in the Las Vegas, however, is more difficult than the rest of the country.
Over the last two years, sales activity has been sluggish in the rest of the country but up in Las Vegas, while prices have been stable nationwide but down in Southern Nevada. He predicts prices will rise 5 percent across the country in 2011.
“In the Las Vegas market, I wouldn’t be surprised if prices are 15 percent higher in two years, and I wouldn’t be surprised if they are 15 percent lower. It could go either way, because there’s more volatility in the local market.”
Yun said he expects foreclosures to continue their levels of the past three years of exceeding 20,000, and there’s no sign of foreclosures halting in Southern Nevada.
The other negative factor hanging over the Las Vegas market is that the price declines influence the behavior buyers who question whether they should wait even longer to purchase because they think they might get a better deal, Yun said.
Despite the short-term weakness, Las Vegas has benefited from the price drops that have resulted in investors buying 40 to 50 percent of the homes, analysts said.
Other markets such as Cleveland or Kansas City don’t grab the attention of domestic investors and foreign buyers like Las Vegas does.
“If you see a vacant home in Cleveland and a vacant home in Las Vegas, believe me the vacant home in Las Vegas will sell more quickly,” Yun said.
GLVAR President Paul Bell said retirees look at Las Vegas because of its weather and entertainment.
“They don’t want to shovel snow any longer in Rochester, New York,” Bells said.
Shelton said retiring Baby Boomers are the answer to the housing slowdown, but interest will be strong among foreign investors in 2011 and beyond.
The emerging markets of Brazil, India and China are becoming more middle class, with 70 million people getting that designation every year, Yun said. Others who are middle class are gaining more wealth in those emerging nations, he said.
“They don’t buy properties in Kansas City, but they will in Las Vegas or Miami,” Yun said. “They want a property in the U.S. for a vacation or social status, and Vegas is going to be able to capture that.”
Mortgage underwriting standards remain stringent, but Yun said he sees those loosening in the next year or two and that should benefit markets like Las Vegas when it happens. He estimates an additional 15 percent of buyers could be created when credit standards soften.
Yun said interest rates averaged about 4.2 percent in the middle of 2010 and are about 5 percent today. He said they should increase to 5.5 percent by the end of 2011 and may reach 6 percent in 2012.
Normally, that’s bad for the housing market but the loosening of credit standards and job growth will soften that increase, Yun said.
Restrepo said nothing can be done to improve job creation in Las Vegas right now, but he lauded discussions to diversify the economy as a long-term solution to combat future downturns.
It’s going to take time to recover, but no one should expect a return to the spending between 2000 and 2005 when credit was cheap and easy.
Despite that, Las Vegas is poised for a recovery in 2012, although the jobless rate should remain double digits for several years, Restrepo said. He said he sees optimism in the business community that he hasn’t seen before.
“I don’t think this is the kind of optimism based on irrational exuberance but based on realism,” Restrepo said. “For a long time, we tried to avoid where we were in this recession and that we were immune. We know we’re not and are starting to deal with issues in an adult away.”
Buck Wargo covers real estate and retail for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at [email protected].