Experts see hope for Southern Nevada’s housing market

By Buck Wargo

Monday, March 21, 2011 | 3 a.m.

Las Vegas has served as a destination point for brokerages holding their international conventions. The top executives of Coldwell Banker and RE/MAX took their turn to speak about the housing market and its prospects for recovery.

Jim Gillespie, CEO of Coldwell Banker, said real estate and the housing markets have traditionally led the nation out of major recessions, but that’s not happening this time. The economy is going to recover from other scenarios because improvement in the housing market has been slow and gradual, he said

The housing market effectively tanked when the federal housing tax credit expired last spring, but despite what some media have suggested, it isn’t dead and has picked up in the past six months, Gillespie said.

Some suggest that prices will fall another 15 to 20 percent, but Gillespie said he thinks prices are stabilizing nationally with the biggest weakness in Nevada, California and Arizona, which have high foreclosure rates.

Gillespie said he’s optimistic about the continued recovery of the housing market because of the improvement in the nation’s economy. Even 18 months ago, jobs were being cut, but the country gained more than 1 million jobs in 2010 and added nearly 200,000 in February, he said. More than 2 million will be created this year, he said.

Consumer confidence is at its highest level since 2008, and auto sales have rebounded, Gillespie said. Retail sales had their highest year-over-year gain since 1999.

“All of these things are happening from a low base, and it doesn’t mean we are back to a boom,” Gillespie said. “I don’t think we want to see housing prices spike through the roof again. We have learned what goes up, goes down, and as long as we are showing a steady increase and unemployment goes down and jobs are created, we will get out of this.”

The housing market will have some pent-up demand because a lot of younger people have been moving in with each other or in with their parents until the economy improves, Gillespie said. Once it does, a lot of those people will be looking to buy homes, he said.

Las Vegas had led the nation with more than half of purchases recently involving cash, meaning that investors are a central part of the market. Gillespie said he doesn’t see that as a negative, but the foreclosure properties and short sales need to be “flushed through the system” as quickly as possible.

This isn’t speculation like what happened during the run-up of prices in the past. A lot of checks have been put in place to prevent that from happening again, he said.

Mortgage brokers won’t be earning higher commissions as they did by pushing buyers into subprime loans. There are no more loans without substantiating the ability to pay, he said.

Underwriting standards may be too tough but they aren’t going to go back to the days when they were so loose, he said.

Dave Liniger, co-founder of RE/MAX, said his message to agents has changed over the years. In 2006, he said there was a huge bubble and that the market would crash but that even he didn’t think it would be this bad. He said he didn’t understand the depth of the subprime loan crisis.

Liniger said he told agents this year that the worst is behind them, but the foreclosure problem hasn’t ended and states such as Nevada, Arizona and California are affected by it.

Sales should increase nationwide in 2011 by 300,000 but Liniger said the recovery won’t begin until 2012 or 2013 because of foreclosures.

But he said the future of the housing market is bright because the population is growing and consumer confidence is rising. Foreign buyers are helping the market with its excess inventory, and as the economy recovers and people are able to sell their homes in the Midwest and Northeast, they will move to places such as Las Vegas because housing is so affordable and weather is warmer, he said.

“We’re going to have another mass exodus to the Sunbelt,” Liniger said.

Liniger said his firm has decided to hold conferences in Las Vegas for three consecutive years rather than two years.

Brookings Institution

Las Vegas didn’t fare well in the latest economic performance of the 100 largest metropolitan areas in the nation. The city was in a group of the 20 weakest performing areas that included Phoenix and four California cities.

Las Vegas was ranked No. 96 in change of employment from the second quarter of 2007 to the fourth quarter of 2007. It fell 14.8 percent. It was ranked 96th in unemployment and 100th in a three-year change in its jobless rate.

The valley’s gross metropolitan product fell 8.1 percent for a 97th ranking. Housing prices fell 57.6 percent for a 98th ranking and the percentage of foreclosure properties had Las Vegas 99th on the list.

The one bit of good news noted by Brookings Mountain West, based at UNLV, is that during the fourth quarter of 2010, Las Vegas enjoyed one of its best quarters since the onset of the recession, growing 0.7 percent.

In other news

• CIP Real Estate said it completed 14 lease transactions at Hughes Airport Center in 2010 with a value of $19.4 million. It includes 282,000 square feet of industrial, office and flex space in the 3.3-million-square-foot complex. The 14 leases were 10 new leases and four renewals, including one with Cox Communications for $5.5 million to lease an 84,000-square-foot industrial building. The other leases were Cirque du Soleil and Sitel Operating Corp.

• Housing analyst John Burns lists Mountain’s Edge and Providence as the fifth and sixth leading master-planned communities in housing sales across the nation in 2010. Mountain’s Edge had 645 sales compared with 481 sales in Providence. Both are by Focus Property Group. The Villages in Orlando, Fla., was first with 2,208 sales, followed by Irvine Ranch in Orange County, Calif., with 984; Cinco Ranch in the Houston with 815; and the Woodlands in Houston with 786. The Houston area had four of the top 10. Burns said the popularity of master-planned communities continues because they are considered synonymous with good schools, parks, safer environments and recreational opportunities. They command a 6 to 10 percent price premium over the competition.