Saturday, February 10, 2007

Las Vegas Home prices heading south

Home prices heading south

By Brian Wargo / Staff Writer
It's not the burst housing bubble that some doomsayers have predicted, but Las Vegas homeowners are cutting prices to sell their homes in this soft real estate market.
The median price of homes sold on the Multiple Listing Service dropped 1.3 percent in January to bring the total decline to 4.4 percent since June, when the sales price was an all-time high of $315,000, according to statistics released by the Greater Las Vegas Association of Realtors.
The median price of homes sold in January on the service was $302,000 and is poised to fall below $300,000 for the first time in nearly two years. The prices, however, don't account for any incentives many sellers have been offering in recent months such as paying closing costs and other expenses, which one analyst said could be worth as much as 5 percent, further eroding the value of existing homes.
"I think we are starting to see people come to the reality of where the market is and adjust their prices," said Ken Perlman, vice president of Sullivan Group Real Estate Advisors. "Those who bought homes in 2004, 2005 or earlier have gotten over the euphoria of appreciations they've had and don't expect to recover every cent of it," he said.
"What's happening in Las Vegas is no different than in Phoenix, San Diego or other parts of Southern California," Perlman said. "All of the markets had great years and people had a lot of fun, but it wasn't realistic to sustain those price increases."
Perlman won't speculate on how much further prices will fall but called the reduction healthy for the Las Vegas housing market. When owners are willing to drop their prices to levels buyers can afford, that's like hitting the "reset button" on the marketplace and putting it back on track for sustainable growth.
More people can afford to buy existing homes, which helps appreciation in the long term. Existing homeowners can sell their properties and move into new homes, triggering construction in that market, Perlman said.
"It benefits the builders selling new homes and generates momentum for the marketplace," Perlman said.
Dennis Smith, president of HomeBuilders Research, who has anticipated a slight decrease in resale prices, said he wouldn't be surprised if housing prices fell another 1 percent to 2 percent overall and as much as 4 percent in some neighborhoods where plenty of inventory remains.
With homebuilders running out of supply, that will force more buyers to look at the existing-home market and whittle away at the existing inventory of nearly 19,000 homes, Smith said.
Some national analysts have long predicted that Las Vegas could see housing values drop as much as 30 percent, but that hasn't been the case.
Recently, BusinessWeek analysts said Las Vegas will lose the most of any major city in 2007 with 9.9 percent of its value disappearing. Fortune predicts prices will drop 6.6 percent in 2007 and 8.1 percent in 2008.
Bob Hamrick, president of Coldwell Banker Premier Realty, urged people not to read too much into any national predictions on the housing market since analysts predicted its demise in 2006.
Prices could certainly drop further because foreclosures are increasing and homeowners who bought at higher prices can't fetch the same amount if they want to sell, but the strengths of Las Vegas will prevent any large drop in prices, he said.
"Certainly our market has changed," Hamrick said. "It doesn't take these large publications to tell us that. What tends to be overlooked when these type of predictions are made is that the housing market tends to be closely tied to employment and job growth, two areas where Las Vegas undisputedly shines. It's very easy to predict that 'what goes up so fast must come down.' But nationally, if you look at the markets that had the most depreciation, they did not participate too much in the appreciation of recent years."
Last week during this Crystal Ball seminar for the housing industry, Las Vegas housing analyst Steve Bottfeld, executive vice president of Marketing Solutions, rejected the predictions of the national publications. He said he expects prices to remain stable in the first six months and as inventory lowers, resale homes will appreciate 3 percent to 7 percent by the end of the year.
Bottfeld predicts there were will 50,000 resales in 2007, up from nearly 42,000 in 2006.
Meanwhile, GLVAR President Devin Reiss said he believes prices will remain flat and inventory will gradually decline. The demand for housing will catch up with the supply, he said.
"Our message starting 2007 is much the same as it was during 2006," Reiss said. "We don't believe that home prices will drop significantly here in Southern Nevada."
The drop in prices in January comes as the number of homes listed for sale inched back up after falling in November and December.
There were 18,774 homes listed for sale in January, up a little less than a 1,000 homes or 5 percent from December. That's still well below the high of 23,474 in October but disappointing to those homeowners who hoped inventory would fall and decrease competition for sales.
Hamrick said too much can't be read into the increase in inventory in January. That's the case historically in the early part of the year.
There were 1,397 homes sold in January, down 15 percent from December and 21 percent from January 2006. That drop in sales was coupled with an increase in the number of homes put on the market.
Single-family homeowners put 5,809 homes on the market in January, up 82 percent from December.
Those listing their homes for sale at a median price of $349,000 are asking 4 percent more money than property owners sought in December.
But it appears homeowners are more realistic about the market. That price is nearly 3 percent below what homeowners listed their home for in January 2006.
In January, nearly 46 percent of the homes sold were on the market 60 days or less. Some 53 percent of homes sold in December were on the market 60 days or less.
Nearly 36 percent of homes sold in December were on the market four months or longer.
In the condo and town home market, the median price of units sold in January rose nearly 5 percent from December to reach $204,450. That price is up 4 percent from January 2006.
The inventory of condos and town homes grew in January by nearly 6 percent to 5,116 units. The 1,504 new listings in January were up 54 percent from December. Brian Wargo covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at (702) 443-3604 or by e-mail at wargo@lasvegassun.com.

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