HOUSING MARKET: Baby, it's cold out there Increase in median price not a true gauge, analyst says
BY HUBBLE SMITH REVIEW-JOURNAL
The C2 Lofts can be seen under construction on the west side of the Las Vegas Valley on Wednesday. A housing analyst reported 2,829 sales of new homes in November. Construction crews put finishing touches on homes on South Mandrake Falls Street in southwest Las Vegas.Median prices for new homes in Las Vegas continue to rise in November, but at least one analyst believes incentives are keeping those prices high.
The median price of a new home in Las Vegas was $335,850 in November, up 11.4 percent from $301,519 in the same month a year ago, housing analyst Dennis Smith of Home Builders Research said Wednesday. He counted 2,829 new home sales, compared with 3,680 a year ago.
Factoring out sales incentives offered by most home builders, new home prices would probably be down by double digits, he said.
"Home builders that have more standing inventory will be more likely to have larger sales incentives and therefore have seen their prices decline more than those that had fewer standing inventory homes," Smith said. "Now that new home inventory levels are dropping, incentives will vary from builder to builder as well as by area, product type, lot size and price range."
The housing industry has undergone a severe slowdown this year following a prolonged boom that had been fueled by the lowest mortgage rates in more than four decades.
This year's slump followed five years in which sales of both new and existing homes had set records.
Kurt Lehman of Realty One Group said the Las Vegas housing market is months away from a rebound. He said fewer than 1,000 homes have entered escrow since Dec. 1, signaling another slow sales month for Las Vegas, which has endured a 27.7 percent decline for the year.
"We're hoping that by March there may be signs of life, but unless the available homes drop to a 60-day absorption rate, which I really don't foresee until spring of 2007, if then, things will stay very slow," Lehman said.
But private economists said the November rebound offered hope that the steep slide in housing may be ending.
"It looks like sales activity has truly bottomed out," said David Seiders, chief economist for the National Association of Home Builders.
Seiders said he is forecasting that sales of new homes will be off about 18 percent from last year's record and will be flat in 2007.
Nationally, sales of new homes rose in November while the backlog of unsold homes fell for a fourth straight month, providing hope that the serious slump in housing could be ending.
Sales of new single-family homes rose by 3.4 percent last month to a seasonally adjusted annual rate of 1.047 million units, reflecting solid sales increases in every region of the country except the South, the Commerce Department reported.
The increase was better than had been expected and offered hope that the steep slide in housing may be starting to bottom out as builders, using a wide array of incentives, begin to make a dent in the record level of unsold homes.
The 3.4 percent rebound in sales last month was the third increase in the past four months. It helped to lift the median price for a new home to $251,700, a 3.2 percent increase from a year ago. The median price is the point where half the homes sold for more and half for less.
What some are calling a recession in housing has been a big factor in the economy's overall slowdown, cutting 1.2 percentage points from growth in the July-September quarter, a period when the economy expanded at a lackluster pace of just 2 percent.
Many analysts believe housing is continuing to act as a drag on growth in the current quarter and will continue to depress activity through the early part of 2007.
The number of unsold homes fell by 1.4 percent in November to 545,000. It was the fourth straight decline in inventories after they had hit an all-time high of 573,000 units in July. Builders have been cutting prices and offering various incentives such as helping to cover closing costs in an effort to move finished homes and reduce high cancellation rates.
It would take 6.3 months to exhaust the current supply of homes at the November sales pace, down from 6.7 months in October and 7.2 months in July.
Sales last month increased in all parts of the country except the South, where they fell by 9.3 percent.