Las Vegas Real Estate and Business News

Researcher sees slowing for housing

Year's first half will be soft, Home Builders Research boss says

By HUBBLE SMITH
REVIEW-JOURNAL

Mar. 01, 2006
Copyright © Las Vegas Review-Journal

While housing numbers show a slight slowdown in sales activity and price gains, Las Vegas' job and population growth punctures any theories of a housing "bubble," Home Builders Research President Dennis Smith said Tuesday at the 2006 Builders Show.

During his Housing Outlook, Smith projected new home sales, including condominium conversions, would decline by about 700 this year to 38,250. New home sales in Las Vegas have climbed steadily from 17,903 in 1995 to a record 38,957 in 2005. Without condo conversions, the number was 30,750, still a record.

Median new home prices will increase by about 4.5 percent to $323,939, Smith said. Resale prices, which led the nation in 2004 with 38.9 percent appreciation, will grow 2.5 percent to $292,125.

Smith's outlook was part of the Builders Show, put on by the Southern Nevada Home Builders Association at the Las Vegas Convention Center.

"We're still going to grow, but it's going to become a town of haves and have-nots," he said. "Is there a remedy? Certainly not new urbanism. I guarantee those prices will be higher than the median."

This year's first half will be classified as "soft," Smith said. New subdivision traffic count is down 20 percent in the first eight weeks and net sales per subdivision are down 24 percent.

Cancellation rates on new home contracts have risen to 25 percent, which caused several major home builders, including Toll Bros., to lower their earnings estimates for the year.

That doesn't bother Smith.

"Historically, they've told their sales people if you don't have a cancellation rate over 20 percent, you're not selling enough homes," he said.

Tim Sullivan, real estate consultant with San Diego-based Sullivan Group, said the entire Southwest is suffering from the "double whammy" effects of seasonality and buying cycles.

Prices are moderating in Arizona, California and Nevada and inventories of homes for sale are starting to build.

"That's good. It's the way it's supposed to be," Sullivan said. "Am I alarmed? No. Am I soberly aware? Yes. The Southwest has had it good for a long time. We're now seeing elasticity of demand, the point where prices rose so much that absorption and demand slowed."

Smith said the year's second half, which is traditionally slow, may be a little better than it has been in the past. Certain segments of the market such as low-rise and midrise condos are going to get stronger, he said.

As in past outlooks, Smith said urban sprawl is creating bedroom communities in Pahrump, Mesquite, Logandale and northern Arizona. One- and two-hour commutes are not going to be uncommon for people working in Las Vegas in the next few years, he said.

Richard Lee, public relations director for First American Title Co. of Nevada, said Las Vegas is experiencing the growth of "huburbs," or micro cities within pockets of the valley. They create their own employment base with office and retail development and provide residential options from rental units to starter homes to higher-end homes.

Examples include the planned West Village, once known as The Curve, in the southwest valley; The District at Green Valley Ranch and anything within a 2-mile radius; Summerlin Centre in the west valley; and Centennial Center in the northwest.

Some 50 high-rise projects are proposed for downtown Las Vegas, Lee said.

"Downtown Las Vegas is about to tip from where nobody wanted to live there to where everybody wants to live there," he said. "It happened in Miami. It happened in San Diego. When it happens in Vegas, it gets 10 times the publicity because everybody likes to read about Las Vegas."

When companies like Focus Property Group are spending $500 million and $600 million on land acquisitions, Lee said it gives him "tremendous confidence" in the Las Vegas housing market.

"That's not being done anywhere else in the world, especially in America," he said.

About 1,300 people attended the Housing Outlook and Builders Show, which had exhibit booths for some 150 companies associated with the home-building industry.

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