Analyst says Las Vegas home prices still have room to fall

The median single-family home price in Las Vegas has decreased 57 percent since 2007 and probably has room to go a little lower this year, housing analyst Larry Murphy said Thursday at his Crystal Ball seminar.

Las Vegas home prices were slightly below the national average 10 years ago, then climbed significantly higher in the middle of the decade before falling to $115,000 in 2010, roughly 67 percent of the $171,000 national average.

"Las Vegas prices continue on a precipitous slide and are now well below the national average," Murphy told about 150 real estate professionals at Alexis Park hotel. "The good news is we have affordable housing again."

The president of Las Vegas-based SalesTraq counted 5,438 new-home closings in 2010, a 3 percent increase from the previous year. With stagnant population growth and job creation, Las Vegas probably doesn't need any more homes to be built for a while, Murphy said.

He revised his projections for new-home construction downward, keeping the number around 5,000 for the next couple of years.

"We don't see that changing much. The bar needs to be lowered," Murphy said. "We once had 6,000 to 8,000 people moving here a month. We may never see that population growth again. By 2015, the normal might be 12,000 to 13,000 homes a year."

The luster came off Las Vegas' tourism-based economy when the recession hit and projects such as Fontainebleau, Echelon and Plaza didn't turn out as expected, resulting in the loss of thousands of construction and casino jobs, Murphy said.

The Palazzo, Wynn Encore, CityCenter and Cosmopolitan were completed, but the net gain in employment was a wash, he said.

Communities that have been hit hardest by plummeting home values include Lake Las Vegas, down 71 percent for single-family homes and down 86 percent for attached homes; Aliante, down nearly 50 percent; Summerlin, down 43 percent; and Spanish Trail, down 39 percent.

The worst loss was recorded at Echelon, a midrise condo development in northwest Las Vegas, where units were priced at $735,000 when it was built in 2006, and one of them went for $62,500 at auction last year, Murphy noted. Also, converted condo units at the Meridian near the Strip were selling for $625,000 in 2006, and are now at $106,000.

The $100,000 home -- once on the extinction list in Las Vegas -- accounted for 28 percent of the 51,124 existing-home sales in 2010, which was a 2 percent decrease from the previous year, SalesTraq reported.

The median existing-home price was $114,500 in December, down $500, or 0.4 percent, from the same month in the previous year. New-home median price rose 4.8 percent to $219,000.

"We probably haven't hit the absolute bottom yet, but we have been bouncing along the bottom for 18 months, and you can tell your investors they don't have to be at the bottom," Murphy said. "You won't know that until six months later when you look over your shoulder. We probably have room to go down before we go back up, but we are at or near the bottom."

Investors are paying an average of $64 a square foot for homes auctioned at the courthouse steps in downtown Las Vegas, while bank-owned homes are going for about $75 a square foot and short-sales for $78 a foot, the housing analyst said. Nondistressed homes average $93 a square foot.

Murphy counted 17,578 bank-owned acquisitions in 2010, down from 20,438 in 2009 and 24,069 in 2008. Bank-owned dispositions dropped to 19,860 in 2010, compared with 28,496 in 2009 and 18,119 in 2008.

Roughly 20 percent of Las Vegas homeowners with a mortgage are 90 days delinquent on their payment and three-fourths are underwater, or owing more on their mortgage than the home is worth, Murphy said. That's going to lead to more strategic defaults, or people walking away from their mortgage obligations, he said.

"What are the odds of you catching up? What's going to happen is you get further behind on payments and your options are minimal," he said. "Theoretically you can get a loan modification. So much for theory No. 1. Theory No. 2 is they foreclose on you and theory No. 3 is a short sale."

Murphy said real estate agents will probably sell another 40,000 homes this year and again in 2012 and 2013, but he doesn't see prices getting any better for a long time. They're going to come down more this year and it will be at least 2012 before Las Vegas sees any home-price appreciation at all, he said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.