After home-price surges, analyst says 2014 is ‘tough year to call’
For local home builders, 2013 was a year of surging sales and prices.
So what’s on tap for the sector in 2014? Let’s just say industry experts are already looking ahead to 2015.
That’s the word from a panel of housing experts who met Friday at the Las Vegas Springs Preserve to talk about residential real estate’s fortunes in the year ahead.
“2014 is a tough year to call because of all of the stuff that’s still hanging in the air out there,” said Dennis Smith, president and CEO of local analysis firm Home Builders Research, at the Las Vegas Housing Outlook.
The theme of the outlook revolved around why the Las Vegas Valley’s housing recovery is taking so long. Sure, 2013 was strong: Valley builders pulled just under 7,000 new-home permits in 2013, up 18 percent from 2012. They also averaged 500 to 600 monthly sales, up from 200 to 400 closings in 2011 and 2012. As for new-home prices? They were up 33 percent from 2012 to 2013, to a median of $300,000.
But you can expect those indicators to pretty much stay where they are through 2014, Smith said.
That means no more big spikes. Permits may tick up 3.6 percent, to 7,250. Monthly sales should stay around 500 to 600, and new-home prices could gain 8 percent at most.
For resales, which saw their median price jump 22 percent to $165,000, appreciation will be an even slower — albeit more normal and sustainable — 4 percent.
A few factors are holding back bigger gains. Start with the jobs market. At 8.9 percent, Las Vegas still has one of the country’s highest metropolitan jobless rates.
To see how much ground Nevada has to recapture, consider numbers from Housing Outlook panelist Bob Potts, who is research director of the Governor’s Office of Economic Development. Yes, Nevada has added 60,000 jobs since 2011, but that is only a third of the 175,000 positions the state’s employers slashed from 2007 to 2010, Potts said.
What’s more, the state’s average annual income has stayed flat since 2007, at about $43,500, because of an oversupply of labor and uncertainty among businesses.
And where people are either out of work or seeing few pay raises, housing sales tend to stagnate.
Financing is in flux as well, with lower price limits on mortgages the federal government is willing to back, and new rules on who can qualify for a loan. With a few exceptions, it’s tougher for a lot of buyers to get approved for financing.
Nor will the city’s tight land supply abate in 2014. The scarcity of larger parcels will make it tougher for builders to find lots to replace what they sell, Smith said.
Not all is lost for 2014. Some trends could surprise, and boost the market a bit, experts said.
New construction in master plan developments such as Inspirada and Cadence, both in Henderson, could add to sales and permitting activities.
Consumers are also feeling their way through the uncertain mortgage landscape. Panelist Brad Faunce, branch and sales manager for Nationstar Mortgage, said builders are seeing an increasing number of buyers bring in parents and grandparents as cosigners to make qualification easier. New rules also make life easier for “boomerang buyers,” those who have been through foreclosure or short sale. Financing is available for buyers who can prove their foreclosure was the result of job loss, or who have a good credit history otherwise.
“We’re finding a way to make it happen for the vast majority of people coming in,” Faunce said. “It’s not easy, but it’s happening.”
Also, expect builders to begin the hunt for land in less desirable, but more affordable, locations around the valley, said panelist Alex Barron, founder and senior research analyst with Housing Research Center.
“That’s eventually where they’ll have to go, because affordability is the biggest issue facing the consumer now,” Barron said.
Put it all together, and you have a flat near term while the market works out its kinks in the long run, the experts said. In other words, 2015 can’t come soon enough.
“We have to be very careful with being realistic about our expectations for the next year until these clouds start to clear,” Smith said.
Contact reporter Jennifer Robison at jrobison@reviewjournal.com. Follow @J_Robison1 on Twitter.