Analyst: Housing recovery to continue unless government ‘screws it up’
The Las Vegas housing market has turned the corner and should continue to show improvement in 2013 unless the government “screws it up,” a former economist for the National Association of Home Builders said Wednesday.
“Hopefully they won’t, but I’m fearful they might,” Elliot Eisenberg, president of Graphs and Laughs, said at the Southern Nevada Home Builders Association luncheon at The Orleans.
Eisenberg said government leaders need to understand the impact of new home construction on the local economy.
The construction phase for every 3,700 single-family homes built creates about $378 million in real household income, $111 million in tax revenue and 6,384 jobs, he said. The “ripple effect” for the next eight to nine months generates $218 million of income, $29 million in taxes and 3,860 jobs.
Economic impact is cut in half to about $120 million a year and 1,800 permanent jobs during the occupancy phase, but it goes on for as long as the house is occupied, “swamping” the other two phases, Eisenberg said.
Multipliers from the occupancy phase include spending on furniture, day care for children, dry cleaning, dental and health care, utilities, manicures and newspaper deliveries.
“The model does not say build housing to stimulate the local economy. Rather, it is job creation that results in demand for housing,” the economist said.
Eisenberg calculated $10,000 in raw land cost and $25,000 in permit and infrastructure fees for an average single-family home in Las Vegas that’s selling for $212,850. It brings in about $2,442 a year in property taxes.
“The $25,000 is something to look at in the future,” he said. “I know it can’t go down, but look closely that it doesn’t go up. Don’t end up like California. Fees are $120,000 to build in San Diego.”
Nat Hodgson, chief executive officer of the Southern Nevada Home Builders Association, said new-home sales volume rose in 2012 and will remain steady this year. He doesn’t expect builders to boost production, which is good, he said.
The local housing industry’s biggest challenge this year is construction defect reform, or getting the Legislature to change Nevada Revised Statutes Chapter 40, he said.
“You create so many jobs when you build a home. Gaming is great, but it won’t grow much,” Hodgson said. “We’re the ones bringing tens of thousands of jobs. There are so many nontangible dollars that go into building a house that consumers don’t see.”
Last year was better than most analysts had predicted in terms of home value gains, said Svenja Gudell, senior economist for Zillow.com who will be speaking at the International Builders Show in Las Vegas next week.
Zillow shows Las Vegas home values gaining 1.4 percent in November, with a year-over-year increase of 11 percent. Those are extremely large gains, she said.
“It’s surprising how quickly the market is turning around, driven in part by inventory shortage,” Gudell said. “This gives builders a lot of opportunity. Builders took a step back and slowed down the amount of building. They’re starting to ramp back up and find land to build on. It just takes a while to ramp back up. It’s not done overnight.”
There’s a “catch” to building new homes, economist Eisenberg said. Each one is going to cost roughly $5,500 a year to provide salaries for services such as police and fire, garbage collection and road maintenance. The one-time capital cost is about $8,400 a square foot, he said.
“What’s the benefit of housing to a community? Does it pay its way? Yes. It pays for itself and relatively fast, even faster when homes were $300,000,” Eisenberg said. “No matter how you slice it, housing is more than paying its way.”
Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.