Home prices return to 2004 levels, market watcher says

The $200,000 home, once on the verge of extinction in Las Vegas, is making a strong comeback and some new homes are starting at $150,000, a local housing analyst said Thursday.

The number of homes for sale for less than $200,000 represented 8.3 percent of available listings in the first quarter, up from 4.9 percent in 2007 and 3.4 percent in 2006, said Larry Murphy, president of SalesTraq, a Las Vegas-based research firm.

KB Home is advertising new homes from $149,900, or about $100 a square foot, in the master-planned Providence community.

Murphy identified 15 new-home subdivisions with 100 different models priced at less than $100 a square foot, led by Richmond American's 3,839-square-foot home at Vienna for $319,990, or $83.35 a foot.

"I would not have believed this two years ago, but folks, that is the market today," Murphy said at his Crystal Ball seminar at Texas Station. "We've come full cycle. We're back to 2004 prices."

Median existing-home prices fell 4 percent in 2007, the first drop since Murphy's been keeping records, and he predicts an 8 percent decline by the end of this year. Prices will be relatively flat in 2009, then increase 2 percent in 2010 and 5 percent in 2011, Murphy said.

Home builders overbuilt in Las Vegas for about three years, bringing nearly 40,000 new homes to the market in 2005 when the city's population growth of 75,000 required only 25,000 homes, Murphy calculated.

"Why did we build more homes than we needed? Because a lot of people bought homes they didn't need ... investors," he said. "So in 2007, 2008 and 2009 we're going to build fewer homes than we need."

Consultant Steve Bottfeld of Market Solutions admitted he was wrong last year when he predicted that Las Vegas home prices would not drop. However, he remains bullish on the market and said the median price for new homes, including high-rise condos, will be up 8 percent to 10 percent in 2008.

Bottfeld said the bottom of the Las Vegas housing market is like a three-legged stool. Sales must increase, prices must stabilize and inventory must decrease, he said.

"We're not on the bottom, but we're nearly on the bottom," he said. Home sales in March increased from February, but they're still far below year-ago levels.

Mark McGarry of First United Mortgage said first-time home buyers need to realize that they have about a one-year window of opportunity to buy a home with no money down. Banks are willing to help by paying down payments and closing costs, he said.

"I speak to Realtors daily that are blinded by the dismal news like deer in the headlights," McGarry said. "They simply don't know what to do in this market. Could you imagine if the 17,000 Realtors in Las Vegas found just one first-time home buyer this month? We could potentially take out 50 percent of the homes that are on the market. What an easy fix."

Las Vegas has its problems, but so does the rest of the nation, said Jim Letchinger, president of JDL Development. The Chicago-based developer is building the 113-unit Mercer midrise condos on west Tropicana Avenue near the Las Vegas Beltway.

"It's not just Las Vegas, though it may seem like it," Letchinger said at Crystal Ball. "Vegas is suffering from a temporary -- and I stress, temporary -- correction."

He said most of the failed condominium projects in Las Vegas were "fundamentally flawed," a bad product in a poor location.

The real estate "gold rush" is clearly over, but the market will move on and eventually become stronger and better, Letchinger said.

"I guarantee you every home you buy is going to be worth more down the road. I can't say when -- three years, six years -- but in the history of the world, land prices go up, construction costs go up," he said.

"Las Vegas is a unique city unlike any other city in the country and always will be. Take advantage of it. Stick it out and you'll be successful," he also said.

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