Housing analyst sees hope in residential lot transactions

If residential lot transactions are any indication, Las Vegas could be turning the corner on the housing market crisis, a national housing analyst said Wednesday.

Homebuilders have become increasingly competitive over the past 12 months in acquiring finished lots, or those that have infrastructure and utilities in place to begin building, said Marta Borsanyi, principal of Newport Beach, Calif.-based Concord Group.

Land values are outpacing economic growth in Las Vegas, she said. Lots that were once going for as little as $20,000 have tripled and quadrupled in price.

"There is a run on lots because builders are scared they won't have them when the market turns around," Borsanyi said during a consulting visit to Las Vegas.

Several key housing indicators turned positive in the first quarter after steep declines from 2005 to 2009, she said. New-home sales are up 6 percent, existing-home sales are up 9 percent and housing starts increased 17 percent.

Borsanyi said home prices had to come down in Las Vegas, which is good for the market, even if it brings back opportunistic investors looking for rental properties. About one-fifth of home sales in the first quarter were foreclosures, compared with one-third a year ago, she said.

"We are not done correcting, but that's good. That's why the market turned around in Las Vegas. It can't turn around until it gets rid of all the overreaches," she said. "Speculators are buying them up and renting. It's just life. Some of them took advantage of it, oh yes."

The new-home market is getting healthier, but full recovery won't come until second quarter 2012 for the nation, possibly earlier for Las Vegas, Borsanyi said. She defines a turnaround as low single-digit-percentage price appreciation and one new-home sale per subdivision each week.

Some subdivisions in Las Vegas are selling seven to eight homes a month, mostly at lower-market prices, she said.

Borsanyi said homebuilders must come up with new products beyond conventional, value-oriented homes on smaller footprint lots.

"There is no new product," she said. "It's all junk. We've seen it already. Let's see something new."

As new-home sales continue a modest recovery, many markets across the country are experiencing cresting values and competitive bidding for both ready-to-build and partially improved residential lots, Concord principal Mike Gollis said.

Finished lots and standing inventories range from 18 to 36 months of supply. Return expectations are stabilizing at a 20 percent internal rate of return for midterm land development deals, he said.

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