Las Vegas home values dip for second straight year

As miserable as the housing market has been in Las Vegas, Sherry Stidhum didn't want to sit on the sidelines waiting for the upswing.

The high school teacher at Advanced Technologies Academy purchased her first home last year in the midst of Southern Nevada's crippling housing bust, paying $100,500 for a three-bedroom, 1,660-square-foot foreclosure home in the master-planned Aliante community of North Las Vegas.

It's ZIP code 89084, where median home prices fell by 7.5 percent in 2011, according to an analysis by Las Vegas-based housing research firm SalesTraq. The area has among the highest foreclosure rates in the nation.

"Yes, I know," Stidhum said at her two-story home with mountain views. "I think we're at a place where we're bottoming out and I expect things to turn around. I'm from Mississippi. I can handle tough times and make it through."

Home values dropped in all but three of the Las Vegas Valley's 56 ZIP codes last year, on average by about 11 percent, SalesTraq reported. That's coming off a 6 percent decline in 2010, which was encouraging compared with the 23 percent decrease in 2009.

"So we had a little bit of the dreaded double dip," SalesTraq President Larry Murphy said. "We all thought we were on the way to the get-even line and then we drop 11 percent. The $64 million question is: Where's it going to be this year? That's where we have varying opinions."

Overall, Las Vegas home prices have fallen more than 60 percent from their peak and have yet to find the proverbial bottom. They could easily go down another 10 percent, Murphy predicted, which means the median existing home price will slip below $100,000.

"Who knows what shoe will fall next," he said. "I'm curious to see what the $25 billion settlement with the banks is going to do. It reminds me of the tobacco industry. They either pay it or they're basically history. The banks are saying, 'We'll give you $25 billion just to see this go away.' "

Murphy cautions homeowners not to get depressed over his ZIP code map that shows steep declines in several areas of the valley.

UNHAPPY NUMBERS

In ZIP code 89169, east of the Strip between Desert Inn Road and Tropicana Avenue, median home prices plummeted 27.9 percent from $88,300 in 2010 to $63,661 in 2011.

The situation isn't much better in ZIP codes 89107 in the central city, 89131 in the northwest and 89120 in the southeast, all of which saw declines greater than 16 percent.

That's just how the chips fall in the nation's worst housing market.

Murphy said people should not use the ZIP code map to make home-buying decisions, nor should they use it as a tool "to beat themselves up."

Don't assume that every home in ZIP code 89131 went down by 16 percent. Of the 10,000 homes in that ZIP code, there are probably some that increased in value last year, Murphy said.

"There are good buys and bad buys in every ZIP code," he said. "Only a naive and stupid buyer would use this map to base their buying decision on."

Las Vegas is composed of some 100 submarkets that are all "pretty erratic" when it comes to home valuation, appraiser Mike Brunson of Brunson-Jiu said. He's not seeing unilateral gains in any specific area. Depreciation depends on the amount of distressed inventory in the neighborhood.

"As appraisers, we strive to measure and reflect what a specific market is doing," he said. "A ZIP code doesn't really represent the market an appraiser would use. ZIP codes are huge and you can have a diverse quality of housing, like 89030 (North Las Vegas). You've got homes built in 1964 on the low end of the socioeconomic scale all the way to up to high-end custom homes."

Chris Howard isn't worried about declining home prices. He sees it as a great buying opportunity, much like the stock market.

Howard, 50, is downsizing from his 11,000-square-foot home to one half that size in Red Rock Country Club, ZIP code 89135, where prices decreased by 13.5 percent last year. His home is sold, expected to close escrow in March. He also bought his daughter a home in the Summerlin community.

"I think in Las Vegas we can look at the glass as half-full instead of half-empty," the Primerica Financial Services adviser said. "I'm a native of Las Vegas and I love Las Vegas. As prices went through the roof, I wondered how the younger generation could afford to buy a house."

Luxury Realtor Tom Love said it's been his experience that "pristine gems" have held their value in Las Vegas, while "middle-of-the-road" properties are having more difficulty.

A SPOT OF APPRECIATION

One ZIP code that showed home appreciation last year was 89146, around Sahara Avenue and Jones Boulevard. The median price rose 5.3 percent from $95,000 in 2010 to an even $100,000 in 2011, though it was a relatively small sample with just 360 sales, Murphy noted. It's also a more mature neighborhood, with 20- to 30-year-old homes on half-acre lots.

A better example of where Las Vegas home values are headed is ZIP code 89178 in the southwest valley and 89166 in the northwest. Those are the master-planned communities of Mountain's Edge and Providence, where prices fell 8 percent and 5.6 percent, respectively.

That's where the bulk of new-home construction took place in the boom years, and where you're going to find a lot of foreclosures, Murphy said.

About half the buyers in Las Vegas are investors. If banks continue to tighten the spigot on foreclosures as a result of recent legislation, investors won't be able to pick up distressed properties at bargain prices and they're going to stop buying, Murphy said.

So while inventory may be shrinking and fundamental economics say prices will go up, many investors will drop out of the marketplace, Murphy said.

"I see everything being up in a dark cloud floating above our heads," he said. "It could start to rain on us or a big wind could come along and blow the cloud away and we'd see sunshine. For people who see a bright future, they could see something that's going to blow all this away."

NOT WORRIED BY DATA

Not everyone is concerned about return on investment, said Kevin Savage, president of Evergreen Home Loans. He secured hundreds of loans for owner-occupants in 2011.

"The ones that are buying, God love 'em, they're staying in town," he said. "They're committed to the community. They don't care if the home goes down 5 percent. They say, 'I've got to live someplace,' and they have optimism. The ones that aren't buying are the flotsam on the water. The minute they can, they're going to get out of Dodge."

And the entire market is not in decline. Savage said some appraisals are coming in at list price or higher in certain areas.

"It's a mixed bag," he said. "People that are buying take a longer view. Buying is cheaper than renting, buying is more stable and their life is stable. If you're renting, there's a chance you're going to get kicked out by the bank or the house is going to get sold out from under you. I can't tell you how many stories I've heard where this is the second or third time and they don't want to go through it again."

Savage said he has people from across the country buying second homes in Las Vegas, waiting to sell their homes when the market gets better and take that cash to pay off their homes in Las Vegas.

"This is still the deal of the century," he said. "These people realize that waiting for the bottom is like a blind man walking downhill. He knows he's at the bottom when his next step is uphill."

Some real estate experts point to artificially depressed appraisals for contributing to Las Vegas' declining home prices. Appraisers are using comparable foreclosures and short sales, or homes sold for less than the principal mortgage balance, to set values for nondistressed homes.

"We know values are declining," appraiser Brunson said. "I'm not going to say there aren't appraisers out there overreacting. We know that's the wrong thing to do. Appraisers analyze the market and determine the best price using validated methodology."

Having a buyer and seller agree on a price does not set market value, he added.

"If it's cash, that's fine, but if you have a willing buyer and willing seller asking a financial institution to risk their money, you can't assume the appraisal is wrong," Brunson said.

Stidhum, the teacher from North Las Vegas, said she didn't buy for investment reasons, though she thinks home values appreciating in the future. She got a house with landscaping already in place and upgrades such as granite countertops and marble in the bathrooms.

"Now is the time if you can do it and get a good deal," she said. "I have confidence that the market will improve sooner rather than later."

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