New-home sales still stalled

While the Las Vegas housing market is showing signs of recovery, it's still feeling the effects of a lingering headache from "irrational exuberance" created by the housing boom from 2004 to 2006, a local housing analyst said.

Sales of existing homes in Las Vegas rebounded strongly this year and prices appear to have stabilized. However, the new-home segment has shown "lackluster" performance, said Larry Murphy, president of Las Vegas-based SalesTraq.

He reported 4,069 new-home closings through October, down 54 percent from a year ago, compared with a 65 percent increase in existing-home sales.

The median price for a new home in October was $205,000, a 16.6 percent decline from a year ago and a $6,000 drop from the previous month.

Existing-home median prices have suffered a steeper year-over-year decline of 31.7 percent, but October's median of $123,000 is down just $500 from the previous month. The price has hovered around $125,000 since April.

Builders are being beaten by competition from bank-owned homes that are being sold well below market value, often in cash-only transactions. Roughly half of existing-home sales in Las Vegas are foreclosures with a median price of $116,000, SalesTraq reported.

"We have to exhaust what seems to be a never-ending, perpetual supply of foreclosures," Murphy said. He counted 25,276 foreclosures in 2008 and estimated this year will be about the same with 18,803 through the third quarter.

Foreclosures could shoot to 50,000 next year, the housing analyst said. The Mortgage Bankers Association reported mortgage delinquency rates rose to 9.64 percent in the third quarter, up 40 basis points from the previous quarter.

Mortgage delinquency rates were highest in Nevada (13.8 percent) and Florida (12.3 percent), according to a second-quarter trend analysis from TransUnion.com. The lowest delinquency rates were found in North Dakota (1.5 percent), South Dakota (2.1 percent) and Alaska (2.4 percent).

Las Vegas may be overbuilt, Murphy suggested. The housing boom resulted in about 37,000 excess homes being built and sold at artificially inflated prices, he said.

Using 22,000 new homes a year as baseline demand, Las Vegas would need 132,000 homes to be built from 2007 to 2013. Subtracting the 37,000 excess homes leaves net demand of 95,000 new homes, roughly 16,000 a year, Murphy calculated.

"Until we absorb the extra homes that were built during the boom, there's no need to build any more," he said.

New-home building permits hit a low of 128 in February and climbed back to 332 in October, though the 10-month total of 3,149 remains down 42 percent from a year ago.

Richmond American pulled 474 permits in the past 12 months, the most among local builders, SalesTraq reported. KB Home was second with 426, followed by DR Horton (352), Ryland (309) and Lennar (301).

Some builders appear bullish on the housing market, pulling more permits than they had closings, Murphy said. They include American West, Harmony and Beazer. The bears include DR Horton, which led the market with 784 closings, more than twice its permit number.

American West posted the highest average closing price of $333,136, while Richmond American held average prices down to $205,858, the lowest among new-home builders in Las Vegas. American West also had the highest price per square foot of $120.12, while Harmony was the lowest at $89.96.

What's gone largely unnoticed is the dwindling inventory of standing new homes, said Dennis Smith, president of Home Builders Research. He estimates about 200 unsold new homes on the market, less than a month's supply.

Richmond American has "made their move" this year by aggressively purchasing financially distressed finished lots, addressing demand for homes under $200,000, he said.

"Yeah, there's not many people buying, but there are people who are buying a certain kind of product, smaller homes, not as expensive," Smith said. "They've been replacing sold-out subdivisions as quickly as possible. They haven't bought every deal that has come their way, as some still don't pencil. But they have definitely been the most active public homebuilder in the finished lot arena during the last six months."

Richmond American is actively selling new homes in 21 subdivisions, the most in Las Vegas, followed by Lennar with 19, SalesTraq reported.

Smith said new-home sales typically pick up in January, after the holiday season, and he thinks the expansion of the tax credit to new-home buyers could kick-start those sales.

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