Study: Few can afford homes in LV

A week-old study assessing housing affordability in Las Vegas is already well past its prime, local analysts say.

The 2008 Colorado College "State of the Rockies Report Card" found that just 18.9 percent of the Las Vegas Valley's housing stock is attainable to workers earning the area's median wage, which was $14.03 an hour in June, according to the Nevada Department of Employment, Training & Rehabilitation.

Affording a two-bedroom apartment at fair-market rents in Clark County required pay of at least $15.01 an hour, the report card added.

Those figures translated into a D+ for overall housing affordability in Clark County.

There's just one hitch: The report card's data hail from the first quarter of 2007. And given the swift blast of air hissing out of the Las Vegas Valley's housing bubble, that makes the report card's findings obsolete, experts say.

Jeremy Aguero, a principal in Applied Analysis, estimated the proportion of local homes affordable to median wage earners is likely closer to 36 percent, or about twice the share the Colorado College report card cited.

"Those numbers don't comport with what our market looks like today," said Aguero, whose firm performs economic studies and research for businesses and governments. "To suggest that only 18 percent of our homes are available to local buyers is a dangerous, deceiving statistic."

Among Aguero's quibbles with the study: It fails to consider the sheer volume of homes in foreclosure here. More than half the single-family homes sold locally in March were foreclosures or short sales, according to the Greater Las Vegas Association of Realtors. Those homes are selling at $120 to $125 per square foot -- well below the $185 per square foot parts of the market averaged at its peak in 2005.

Aguero's researchers say they're seeing more houses priced below $200,000 than they've seen in at least 18 months.

A search on Friday of the National Association of Realtors' online Multiple Listing Service found 13,630 condominiums, townhomes and single-family homes on the market for $250,000 or less. A similar Review-Journal search in December 2005 found just 2,657 residential properties priced at $250,000 or below.

The Colorado College study also leaves out the equity the city's hundreds of thousands of homeowners have built, Aguero said. Most buyers who bought before 2005 or 2006 owe less on their home than it's worth. Throw in transplants from pricey housing markets in California, and many buyers in today's market aren't relying on income alone to buy homes.

Renters are catching some breaks these days as well, said Kevin Keefe, a senior associate in the Las Vegas office of Marcus & Millichap Real Estate Investment Services.

Investors who bought condo conversions at the height of the market can't unload them in today's downturn, so they're renting them out, Keefe said. The glut of rental properties has softened the city's apartment market. Average occupancies have dropped from around 97 percent in mid-2007 to roughly 93 percent today, he said. That means rents have stabilized as well, at a valleywide average of about $700 to $800 a month for a one-bedroom apartment.

On top of steady rents, more landlords are offering concessions to lure tenants. Apartment owners are dishing out a month or two of free rent and waiving deposits. Condo owners are discounting rents altogether. Rather than the 5 percent and 7 percent annual rent gains experts forecast a couple of years ago, rates could jump just 2 percent to 4 percent in the next year, Keefe said.

Trends in the broader economy could be offsetting some of those improvements in housing affordability, though.

First, unemployment in Las Vegas rose to 5.6 percent in March, up from 4.3 percent in the same month a year ago. So some households have lost earning power, which in turn erodes their home-buying potential.

And though wages are up slightly, the typical number of hours worked has fallen or flattened. Leisure-sector workers statewide are taking in $14.97 an hour, up from $14.69 an hour a year ago, but they're working 34.1 hours a week, compared with 35.3 hours a week a year ago, said Jim Shabi, an economist with the state's employment department. Construction workers are making $966.38 a week now, compared with $950.42 a year ago. Their hours are stable at 37.5 hours a week now, compared with 37.7 hours a year ago.

And consumers everywhere find it tougher to qualify for home loans, even on properties they could have afforded a year ago. Companies that insure mortgages have placed the entire Silver State on their lists of restricted markets, where they're demanding pristine credit histories and downpayments of at least 5 percent to 10 percent.

Still, the affordability picture is mostly better now than it was when Colorado College's data were gathered, locals say.

The 65,000 service workers belonging to the state's largest union, Culinary Local 227, all earned 3.7 percent raises in 2007 thanks to a new contract, and they maintain free health insurance and pensions as well, noted Culinary Political Director Pilar Weiss. That's helped them move forward economically, she said.

Added Aguero: "We haven't seen a hugely material change in the foundational elements of the economy. Does that mean homes here are affordable to everyone? Certainly not. But if you look over the long history, I think Clark County is better off today than it was 12 months ago, or even 24 months ago."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.