Saturday, October 27, 2007

Homesales Nosedive in Las Vegas - Pulte and KB drop prices again

Looks like the once hot Las Vegas Housing market is declining as fast as the rest of the nation. Many builders were depending on the market, but now it looks like either Pulte or KB Home is going to pull out of Las Vegas. Below is an article from Brian Wargo - In Business Las Vegas

The number of new-home and existing-home sales in September fell to the lowest monthly total this decade as home prices continued to tumble, according to statistics released Tuesday by a Las Vegas research firm.

The release of the data by SalesTraq comes as a local housing analyst said Wall Street investment bankers are concerned that at least one and maybe other major public builders will pull out of the Las Vegas housing market.

Steve Bottfeld, executive vice president of Marketing Solutions, declined to name the builder analysts named, but said they are concerned because Las Vegas has been so profitable for builders.

The worry centers on the rising cost of land and a move toward mixed-use developments and mid-rises, Bottfeld said. A number of builders have sold their land holdings and aren't interested in urban villages, he said.

Builders didn't show much confidence in the Las Vegas housing market in September when they took out 591 housing permits. That's the lowest monthly total this decade, said SalesTraq's Larry Murphy.

"We have not reached the bottom of this market in either new homes or existing homes," Murphy said. "The short-term outlook for this market is not good. It will take another 12 to 18 months before we will see any significant improvement in my opinion."

New-home sales plummeted to 1,328 in September, down 52 percent from September 2006, when there were 2,565. The median prices fetched for new-home sales in September was $308,055, 13 percent below the market's peak in April 2006 when the price was $355,435.
As for existing-home sales, there were 1,466 in September, down 50 percent from September 2006 when there were 2,946. Of those homes that sold, the median price of $263,075 is nearly $27,000 or 9.2 percent below its peak of $290,000 in October 2006. That's the lowest median price since it was $263,000 in March 2005.

Some analysts have predicted existing-home prices could fall 20 to 30 percent from their peak as inventory remains at record levels with a 19-month supply.

The fall in prices comes as a credit crunch makes it harder for buyers to qualify for loans. Analysts said that's an even bigger problem in Las Vegas where there are a lot of first-time and second-time homebuyers. In addition, casino workers who in the past have relied on stated income loans aren't qualifying today.

The latest report is good news for buyers waiting for prices to drop even more before they jump in the market and bad news for those hoping to cash in on the appreciation of their homes from price increases 2004 and 2005.

Builders continue to offer substantial incentives ranging from bonus commissions to real estate agents to as much as $100,000 in free upgrades to buyers, Murphy said. Earlier this month, Lennar Homes dropped prices 25 percent in about 30 of its new-home subdivisions, Pulte had a sale advertising a 15 percent cut in prices while Astoria Homes had price cuts of $70,000 or more. KB Home has had major price reductions twice this year already, he said.

Despite the prices and sales continuing to nosedive, Bottfeld remains optimistic about the future of the housing market and suggested September may have been the bottom. One reason he cites is that the inventory of existing homes on the market in September at 27,417 virtually matched the August total.

"As far as a correction goes, what we have had is pretty mild," Bottfeld said. "If we are not at the bottom, then we will have one more bad month before we see it turn around. I am willing to bet that prices will go up at the end of this year, not down."

Despite his concern about the market over the next 12 to 18 months, Murphy said the housing market future remains bright with resort development along the Strip that will generate more jobs and need for housing.

As for a major builder or two pulling out of the market, Monica Caruso, spokeswoman with the Southern Nevada Home Builders Association, said she is not aware of any such plans, but she noted that builders could do that without an announcement. The number of builders in the market was 97 in 2005 and fell to 77 in 2006 and is expected to fall even further through consolidations, closings or pulling out of the market, Caruso said.

"It is a trend we have been watching and we believe with the decline in sales activity compared to 2005 and 2006, that many homebuilders are operating on reserve funds and that can only go on for so long," Caruso said. "Many if not all of the home builders have had layoffs and cut back expenses to make it through this period."

Many builders are counting on resort development, including developers like CityCenter, to generate more jobs and with it a greater demand for housing, Caruso said.

"We know there are many homebuilders who are holding out because of the opening of two major resort properties," Caruso said. "They feel it is going to create instant demand because of the thousands of new jobs created. People must live somewhere."

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