Las Vegas New homes to surge last quarter of 2007
Monday, February 26th, 2007
John Burns real estate consulting Irvine, California spoke last week to the Las Vegas Home Builders Association. John is a C.P.A., and has an M.B.A. from U.C.L.A., and a B.A. in economics from Stanford. He is a nationally known expert on housing and has been quoted by CNN, The Wall Street Journal, USA Today and others.
“By some accounts, Las Vegas now has a one-month to two-month supply of new homes.†However with a large supply of resale homes builders must continue to trim costs and cannot expect to raise prices anytime soon.
Mr Burns believes that the long term look for housing in Las Vegas is good because of population growth spurred by strong job growth. He also believes that California will continue to play an important part in the growth of Las Vegas as California has a lack of affordable housing and an business environment that is unfriendly. More companies will continue to move to Southern Nevada.
With the current Las Vegas resale home inventory at approximately 24,000 units he thinks it will take most of 2007 to drop inventory levels to a healthy 15,000 units. He also believes that prices on resales could drop by up to 6%. The price of existing homes have dropped $10,000 in the last 3 months.
Side note: Keep in mind that over 40% of the resale inventory is vacant as investors from 2004 and 2005 are trying to liquidate their homes. These investors are more likely to sell at a discount to stop their negative cash flow. Those investors who bought late in the price surge may find their properties in foreclosure as they fail to meet the payments or discount their properties. Another complicating factor is exotic loans that were taken out by buyers. If interest rates increase they may not be able to meet their payments.
According to the Greater Las Vegas Association of Realtors the median price of a home in Las Vegas dropped only $8,000 from Jan. 2006 to Jan. 2007. The highest point in the market was December 2005 where the median price of a single family home was $312,500. So the $10,000 price drop has taken 13 months, much slower than the anticipated balloon bursting predictions made by the national media.
Homeowners that occupy their homes seem to be holding out for their price. This group of Sellers will probably continue to hold their ground unless forced to move by job transfer or other outside forces.
Mr. Burns went on to acknowledge that the new home sellers have dropped the price of their inventories by about 10% in order to compete in the market and have reduced drastically the number of units they are building.
Moving on from John Burns speech we need to keep in mind that Las Vegas has a projected job growth rate this year of 5.1% and an unemployment rate of 4.2%. These figures are far superior to the U.S. National figures of 1.6% job growth rate and 4.6% unemployment. With $30 billion dollars in construction on the Las Vegas Strip they will need an additional 20,000 workers this year alone.
In summary: New home inventories are low which will drive buyers towards the resale homes (especially those that are being discounted and just a few years old). These resale inventories will continue to shrink this year to about 15,000 units which will balance the market. Then in the last quarter we may see prices start to rise again.
The bottom line is that right now a Buyer could very possibly obtain their best deal in this market place.
For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.
