Analyst: Builders might leave Las Vegas market without sales gains

By Buck Wargo

Thursday, Feb. 10, 2011 | 1:01 p.m.

A Las Vegas housing analyst said today he expects sales of new and existing homes in 2011 to match their 2010 levels, but some builders may leave the market if new home sales don’t improve.

Dennis Smith, president of Home Builders Research, said 2011 will be an important year for many public builders who will have to decide whether they’re going to remain in Las Vegas. He predicts 4,500 new home closings in 2011, down slightly from 4,761 in 2010 when sales were aided by a federal tax credit. It will reach 4,700 closings in 2012, he said.

The gap between the median price of new homes and existing homes is about $100,000 -- $218,080 for new homes and $119,000 for existing homes, Smith said. Traditionally, that gap is been between $20,000 and $25,000. Builders can’t get their prices any lower and existing home prices will have to increase before builders can be more competitive, he said.

“It’s going to be a difficult year for some builders to retain a presence,” Smith said. “We may have some builders who may want to liquidate their lot holdings by the end of the year.”

Smith said more people are looking at new homes since the beginning of the year, but that has yet to translate into more sales.

“Buyers are more discretionary and taking their time and looking at the products of builders,” Smith said. “There’s a lot of competition with pricing.”

In the existing home market, Smith projects there will be 43,250 closings in 2011, up slightly from the 42,673 in 2010. The numbers should grow to 44,500 in 2012, he said.

Although statistics released by the Greater Las Vegas Association of Realtors showed that 51 percent of sales were done with cash, Smith said not all of those are investors. More baby boomers who want to relocate to Las Vegas are taking advantage of the low prices, Smith said. In addition, many foreign buyers are looking purchasing homes as well, he said.

Smith said one sign of the recovery of the valley’s housing market is what happens in North Las Vegas. Some 13 percent of the homes sold are in North Las Vegas and if that share increases a couple of percentage points, that would be a positive sign, he said.

“When that starts to improve, that would signal we have some better job growth, improved consumer confidence and maybe some easier lending standards,” he said.