Las Vegas Sun

March 28, 2024

Experts say housing’s future is cloudy

No one has a crystal ball when it comes to Las Vegas housing.

One of Las Vegas’ leading analysts predicts the housing market will reach its bottom in the first quarter and suggested prices don’t have much further to fall. But Steve Bottfeld, executive vice president of Marketing Solutions, tempered his own prediction by urging people to be wary of forecasts about the housing market. Speaking at his Crystal Ball seminar Jan. 22 at Texas Station, he said what’s happening in housing is uncharted waters.

“With all the unknowns for 2009, no one can accurately assess the future,” Bottfeld said. “You have all these people saying it is going up, down and sideways. What the heck are they basing it on? They don’t know. We know the economy is bad and home prices may fall further. There may be more layoffs coming and no amount of bailout can fix things overnight. It is just common sense.”

Larry Murphy, president of SalesTraq, which compiles housing statistics, said no one is an expert on the Las Vegas housing market but only a student. He also lamented some of the many predictions made about the housing market and its demise.

Bottfeld said most of the bad news has been factored into the prices. He said he predicted a year ago the market would hit the bottom in the fourth quarter of 2008, but has adjusted that to the current quarter. Home prices are 14 percent undervalued, he said.

“I think we could see a bottom of retail prices in the first quarter, and they could trade in a narrow range and bounce up and down,” Bottfeld said.

Bottfeld predicted new-home prices will be plus or minus 5 percent this year.

If someone wants to predict what the housing market is going to do, they need to look at the signposts, Bottfeld said. The stock market is a key indicator because in 60 days it will reflect whether there is confidence in President Barack Obama’s financial plan.

Foreclosures are another important sign. In December, sales of foreclosed homes continued to get closer to number of repossessions, Bottfeld said. Once sales exceed foreclosures, that’s a sign of the bottom.

Murphy said, however, he was concerned about people walking away from their homes because more than half of homeowners owe more money than their homes are worth. He expects foreclosures to remain a problem for another two years.

Employment is another signpost, Bottfeld said. It’s not simply looking at the jobless rate but the number of new jobs created by casinos. The federal stimulus package will create construction jobs, he said.

Because of the low interest rates paid for bond investments, Bottfeld predicted more people will move money into real estate and take advantage of low prices.

That has already happened with sales of existing homes up 38 percent in 2008, Murphy said. The reason is housing affordability with so many more homes selling for under $200,000 — about 17,000 in 2008 compared with about 10,000 in 2006. There are even some new homes selling in East Las Vegas for less than $100,000 he said.

“We were anticipating the demise of the $200,000 home a few years ago, and we pretty much buried the $100,000 home,” Murphy said.

The luxury home market hasn’t been immune from the slowdown with fewer than 600 homes selling for less than $1 million, Murphy said. There were nearly 1,200 sales in 2007.

After peaking in 2006, new-home prices continued to fall in 2008 to the point where builders are staying on the sidelines.

The spread between the median price of a new home at $240,880 and existing home of $157,250 is wider than the housing boom when the margin was closer to $10,000 to $12,000, Murphy said.

“You have to make a decision if you want to build another house,” Murphy said. “Rather than see the prices drop, you will see the builders stop building.”

That is confirmed by builders taking out 53 percent fewer permits in 2008. There were only 143 permits issued in December.

The good news is the slowdown in construction helps the market correct itself because of the massive overbuilding during the housing market boom, Murphy said.

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