Housing recovery at least a year away, analysts say

By Buck Wargo

Thursday, Jan. 21, 2010 | 7:45 p.m.

Three of Las Vegas’ leading housing analysts said they expect 2010 to mirror 2009 for home sales. They predict prices will remain stable and suggested any recovery won’t come until 2011 at the earliest and most likely later.

The forecast for price stability mirrors a report released Tuesday by First American CoreLogic that shows Las Vegas home prices between November 2009 and November 2010 will fall 0.79 percent.

Dennis Smith, the president of Home Builders Research, said he’s expecting the number of resale homes to remain constant, rising from 44,885 he counted in 2009 to 45,000 in 2010.

Steve Bottfeld, the executive vice president of Marketing Solutions, said he expects existing home closings of about 48,000 in 2010, slightly more than the 47,625 reported by SalesTraq in 2009.

After dropping 33 percent in 2008, the median price of existing homes in Las Vegas fell 23 percent in 2009 to $115,000, according to SalesTraq President Larry Murphy.

Since June 2006, prices have fallen 60 percent, but Murphy said he’s not expecting the $100,000 level to be reached.

Murphy said Tuesday during his Crystal Ball seminar at the Suncoast that prices of existing homes should remain steady, matching the 0 percent appreciation in 2006, when prices began and ended the year at $285,000, he said.

“I think we are at the bottom, and we are skidding along the bottom,” Murphy said. “I think it will stay like that for another 12 months before we see any significant improvement.”

As for the new-home market, Murphy projects sales in 2010 to mirror 2009’s sales of 5,184, the fewest number of new homes sold since 1985.

Murphy predicts that will increase to 6,100 homes in 2011, 12,500 in 2012 and 20,000 in 2013, which matches the number built in 2007. The market peaked at 38,705 new homes sold in 2005.

“We have built 50,000 homes too many, and we have to build 50,000 fewer homes” to make up for it, Murphy said.

Smith, meanwhile, predicts builders will sell 5,750 new homes in 2010 compared to 5,271 he calculates were built in 2009.

Bottfeld is the most optimistic about the new home market, projecting 7,500 sales in 2010.

He said prices, however, won’t hit bottom until the second or third quarter. SalesTraq listed the median new home price in December at $210,000, a 9 percent drop for the year.

The forecast from Las Vegas analysts differed from national economists who were in Las Vegas this week at the International Builders’ Show sponsored by the National Association of Home Builders.

David Crowe, the NAHB’s chief economist, said he’s wasn’t optimistic for the Las Vegas housing market for 2010 because of a high number of foreclosures that continues to add to its inventory.

He said Las Vegas doesn’t have enough demand to absorb the homes on the market through 2010 and most of 2011.

David Berson, a chief economist and strategist with California-based PMI Group, said he expects prices to continue to decline in Las Vegas, but the drop won’t be large.

Other national analysts have suggested home prices could fall another 10 to 15 percent in Las Vegas, in part because of foreclosures.

Murphy and Bottfeld said they aren’t expecting a wave of foreclosures for Las Vegas in 2010.

Murphy has projected Las Vegas will have 26,000 foreclosures in 2010, an increase of about 2,000 over 2009 because of job losses. The valley had 25,288 foreclosures in 2008.

“It looks like a continuing stream, and it’s not going away. But I don’t see a flood,” said Murphy, who anticipates banks will approve more short sales in lieu of foreclosures.

In a short sale, the bank allows the homeowner to sell the house for less than is owed on the mortgage.

The percentage of foreclosed-upon homes that made up the 47,625 in sales fell to 50 in 2009, Murphy said. It was more than two-thirds in 2008, he said.

Murphy said today that he’s concerned his foreclosure projection could be wrong, if people who can afford to pay their mortgages start walking away from their homes in larger numbers.

Those who bought homes in the last two to five years have lost 50 percent on the value of their homes, and two of three Las Vegas residents owe more on their mortgages than their homes are worth, Murphy said.

Someone who bought a home for $300,000 has seen its valued drop to $150,000, and if prices appreciated at 5 percent a year, it would take 20 years to recoup that, he said.

“Strategic defaults are a very real possibility,” Murphy said. “People may lose hope and make a business decision and take a walk. Studies have shown this can go viral. If this were to happen, we could have a tsunami next year.”