New Home Closings in Nevada Housing Market Fall to Lowest Point in Decade
February’s new-home closings fell to their lowest point this decade as prices tumbled five percent from Januar - but the Las Vegas housing market had a bit of a silver lining as housing starts reached their highest level since August, according to SalesTraq.
There were 1,441 new-home closings in February, a drop of nearly 50 percent from February 2006 and a decline of 30 percent from January’s 2,052, according to SalesTraq, which compiles housing statistics. That’s the lowest monthly total this decade.
In the resale market, the 2,594 homes sold in February was the lowest total since April 2001.
“I think it’s always disappointing to see dismal results, and let’s face it, those sales figures are disappointing,” said Las Vegas housing analyst/Nevada mortgage expert Steve Bottfeld, executive vice president of Marketing Solutions. “I would say they are disappointing numbers because the market is showing signs of recovery.”
Bottfeld noted that home closing figures are a look at the past because it can take 60 to 180 days to close. He added that cold weather in December and January may have kept many potential home purchase loan applicants from looking.
Traffic through model homes has been stable since February, according to Las Vegas housing analyst Dennis Smith, the president of Home Builders Research. But it’s still off 26.5 percent from the first two months of 2006.
None of the new numbers reflect the recent events in the subprime lending market in which it’s tougher for people with lower credit scores to obtain Nevada mortgages. In addition, for the second consecutive month, Nevada ranked number-one in the country in the number of cases entering some stage of foreclosure. That should bring even more homes onto the market, but Smith said it won’t pose a problem.
“I believe that investor demand for owning property in Las Vegas and pent-up consumer demand will absorb the homes going through foreclosure in a relatively short period of time,” Smith said. “Consumers will buy foreclosed homes if they perceive a steal or deal.”
With the decline in home sales, prices came down in February with the median price at $321,555, a drop of 5 percent from January’s price of $339,253. The new-home price is the lowest since March 2006 when it was nearly $320,000.
When mid-rise, high-rise and condo conversions are removed from the equation, the statistics show prices for new single-family homes and condos have dropped 3.4 percent over February 2006 to $331,088, SalesTraq reported.
The home prices don’t include the incentives that some builders are offering and have yet to disappear. Meritage Homes recently had a 48-hour weekend sale in which it was offering $60,000 in incentives for homes in Mountain’s Edge to those considering mortgage loans there.
“Home builders have attacked the inventory of unsold new homes,” Smith said. “The selling incentives they have offered have been working. That is the difference with the resale (market). Homeowners are not prepared to slash the bottom line to whatever it takes to sell their home. That is why it will take so much longer to bring the inventory of active listings down to a more normal market level.”
The bright spot in the new-home market: Builders are taking out more permits than they were at the end of 2006. There were 1,005 permits issued in February. Although that’s 61 percent lower than the 2,548 permits issued in February 2006, it is the highest total since 1,764 permits were issued in August.
With about a one-month supply of new homes and the demand for new homes outpacing supply over the last six months by more than 9,000, that should begin to cut in the resale inventory, Bottfeld said.
Smith remains optimistic about the long-term prospects for the housing market and suggested Nevada home prices will go higher despite the slump, he said.
The key is the job growth, especially with states like Michigan losing manufacturing jobs and people looking to relocate to places like Las Vegas, Smith said.
“It’s that simple,” Smith said. “As long as we can show job growth, people from other parts will seek those jobs, and require housing. Our housing market has a much better outlook than most others around the country.”
Brian Wargo covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun.