Tight housing supply drives many to new-home market

Tight supply is driving more homebuyers to the new-home market even though the gap between new- and existing-home prices remains far above what it was during normal years, Las Vegas housing analyst Dennis Smith said Wednesday.

The Home Builders Research president reported 462 new-home sales during July, bringing the total for the year to 2,717 sales, a 26 percent increase from a year ago.

Everyone knew the Las Vegas housing market was going to be “iffy” with the national mortgage settlement and Nevada’s own robo-signing law that makes it tougher for lenders to foreclose, but this is “uncharted waters,” Smith said.

“The inventory level is still down and it doesn’t look like it’s going to change anytime soon,” he said. “The next target date is next year in the Legislature, whether they adjust or repeal AB 284, which I don’t think is going to happen. What that means is we’ve got another year of this inventory.”

Smith said he’s never seen such as absolute change in the supply and demand of homes in such a short time. The irony of having virtually no inventory of new or resale homes – yet thousands of homes sitting empty or in limbo with no payments being made – is unmatched, he said.

The median price of a new home in July was $194,270, a 2 percent decrease from a year ago.

That’s $71,770 more than the median price for resales, Smith noted. A year ago, the gap was $88,618. A normal gap would be $25,000 to $30,000, he said.

Although data suggest the housing market headed in the right direction, it still has a long way to go before the term “normal” can be applied to Las Vegas, Smith said.

Traditional equity sales, those that are not bank-owned or short sales, now make up nearly 68 percent of the housing inventory for sale, said David Brownell of Keller Williams Realty. Many of those sellers have unrealistic pricing and are not really on the market, he said.

That’s another reason inventory remains tight. With reports that 70 percent of Las Vegas homeowners are underwater, owing more than their homes are worth, traditional sellers can only supply the market for so long, Brownell said.

“Ultimately, the distressed product will return, and it will need to in order for us to have properties for sale in Las Vegas,” he said.

A report Wednesday from Seattle-based online listing service Zillow.com showed the percentage of underwater homeowners in Las Vegas dropping to 68.5 percent in the second quarter from 71 percent in the previous quarter.

It’s still the highest underwater percentage in the nation, more than double the national average of 31 percent, Zillow senior economist Svenja Gudell said. Las Vegas has 228,614 underwater homes with total negative equity of
$23.7 billion.

Zillow’s Home Value Index shows Las Vegas prices rose 1.7 percent in the second quarter, to $116,200, though they’re flat from a year ago.

“As home values appreciate, and we’ve seen four months of home values going up, you’ll see more people underwater cross over into positive territory and then people have a choice to put their house on the market,” Gudell said Wednesday. “That doesn’t mean everyone in positive territory will sell. Sellers don’t want to sell at the bottom, so it may take a couple months of appreciation for sellers to get comfortable, so they’re a little off the bottom.”

The resale count remained strong with 4,043 recorded closings in July, Home Builders Research reported. The year-to-date total is up 11 percent at 29,669.

The median resale price rose for the fifth straight month to $122,500, up
2.1 percent from the previous month and up 11.4 percent from a year ago.

Builders pulled 543 new-home permits in July, nearly twice the 287 permits pulled in July 2011. For the year, the permit count has increased 49 percent to 3,437.

Harry Jacobs, chief executive of Credit Restoration of Nevada, said banks are still holding 12,000 to 20,000 homes in some stage of foreclosure. Others think the number is higher.

“Until those homes are gone, no one’s going to get an accurate snapshot of what this market really is like,” he said. “Anyone that tells you home prices are increasing and this is it, we’re on the way up … I call B.S.”

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.