Gulf Coast Tragedy Could Affect Las Vegas Housing Market
By JENNIFER ROBISON
As New Orleans re-emerges in coming weeks from the storm surge that claimed it, the destruction left behind will be vast, said a report from the National Association of Home Builders. The Washington, D.C., trade group released numbers Friday predicting that a "large share" of the 200,000-plus homes in the Crescent City will be beyond repair, in addition to thousands of homes in other cities along the Gulf Coast. That compares with 28,000 homes destroyed by Hurricane Andrew in 1992, and 27,500 units destroyed by last year's hurricanes Jeanne, Ivan, Frances and Charley, the association said.
Analysts say that catastrophic damage could ripple across the country toward Southern Nevada, affecting the availability and cost of homes for sale in Las Vegas. "It's really difficult to look at the opportunities presented by someone else's tragedy. You have to feel sorry for all of the people and the human damage," said Steve Bottfeld, an analyst with local consumer-research company Marketing Solutions. "However, if we're going to speak in economic terms, then Las Vegas is going to receive some benefits."
In two to three months, thousands of displaced Gulf Coast residents could migrate to high-growth markets such as Las Vegas in search of work, said Joe Reel, an economist with the Nevada Department of Employment, Training and Rehabilitation.
Bill Hoover, division president of home builder Pageantry Cos., said increasing numbers of retirees might also flock to the valley. And those new residents will need places to live.
Bottfeld said the influx of labor could especially boost the valley's more affordable housing submarkets. Condominium conversions -- which have a median price below $200,000, compared to a median of more than $300,000 for new homes for sale in Las Vegas -- are "already doing extremely well and will do even better," Bottfeld said. Midpriced single-family homes in suburban communities such as Centennial Hills and Green Valley would also be popular among the newcomers, he said. Plus, the northeastern quadrant of the valley -- long one of the city's most affordable sections -- could "come more alive," he said. Bottfeld said short-term housing, such as extended-stay hotels, could also see an upturn in business.
"Another impact is that investors stuck with houses they couldn't flip will finally find people to rent them," Bottfeld said. Hoover agreed: "A lot of the rental inventory we have would be absorbed relatively quickly." Hoover added that the potential demand could drive up local housing prices of homes in Las Vegas, which appreciated 27 percent in the second quarter compared with a year ago, according to a Thursday report from the Office of Federal Housing Enterprise Oversight.
Housing needs could also strain the city's apartment supply, which is already tightening due to slowed construction and a thriving condominium-conversion sector.
Spencer Ballif, senior vice president of the Las Vegas office of commercial brokerage CB Richard Ellis, said the apartment vacancy rate is about 4.5 percent. Local builders will add 2,800 units this year, down from the 10-year average of 5,200 units a year.
"New construction is down significantly at a time when we have record job growth, relatively flat wage increases and housing costs that make homeownership unobtainable for a lot of people," Ballif said. "It's created the perfect storm for rising rental rates," which he said would increase 7 percent to 10 percent this year.
Introduce a noticeable number of Southeastern evacuees into the equation, and the market "will just get tighter and tighter," Ballif said. "There's not going to be a ton of new supply."
Bottfeld said any relocation trend from the Southeast to the Southwest would likely continue for six months to nine months, and then slacken as rebuilding along the Gulf Coast begins to generate jobs. Some of those jobs will be in construction, and Bottfeld said that could drain labor from an already tight local construction work force. That in turn would make labor more expensive -- a cost that builders would tack on to their home prices. But Hoover said any potential work force loss would be "slight"; it's just as likely that construction workers in the Southeast will move to Las Vegas looking for work, he said. The economic-impact report from the National Association of Home Builders said previous natural disasters have not led to big surges in home building in affected areas, because reconstruction doesn't usually begin for many months and occurs over a number of years.
Katrina's effect on prices for construction materials -- also key contributors to the cost of Las Vegas real estate -- will be mixed, the association's report said. In the short and medium terms, costs of some commodities will fall. Demand for concrete will decline initially as previously planned projects along the Gulf Coast are canceled or delayed. Plus, Katrina blew down thousands of trees on tree farms in the Southeast, a region that houses a significant number of wood-production plants. Farmers will need to harvest those felled trees quickly, which could lower lumber prices in the intermediate future. However, New Orleans is the nation's top port for imports of cement and other building materials. The association's economists predicted that the diversion of shipments to other ports would disrupt supplies, as would land transportation problems resulting from damaged roads and railroads. Summerlin Homes for sale