Las Vegas Housing Boom or Bubble
By JENNIFER ROBISON
The Las Vegas housing market has traded in its go-go performance of 2004 for a little sanity, local analysts said.
"The good times are not over, but the boom is over. We're going into a period of normalcy," said Steve Bottfeld, an analyst with Marketing Solutions, at the company's Crystal Ball housing outlook last week. "A regular market is good enough. It's fabulous. We're going to be on a very high plateau."
Numbers from SalesTraq, which compiled the data used in the Crystal Ball seminar, showed marketwide gains that were steady, though smaller than in recent years. Numbers of existing Las Vegas homes for sale in the Las Vegas Valley totaled 15,530 units in the third quarter, up from 14,731 homes in the same quarter a year ago. The median price for local resale homes rose 14 percent in the last year, from $249,000 at the end of the third quarter of 2004 to $284,500 at the end of the most recent third quarter.
Local builders closed on 10,314 Las Vegas new homes in the third quarter, up from 7,194 homes in the third quarter of 2004. The median price for new homes increased 7 percent, from $281,082 at the close of last year's third quarter to $301,050 at the end of the most recent third quarter.
Those increases are significantly lower than increases recorded in 2004, when Las Vegas led the nation in housing appreciation. The National Association of Realtors reported a local appreciation rate of nearly 54 percent in the third quarter of 2004 from the third quarter of 2003.
Conversions of apartments to for-sale condominiums are helping suppress price increases in the new-home segment, said Larry Murphy, president of SalesTraq. Without the condo-conversion average of $160,000, new-home prices would average about $330,000, Murphy said. SalesTraq's statistics show the sheer sales numbers that allow condominium conversions to influence local housing prices.
In the fourth quarter of 2004, developers sold 500 condo-conversion units. In the first quarter of 2005, that figure doubled to 1,000 units. In the second quarter, conversion sales rose to 1,300 units, and in the third quarter, 2,200 units were sold -- about a fifth of the new-home market. Murphy said he expects sales of condominium conversions to reach 2,500 units in the fourth quarter.
The ascension of the condo conversion also shows in patterns of local closings. Single-family homes claimed 85 percent of new-home closings in the third quarter of 2004, while the condominium sector, which includes both new condos and conversions, had 14 percent of the market's new-home closings. In this year's third quarter, single-family homes accounted for 65 percent of new-home closings, while condos took 34 percent of new-home closings.
"If you look at the value in Las Vegas compared to Southern California, Las Vegas is still undervalued and that's good for us. That tells me our properties will continue to increase in value. It's just going to be at a slower pace than in the last year."
Other findings released at the Crystal Ball seminar:
Presenters unveiled numbers that they say contradict the predictions of analysts who believe just 25 percent of the market's proposed luxury high-rises will be built.
Of the 40,000 units that Murphy said have been announced, 12,000 units, or more than a quarter of the total, are under construction -- so the high-rise market has already surpassed analysts' expectations, he said. In addition, developers are actively marketing nearly 13,000 units.
Seven of the 10 best-selling subdivisions in the third quarter were condominium-conversion neighborhoods. Measured in a single bloc, condo conversions led the market in number of closings, with 2,114 units. KB Home was No. 2, with 938 closings. Pulte Homes and subsidiary Del Webb Communities combined to capture the No. 3 spot, with 893 closings. D.R. Horton was No. 4, with 811 closings. Richmond American Homes rounded out the top five, with 583 closings.
The five best-selling master plans in the valley all posted average prices well above the market norm.
Aliante, which American Nevada Co. and Pulte-Del Webb are developing in North Las Vegas, topped the sales list with 454 units closed in the third quarter. The average new-home price at Aliante was $388,462.
Pulte-Del Webb's Anthem master plan in Henderson came in at No. 2, with 405 closings. New homes in Anthem averaged $409,861 in the most recent quarter. The Howard Hughes Corp.'s Summerlin, in the western valley, was No. 3 in sales, with 338 closings and an average price of $569,215.
Mountain's Edge, a Focus Property Group master plan in southwest Las Vegas, made its debut on the list at No. 4, with 291 closings and an average price of $441,169.
American West's Coronado Ranch in southwest Las Vegas was No. 5 in closings, with 252 units sold and an average price of $343,788.
The number of days that resale homes spend on the market has risen, from 19 days in spring 2004 to 42 days. Most markets experience averages of 60 days or more on the market, Murphy said.