Housing prices are rising by as much as 30 percent in some submarkets of Las Vegas, a pace that is not sustainable, housing analyst Dennis Smith of Home Builders Research said Wednesday.
Home Builders Research reported 593 new home sales in October at a median price of $216,614, a 10.3 percent increase from $196,360 a year ago.
New home prices are finally showing the effects of the lack of inventory, Smith said. Some sales offices in Summerlin, Anthem and Mountain's Edge are raising prices by up to 30 percent.
One thing that appears more evident each month is that the housing market will correct itself, regardless of government efforts to get banks and mortgage servicers to help in the recovery, Smith said.
He counted 4,098 resale closings in October, bringing the year-to-date total to 41,596, a 4 percent increase from a year ago. The median resale price rose 18.2 percent from a year ago to $130,000.
As positive as this may sound, the increases are very segmented, Smith said.
"There are still communities in the Las Vegas Valley that have downward pricing pressure from distressed housing," he said. "It's a totally unique situation. There's been nothing like this artificially sustained level of demand for so long, but I don't think anybody's going to complain about it too much. We all want to see prices go up. It's hard to criticize what's taking place. Just recognize what it is."
An unknown number of homes could become "instant inventory" if banks decide to proceed with foreclosures, he said.
CoreLogic reported that 63 percent of Las Vegas homeowners with a mortgage are underwater, or owing more than their home is worth, which is down from 68 percent a year ago. Still, that's three times the national average, Smith noted.
If half of the estimated 225,000 underwater homeowners stick it out, that leaves more than 100,000 potential defaults, and half of those could end up going back to the bank, the analyst said.
"Will it happen? I hope not," he said.
The lack of inventory continues to be the big story in Las Vegas. With 48 percent of home sales going to cash buyers, competition is intense and homes are getting multiple offers.
Builders have taken advantage of the short supply by raising production. They pulled 576 new home permits in October, nearly triple the 197 permits pulled in the same month a year ago. For the year, permits have increased 53 percent to 4,451 through October.
A recent report by national housing data firm Metrostudy shows the Las Vegas housing market has stabilized and is beginning to improve.
Metrostudy reported 1,816 new home starts in Las Vegas during the third quarter, a 66 percent increase from 1,085 starts in the year-ago period. Annual single-family new home closings were 4,359, up 26 percent from a year ago.
"The good news is that production is increasing and at the same time we are seeing price increases," said Greg Gross, director of Metrostudy's Las Vegas region. "Even the once burdensome attached market has stabilized and new projects are beginning to appear."
The market continues to suffer with excessive midrise and high-rise projects that had no real occupancy demand whey they were conceived, Gross said. Finished and vacant attached product represents 67 percent of all attached inventory, which is 80 months of supply.
The last half of 2011 and the first three quarters of 2012 proved to be busier than 2010, which will help spur better confidence in the market, Gross said.
"The new normal will be steady absorptions, difficult lending standards and increased construction costs," he said. "However, a thorough understanding of competitive framework, buyer segmentation and conducting crucial strategic planning will be vital for success."
Contact reporter Hubble Smith at email@example.com or 702-383-0491.