Saturday, October 02, 2004
Copyright © Las Vegas Review-Journal

Number of homes for sale swells as red-hot market cools

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Local housing experts predicted in April that the explosive Las Vegas market would begin to cool down, and there are signs that's starting to happen.

Resale home prices have remained relatively unchanged over the past few months, and sellers no longer are being bombarded by multiple offers topping their list price.

Further, the number of single-family residential units for sale on the Multiple Listing Service grew from 8,654 in April to nearly 15,000 in August, the Greater Las Vegas Association of Realtors reported.

"The market has switched to a buyer's market or normal market," Coldwell Banker Realtor Dave Lampe said Friday. "You look at the MLS, every day there's price reductions, price reductions. You didn't have that three months ago."

With more homes on the market, they're taking 45 days to 60 days to sell, he said.

Larry Murphy, president of SalesTraq, reported that homes stayed on the market for an average of 23 days in August, compared with 36 days in August 2003, and the average sale price was 99 percent of the list price.

"Days on the market is a good relative indicator but a poor absolute indicator," Murphy said.

He said those statistics are susceptible to distortion because "the truth is, a home may get listed more than once before it's sold."

For example, a home could be placed on the market at $180,000. When it doesn't sell in 90 days, the owner might take it off the market, lower the price to $160,000 and put it back on the market where it sells for $159,000 in three weeks.

The inventory of resale homes has grown to the point that it's hurting sales in some of the new home subdivisions, mostly those with prices above $300,000, said Dennis Smith, president of Home Builders Research.

"That slowdown is all tied to the resale segment," Smith said. "Increased supply brings competition to the new-home segment. We saw zero supply early in the year, under 2,000 listings, and that affected prices."

Several distinct changes clearly show how much consumer demand has receded.

Traffic, or the number of people visiting new subdivision sales centers, and net sales per project have dropped in each submarket, Smith reported. The number of buyers cancelling contracts to buy a home has doubled.

Home builders have "adjusted" prices in some subdivisions. Smith said Pulte dropped prices by $130,000 in Summerlin, while American West raised prices by $45,000 across the board.

"The market has really performed as expected," he said. "The first quarter was an exception because of incredible price increases."

The jump in resale listings definitely signals a change from a seller's market to a buyer's market, but if homes are sitting on the market for months, it's because they're overpriced, Smith said.

Murphy said Las Vegas' housing market will remain strong in the months ahead, the difference being that it will become less of a seller's market.

"It's definitely slowed down. You'll notice the resale price was $250,000 in August and it was also $250,000 in July. What has happened is the supply train has arrived in the new home market. There's no more (waiting) lists," he said.

The median price of a new home in August was $259,700, a 26 percent increase from the same month a year ago. Existing homes are at $250,000, up 45.3 percent from a year ago.

The housing market entered the "perfect storm" in December, swirled through the eye in March and entered the outside edge of the storm in April, Murphy said.

Murphy said the market has not been normal for the last nine months. He doesn't see the change as a "downturn" or "softness" in the market, but rather a return to normalcy.

"Everybody is asking, `How long can this continue?' Here's the obvious answer: Not much longer," Murphy said at his Housing Outlook seminar in April.

"And here's why. The median income of home buyers has not increased 22 percent in the past six months, and investors who have helped fuel the fire to this point will soon realize the best time to buy a home in Las Vegas was last year, not this year."