Western Sign and Flag employees Martin Frady, left, and Luis Herrera install a KB Home sign Thursday for a subdivision near Sunset Road and Hillside Pine Street. Photo by Clint Karlsen.

A decline in new home orders by some of the nation's large builders reflects a softening in the housing market that is being felt in Las Vegas, a local housing research expert said.

KB Home, the No. 1 builder in Las Vegas with 3,936 closings in 2005, recently filed a report with the Securities and Exchange Commission that said cancellations of new home orders rose during the first two months of the year while net orders for new homes fell. That follows a report from Toll Bros., a high-end home builder with 374 closings in Las Vegas last year, that orders for new homes fell 21 percent in the first quarter.

"It's softer than it was, the way it should be," said Dennis Smith, president of Home Builders Research, "because we all knew it was going to slow down sooner or later. We got away from talking about cycles and started talking about bubbles. The cycle is on the downward slope of the peak, but we're going to be OK."

Excluding apartment conversions, Las Vegas is going to be hard-pressed to match last year's record of 30,750 single-family detached new home closings, Smith said. He counted 31,010 new home building permits in 2005, down 1,869, or 5.7 percent, from the previous year.

"I think most of the big builders will struggle to meet last year's totals," he said. "Anytime you have interest rates on the rise, you're going to have higher cancellation rates. People are not able to qualify or if they haven't locked in their payment and rates during the construction of the house, if rates go up twice during that six months, they go to close and find out their payment has increased since they signed their contract. They might get cold feet."

KB's sales total of 3,936 was up 4.7 percent from 3,759 in 2004. Las Vegas represents about 10 percent of the Los Angeles-based builder's business. Pennsylvania-based Toll Bros. had 374 closings in Las Vegas last year, a 36 percent increase from 275 in 2004.

John Woodward, a housing analyst with Woodward & Associates in New York, said Centex, Pulte and D.R. Horton have all said business is soft and cancellations are up.

"It's been soft in January and early February, but it's not a good seasonal part of the year," Woodward said. "With consumer confidence and employment being strong, I think it's a jump ball in the spring. I'll lean maybe 65-35 that it'll be weaker with standing inventory."

One of the problems with national housing numbers is that they're not necessarily a true reflection of the Las Vegas market, Smith said.

"What builders look for is how has their market share changed," he said. "They always look to capture more of the market."

KB is selling new homes in nine subdivisions in Las Vegas, with prices starting from a low of $292,700 at Villas at Fort Apache to $426,000 at Ladera Crest. Toll Bros. has seven subdivisions under development in Las Vegas, including Madera and Mirasol at Mountain's Edge, where prices are starting from the $500,000s to $700,000s.

Las Vegas is returning to more of a "normal" housing market with adjustments in sales and new home orders, said Ron Rulof of local research firm Team Power Marketing.

He said builders such as KB Home, Toll Bros., D.R. Horton and Lennar are having great success at Mountain's Edge, the 3,000-acre master-planned community being developed by Focus Property Group in the southwest Las Vegas Valley.

"You go into their sales office and look at what they've released and what they've got in standing inventory, it's very isolated. A couple here, a couple there. It's not standing inventory for long," he said.

There's always slightly less activity in the housing market around the end of the year, Rulof said. The past two years have been an exception because of pressure from investors and second-home buyers.

"When you have peak year after peak year like we've had, you start moving toward a more normal year," he said. "You can't run at that fever pitch forever. I think we're entering a healthy period."

Rulof said it's likely that KB and other builders are adjusting their numbers downward from last year.

"It's an adjustment. Las Vegas is so stable," he said. "These (analysts) would all like to see the demise of Las Vegas for some reason. We're a unique place and a unique economy and that can't be overstated. You can't put us in the same box."

James Chung of Boston-based Reach Advisors expects rising cancellations and falling orders to be the norm across the board for publicly traded builders.

"When there's been high price increases or lots of new homes being built, when growth has been so high, it's inevitable that it will slow down and it's going to hit some of the home builders hard," he said. "They've had to adjust revenue expectations. All of them have a plan B."

Cancellations are rising partly because people have found they're not able to sell their current home for as much as they thought, Chung said.