Condominium conversions have peaked in pricing at nearly $200,000 and sales have dipped to 400 a month in Las Vegas, a housing researcher said.

Closings of apartments converted to condos have declined since reaching a high of about 900 in December, suggesting that some price reductions may be coming to a segment of the housing market seen as an affordable alternative for entry-level buyers, SalesTraq President Larry Murphy said.

Conversions, counted as new homes because of first-time deed recordings, continue to make up anywhere from 20 percent to 25 percent of the local market.

"We are seeing sales velocity of conversions slow down," Murphy said. "I think they're cooling off because people are tired of paying $200,000 for a two-bedroom, two-bath condo."

One indicator of the slowing condo market in Las Vegas is the growing inventory of units available for sale, he said.

Just as the single-family residential market hit a record in May with 19,132 homes for sale on the Multiple Listing Service, up 27 percent from a year ago, the condo and townhouse market has also peaked with 4,253 listings, a 67.4 percent increase from May 2005, the Greater Las Vegas Association of Realtors reported. The number of new condo listings in May was 1,465, rising 64.8 percent from a year ago.

Murphy estimated another 7,000 apartment units are being converted to condos or have the potential for conversion.

"You can't guarantee every apartment building that gets mapped for condos will go to conversion, but you assume it will," he said. "Otherwise, why would they map it? So we've got a year's supply of conversions. Plus single-family builders are offering incentives. They're giving away swimming pools and paying closing costs. What's happening is these incentives have taken the place of price reductions. If a builder lowers prices, then he shoots himself in the foot and the neighbors come after him like a lynch mob."

The condo conversion craze started a couple years ago in Las Vegas with projects such as Bella Vita starting in the $90,000s. They quickly escalated in price. Condos easily outpaced single-family home appreciation last year in Las Vegas, going from $130,000 to $190,000, Murphy said.

The Realtors association reported a median price of $202,000 for condos and townhouses in May, an 8.6 percent increase from a year ago. The Office of Federal Housing Enterprise Oversight reported Las Vegas was 83rd among U.S. metropolitan areas with 12 percent home appreciation in the first quarter.

Ken Pearlman, a housing consultant for San Diego-based Sullivan Group, said the condo market in Las Vegas is similar to single-family housing in that the price run-up was largely due to heavy investor demand that has slackened.

"This was a method to provide affordable housing and those buyers who were interested in that market were basically able to buy those units," Pearlman said. "You're looking for a situation to buy a unit and get some appreciation. That's what helps the first-time buyer build equity as well as investors.

"We're quickly reaching a point where the number of buyers who perceive there's additional equity to be gained has reached its peak. There's just not the frenzy there was," he said.

The condo market has affected the apartment market in Las Vegas as sales slowed dramatically in the first quarter, said Carl Sims, partner in Hendricks & Partners.

While operations within the Las Vegas apartment market rank among the strongest in the nation, investment activity appears to be slowing for two reasons, he said.

First, the average price for apartments has roughly doubled since first quarter 2004 to $86,186 a unit this year. Some investors are starting to look at other markets such as Denver and Texas, he said.

Second, the slowdown in condo conversion sales comes amid a softening of the Las Vegas residential real estate market in general.

"This has lessened demand for apartment properties suitable for conversion," Sims said. "Also, many of the region's newer, more desirable apartment properties in prime locations have already been acquired and converted to condominium projects."

Sullivan Group principal Tim Sullivan said he looks at the changing real estate market in Las Vegas and shrugs.

"It's supposed to happen. When the low range of your housing product gets into the $300,000s, it's time to take a break," he said. "We could take an apartment in a B or C location, east of the Strip or to the north, buy it and renovate it and bring it back to the market at $150,000 absolute pricing and it would sell today."

SalesTraq's Murphy said condo conversions will be the last segment to lower prices because they're at the bottom rung of the ladder.

"It hasn't happened yet," he said. "We've still got 6,000 to 7,000 people coming here every month. They've got to have somewhere to live. That's why the sky is not falling, even with increased inventory and prices."

With limited new supply and continuing condo conversions, apartment absorption, or the number of units added to the market, was a negative 1,027 units in the first quarter, Sims said.

No new apartments were brought to market during the period. There are some 3,700 units in the construction pipeline and multifamily building permits, including condos and apartments, totaled 2,771 units, well above the 521 permits in the same quarter a year ago.

Given rising construction and land costs, multifamily development remains largely focused on high-rise luxury condos, Sims said.

Total apartment units completed in the United States dropped from 865,400 in 1974 to 270,000 in 2004, reported Plunkett Research, a Houston-based market research company. The value of U.S. private construction put in place for new multifamily development was $41.8 billion in February 2005, up from $36.8 billion in February 2004.