Ryland homes are being built on South Mandrake Falls Street in the southwest Las Vegas Valley. Sales of new homes fell to 2,606 in October, a 21.3 percent decrease from the same month a year ago. Photo by Clint Karlsen.
Home sales in Las Vegas, which have tumbled by double-digit percentages in recent months, fell again in October. Sales for new homes and existing homes both dropped sharply.
There were 2,934 resales in October, down 35.7 percent from the same month a year ago, Home Builders Research reported Thursday. It was the seventh straight month the number of sales has fallen.
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Sales of new homes also continued to slide, down for the fourth consecutive month at 2,606 in October, a 21.3 percent decrease from last year.
Inventories continued to rise. The number of homes for sale on the Multiple Listing Service, considered to be abnormally low at 5,000 two years ago, grew to 23,474 in October, a 53.8 percent increase from a year ago, according to the Greater Las Vegas Association of Realtors.
Dennis Smith, president of Home Builders Research, said Southern Nevada is returning to a more normal level.
"The good thing is the number of new listings entering the market has gone down," Smith said, from 5,253 in September to 5,125 in October. "But it's still a positive (gain), not a negative."
Even with more homes on the market and fewer sales, year-over-year median prices have crept higher. Existing home prices gained 3.5 percent in October to $290,000 and new home prices rose 10 percent to $326,502, Smith reported.
However, homeowners who read that median prices are "x" amount must understand that average incentive packages of $10,000 to $25,000 must be deducted from the sales prices to reflect the home's true market value, he said.
"Appraisers know this, and that's why many homeowners think their recent appraisal is low, when actually it reflects the true level of pricing activity in the submarket area for the subject product type," Smith said.
Pessimistic national projections call for further sharp corrections in the housing market that will tip a slowing economy into a recession for 2007.
Paul Kasriel, economist for Chicago-based Northern Trust Co., said the supply-demand balance indicates that home prices have further to fall.
"Falling home prices would imply much slower growth in home equity for households, which in turn would imply much less home equity available for withdrawal," Kasriel said in a market analysis for Northern Trust Co.
Mortgage equity withdrawal hit a record high annualized rate of $732 billion, or 8.1 percent of disposable income, in third quarter of 2005, the economist reported. As of the second quarter this year, it had slipped to $327 billion.
The housing boom was not a local phenomenon, Andrew Pugh of SellFastLV.com I hate to break this news to the housing cheerleaders out there, but supply versus demand is a two-way street."
James Chung, housing analyst for Boston-based Reach Advisors, talked about a nationwide glut of homes for sale when he attended the Big Builder Conference in Las Vegas in early November. He said reports of stable home prices in Las Vegas gloss over that.
"Overall, my main point is that prices are holding up, but the major concern is months of inventory on the market," Chung said. "Inventory is up, the number of homes sold is down, so the months of inventory is shooting up. That's been the pattern that's preceded the price downturn in a number of cities this year."
Though demand and supply conditions continue to shift, the presence of strong growth fundamentals in Southern Nevada may keep the overall economy "out of the pickle," said Keith Schwer, director of the Center for Business and Economic Research at University of Nevada, Las Vegas.
Nevada's housing and real estate industries, having prospered and flourished relative to other cities, will likely face adversity that will take a toll, he said.
"Still, housing markets, like other markets, will adjust and right themselves over time. Since the growth fundamentals have not shifted measurably and population growth continues in Clark County, the adjustments may be easier for Southern Nevada than for other areas of the United States experiencing slow growth," Schwer said in a quarterly overview of housing market conditions.
Smith of Home Builders Research said the October housing numbers for Las Vegas "indicate a continuation of the nasty cycle that has had a grip on our housing industry for almost a year."
