Once considered nearly extinct in Las Vegas, the $100,000 home has made a strong comeback in recent years, housing analyst Larry Murphy said Thursday.
The median price of an existing home has fallen from its peak of $285,000 in 2006 to $108,000 in March, Las Vegas-based SalesTraq reported.
Murphy, president of SalesTraq, put the chances at 50-50 that the median price could scrape $100,000 in the second half of this year. Almost one-third of last year’s existing-home sales were under $100,000, he said.
"One thing I’ve learned in this business is anything is possible," Murphy said at his quarterly Crystal Ball presentation. "Every time we think we’ve hit the bottom, we go down a little more."
New-home median prices are down to $195,950 from their peak of $328,850 in 2006. Sales volume plummeted from 38,705 in 2005 to 5,438 last year and probably won’t reach 4,000 this year.
Murphy said he’s getting tired of delivering bad news at Crystal Ball and admitted that sometimes he doesn’t recognize good news when he sees it. Then again, it’s a matter of perspective.
"Good news or bad news depends on if you’re a buyer or seller," he said. "People make money on real estate in an up market and people make money on real estate in a down market."
Take, for example, a 479-square-foot condo at Luna di Lusso in Lake Las Vegas. It last sold for $399,000 in 2006 and is now listed for sale at $39,900, or 10 cents on the dollar.
In the new-home segment, KB Home has lowered prices on homes in the Inspirada community and William Lyon Homes is giving a $20,000 allowance to be used any way the buyer wants.
Richmond American is offering 4.25 percent financing on 30-year, fixed-rate mortgages.
"The last time you saw that was World War II," Murphy said. "We may never see anything like it again in my lifetime."
Frank Wyatt, founder of Las Vegas-based Pinnacle Homes, said demand for new homes is stable, albeit at depressed levels. Site development is limited because it’s still hard to make financial sense out of finished lot prices. Financing for new-home construction is also difficult, he said.
"At the time when values dropped, we didn’t do much. We’re not looking for dirt," Wyatt said. "The first thing we did was resolve old construction loans. We had not been active in buying lots until nine months ago. Since then we bought 14 lots, one or two at a time. The price of lots is critical. You can’t stub your toe. You look for skeletons in the closet, entitlement issues and restrictions."
Even after finding a willing buyer and signing a sales contract, the builder has to "pray for the appraisal," Wyatt said. "If that appraisal doesn’t come in, you’re screwed."
Murphy said the number of new-home subdivisions in Las Vegas has remained stable at 239, with three or four subdivisions opening and closing each month. Builders pulled 808 new-home permits in the first quarter, down 46 percent from a year ago.
"If that’s a measure of optimism, it looks to me like builders are not as optimistic as they were one year ago," Murphy said. New-home sales were boosted in 2010 by the government’s homebuyer tax credit that expired in June, he said.
Home prices continued to decline in Las Vegas even as demand increased, starting in June 2008. Existing-home sales surged to 5,114 in March, the highest level since October 2009, according to SalesTraq.
"In your heart, you’ve got to believe Las Vegas is undervalued," Murphy said. "Even without a calculator or a college education, when you see a condo at Luna di Lusso for 10 cents on the dollar … smart money is buying a home in Las Vegas today. You’ll look like a genius in five years."
About three-fourths of Las Vegas home sales are real estate-owned, or bank-owned, and short sales, or homes sold for less than the principal mortgage balance. That’s affecting prices of nondistressed home sales, Murphy said.
Homes are selling for an average of $65 a square foot at trustee auction; $71 for REOs; $80 for short sales; $88 for nondistressed; and $103 for new homes, according to SalesTraq.
Contact reporter Hubble Smith at firstname.lastname@example.org or 702-383-0491.