Las Vegas will lead the nation’s housing market recovery, probably starting in the second half of the year, the chief economist for the National Association of Realtors said Monday.
Low mortgage rates, combined with first-time homebuyer assistance from the federal stimulus package, will push buyers off the fence and into affordable homes, Lawrence Yun said at the Realtors association’s Rocky Mountain Regional Conference held at Green Valley Ranch Resort.
“I think Vegas will be the bellwether of how the nation will recover,” he said. “Rising sales could help stabilize prices by the end of the year. Vegas is a leading edge and portends what’s coming for the rest of the country and also for financial institutions.”
Prices are still falling, but monthly sales of existing homes have doubled for the past few months, a precondition for prices to stabilize, Yun said.
The long-term prospect for Las Vegas is bright because baby-boomers reaching retirement age are migrating to cities with warm climates and favorable tax structures, the economist said.
Yun, who earned a doctorate degree in economics from University of Maryland, said President Obama’s stimulus plan is going to be a “net positive” on foreclosure mitigation. However, he’d rather see the $75 billion for loan modification go to the Federal Reserve to drive mortgage rates lower.
The homebuyer tax credit accounts for less than $10 billion of new $787 billion stimulus package, a rather small amount, but nonetheless sufficient to help spark a comeback, he said.
“I’m a little disappointed that it didn’t address as much as it could have, given the size of the bill,” Yun said.
The stimulus package creates an $8,000 tax credit for first-time homebuyers and raises loan limits to $720,000, though not in Las Vegas. It will keep mortgage rates low through the Troubled Assets Relief Program and will lower foreclosures through loan modifications, Yun said.
That’s going to raise a “moral hazard,” he said. People who purchased homes responsibly, who bought within their means and didn’t skirt lending requirements, are wondering why they’re not getting help while others are.
“If the housing market recovers, it’s money well spent. If not, it will be difficult to get the second $350 billion in TARP,” he said.
Housing is the source of the national recession, Yun said. The boom from 2000 to 2005 was an “artificial boost” to home values and the general economy as well. Now, with declining home prices, consumers are more cautious about spending.
The second part of that is the “bleeding” of bank balance sheets, he said. Tightened credit flow is hampering the economy.
“We have to go through recession to take exuberance out of artificial growth,” Yun said. “Now I’m afraid the economic downturn could be snowballing and hard to stop without the stimulus package.”
The media report that new home sales have collapsed, but they’re missing the real story, he said. A more accurate interpretation is that builders have cut back on production, which is the way to correct inventory, so naturally there will be fewer sales, Yun said.
Home builders in Las Vegas pulled just 183 new home permits in January, compared with 353 in the same month a year ago, according to SalesTraq research firm. The 5,550 permit total for 2008 was down 53.2 percent from the previous year.
The home-building industry won’t recover until 2010, Yun predicted. He forecast an increase of 10 percent to 20 percent in existing home sales nationwide.
Contact reporter Hubble Smith at email@example.com or 702-383-0491.