Housing outlook remains healthy

Analysts say market to normalize in 2006

By Jennifer Shubinksi / Staff Writer

Despite national media decrying the end of the Las Vegas housing market, there were actually more new homes sold in 2005 than 2004 -- a record-breaking year -- and housing prices continued to inch up.

This year -- 2006 -- is expected to be a continuation of modest price appreciation and a possible plateau in the number of houses sold.

Local real estate tracking firm Home Builders Research Inc. said it appears that new home closings will be up 31 percent in 2005 from 2004, with an estimated 35,500 new home closings. (December 2005 housing numbers have not been compiled yet.)

That compares with 2004 when there were 29,248 new home closings counted, Home Builders Research reported.

The reason for the tremendous growth, local housing experts said, was the explosion of apartment-to-condo conversions onto the market. The condos are counted as new home inventory.

"One of the lead stories of the year (2005) was condo conversions," said Larry Murphy, president of SalesTraq.

In 2005 there were about 7,000 condo conversions that closed escrow, local research firms reported.

Even though the market appeared to remain strong, housing permits were down 8 percent in 2005, Dennis Smith, president of Home Builders Research said.

"It tells you there's been an adjustment in inventory, and that's good," Smith said. "One of the things that a housing market doesn't want is too much inventory."

When there is too much housing inventory, prices start to fall, he said.

From that perspective, the Las Vegas housing market continues to be healthy, Smith said.

"It's adjusted and it's positioned to where it's in good shape to have sustained growth. Not runaway growth, sustained growth," he said.

KB Home Division President Don DelGiorno said 2005 was a good year for the company, the valley's largest homebuilder.

The company closed escrow on 3,854 houses through its fiscal year (which ended Nov. 30). For 2006 KB Home's Las Vegas division expects to close 4,000 houses.

DelGiorno expects 2006 to be a "normalized" market.

"It's impossible to expect a market could continue to rise the way it was," he said. "It's not normal, it's not healthy. We are heading toward a healthy market."

Resale housing sales did not enjoy as fruitful of a year in 2005, experts said.

Smith said it appears that the number of resale houses sold in 2005 dropped 9 percent over the previous year, when there was an astonishing 64,168 resale homes sold.

"The reason they (sales) slowed down is because people got too aggressive in their pricing," Smith said.

Murphy said that despite the lower number of resale homes sold, it's still an impressive number. Murphy estimates that when the final tally for 2005 resale houses comes in, there will be 55,000 resale houses sold.

"That is amazing, considering last year was such a huge, record-breaking year," he said.

Prices for new and resale homes continued to increase in 2005, albeit at a slower pace, local experts said.

Resale housing prices flattened out near the end of the year at $280,000 for resale houses, while new home prices were at $303,903 for November, and $292,000 for the year (not including December), Murphy said.

"I don't see new home prices getting any cheaper because of materials and labor," Murphy said.

This year, there may be an upward pull on new home prices, Smith said.

Just like apartment conversions pulled down the overall new-home prices, high-rise condo units, which will begin closing en mass in 2006, will pull up the median price.

Housing appreciation is expected to be modest in 2006, in the single digits, Smith said.

The number of homes sold in 2006 is expected to be similar to 2005, housing experts said.

Jennifer Shubinski covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun. She can be reached at (702) 259-8832 or by e-mail at js@lasvegassun.com.

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