The Las Vegas housing market should bottom out this year, but going forward the recovery will be slow. One analyst suggested it won't be until 2010 when sales of new and existing homes return to levels of 2007 when the market was still sliding. Prices of existing homes will continue to fall this year and won't approach 2007 levels until 2010.

"This recovery is not a V, but a deep wide U," said Dennis Smith, president of Home Builders Research, during a presentation to builders and developers at the Las Vegas Convention Center. "It is typically not what we are used to in Las Vegas. It is going to be a long, drawn-out recovery. This market was hurt, and it was hurt really bad. It has got to mend itself and move forward."

In the traditional new-home market, Smith projects there will be 12,500 closings in 2008, down 20 percent from the 15,584 in 2007. The market will have 14,000 closings in 2009 and 16,000 in 2010, Smith said. None of those projections approach the more than 29,000 closings of 2006.

That didn't stop analysts from looking for a silver lining.

"What we are saying is that we are coming toward the bottom," said Bernard Markstein III, director of forecasting and staff vice president with the National Association of Home Builders. "I think we will see some improvement by the fourth quarter (of 2008). It is like the guy who stops hitting his head against the wall. He feels better, but he still has a headache."

Smith said it won't be until 2009 when people recognize 2008 was the bottom of the Las Vegas market.

"I think we are really close to it, but it is going to be an extended bottom," Smith said. "In 2009, you will start to see these numbers turn around and go in the opposite direction."

With a two-month supply of homes as inventory and competition from the resale market, Smith said builders won't start raising prices until 2008.

The median new-home prices will fall to $274,000 by the end of the year, a drop of 12 percent from 2007, Smith said. The prices will increase to $280,000 in 2009 and $286,000 in 2010, but that is well short of the $311,924 in 2007.

In the resale market, Smith said Las Vegas will likely see 1 to 2 percent price increases for quite a while, something that was normal during the 1990s. He said he expects prices to fall to $237,000 in 2008, a 5 percent drop from $250,000 in 2007.

Smith said he expects prices to increase to $240,000 in 2009 and $245,000 in 2010. That's still below the $250,000 price in 2007 and $285,000 in 2006 at the height of the market.

"The lower prices are starting to work, and people are seeing the opportunity," Markstein said.

If it makes Las Vegans feel any better, Markstein said Miami's real estate market is in worse shape. Phoenix is about the same as Las Vegas, he said.

The Las Vegas economy isn't in recession, but the area's housing market certainly is, Markstein said. He tried to downplay concerns that the nation's economy will go into recession and further hamper the housing industry.

"We are not calling for a recession, but we think growth will be close to zero," Markstein said. "Even if we are in a recession or about to go into a recession, it should be short-lived and not too bad."

The Federal Reserve was slow to come around but it has done "all the right things to this point" by lowering interest rates, Markstein said. The economic stimulus package approved by Congress that hands out tax rebates won't be enough to boost the economy, and the National Association of Home Builders as a result is pushing for further help, he said.

The association wants legislation that grants tax credits for first-time homebuyers, and Markstein said it has a 50-50 chance of being approved.

Home Builders Research projects there will be 11,500 new-home permits issued in 2008, down from 14,510 in 2007. That number should increase to 14,000 in 2009 and surpass 16,000 in 2010.

As demand for housing remains weak, Markstein credited builders for cutting back on housing starts to aid in the recovery. Buyers, he suggested, must realize that the incentives and upgrades builders are offering won't last for much longer and need to take advantage of them.

For now, the biggest problem to overcome is the credit crunch, Markstein said. Lending standards have tightened to the point where qualified buyers are having trouble getting loans. JP Morgan Chase, for example, now requires a 35 percent equity in properties.

"This is a problem and it is not just Las Vegas," Markstein said. "It is all over. (Lenders) are running scared."

Lenders who threw their money around like drunken sailors are paying the price, Markstein said. The problem, however, is most foreclosures are the result of subprime lending, not prime loans with fixed rates.

"All of the problems have been with the adjustable rates yet we are tightening across the board," Markstein said. "This is a problem, and I don't know how to get over it. We are all trying to get the federal authorities involved. There are people out that with decent credit scores and some of them are not getting loans."

Markstein said he expects the spigot will turn on slowly and those with good credit will find it easier to obtain loans later this year.

Smith said an improvement in consumer confidence will be important in the housing market rebound. A further decline in inventory will hasten any recovery, he said.

Brian Wargo covers Real Estate and Development for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at wargo@lasvegassun.com.