Homebuilders put brakes on valley production

Las Vegas Foreclosure & Investment News

By Brian Wargo / Staff Writer

As the credit crunch worsens and consumer demand remains soft, Las Vegas builders are cutting back on their production of new homes.

For only the second time since January 1992, homebuilders took out fewer than 1,000 permits in a month, according to Dennis Smith, president of Home Builders Research, who expects new-home prices to continue to fall through 2008. In July, 859 permits were issued, bringing the seven-month tally to 10,140. That's a year-to-year decrease of 36 percent, the lowest total through July since 1993, Smith said.

Las Vegas builders have been in better shape than other markets when it comes to low level of inventory, with some estimating a six-week supply of new homes. Smith said evidence that the new-home market isn't overbuilt is that builders have pulled 32,500 permits in the last 18 months, while closing on nearly 36,803 homes.

The price decline in the new-home market is caused by soft consumer demand, an oversupply in the resale market and the increasing difficulty of getting financing, he said.

In July, Smith reported a median new-home sales price of $314,551, almost identical to June. For the year, prices are down more than $20,700, or 6.2 percent, he said.

Smith said that by the end of 2007 he expects prices to be 7 to 9 percent lower than 2006 and wouldn't be surprised if new-home prices fell another 6 to 8 percent in 2008.

In the resale market, Smith said, 2,101 transactions in July brought the yearly total to 16,957, a yearly decrease of nearly 37 percent.

Given that the prices of new listings are declining and inventory continues to rise, Smith predicts the median price of resale homes will have fallen 7 to 9 percent in 2007 and prices will continue to soften in 2008 and possibly into 2009. Once prices stabilize, they will remain flat for a while. Smith said his timetable changes if interest rates are lowered.

Foreclosures: Foreclosure.com reported that the number of new foreclosures in the Las Vegas Valley in the second quarter rose by 87 percent and was nine times higher than the 353 filings reported in the second quarter of 2006.

There were 3,147 repossessions in the second quarter and 4,535 active cases that have yet to make it that far in the process, according to local tracking firm Applied Analysis. The unincorporated areas had the greatest number of repossessions at 1,263, or 40 percent, followed by 956 repossessions in Las Vegas, 487 in North Las Vegas and 433 in Henderson. There were eight repossessions in rural areas.

Foreclosure.com reports that as more units go through the foreclosure process, more inventory will be added to the resale market.

"We remain concerned about the duration of the current cycle as foreclosures reside at elevated levels," according to Applied Analysis. "The number of new foreclosures reported through the next few quarters will certainly provide additional insight."

RealtyTrac has crunched its foreclosure filing numbers for Nevada over the first half of 2007. It leads the nation with one filing per 40 households. The 25,208 filings involved 14,687 properties. Colorado was second at one filing per 60 households, while California had on filing for every 69 households. Its numbers include default notices, repossessions and other foreclosure filings.

Speaking of foreclosures, Trump University will present seminars focusing on teaching people how to profit from them. The sessions will be held at 10 a.m. and 3 p.m. Aug. 25 at the MGM Grand Hotel; 3 p.m. Aug. 26 at Green Valley Ranch; and 1 p.m. and 7 p.m. Aug. 27 at Red Rock Resort. To register, log onto www.TrumpUniversity.com or call (877) 508-7867.

Mesquite: The opening of Sun City Mesquite increased residential sales in Mesquite by 10 percent in the second quarter compared with April through June 2006, according to Mesquite Realtor Chris Miller, who tracks the market. The opening of sales in the community in June generated a lot of interest in the market.

The average sales price fell from $291,379 to $249,659 in the second quarter as the average unit size fell about 200 square feet to 1,447, Miller said. The price dropped 3 percent per square foot, he said.

New home sales followed similar trends, with the average size of homes sold declining from 2,173 to 1,834 square feet and prices per square foot falling from $194 to $184, Miller said. The smaller homes reflect a trend of baby boomers retiring and downsizing in their move West, Miller said.

Miller said Sun City representatives said they had more than 100 new home contracts, and the average price was close to $160 a square foot.

Commercial sales and leasing activity of both vacant land and buildings has slowed considerably from 22 transactions in the first half of 2006 to five in the first half of 2007, Miller said. New commercial building permits have doubled from nine in 2006 to 18 during the first half of 2007, he said.

In other news:

• Centra Realty Corp., based in Irvine, Calif., has purchased 5.78 acres of vacant land in the Hughes Airport Center for $5.5 million, Voit Commercial Brokerage announced. Centra plans to develop for sale a 100,000-square-foot Class A office and research and development industrial project. Plans call for construction to begin in the fourth quarter. Centra bought the property from CIP Real Estate.

• LaPour, a regional commercial real estate development firm, announced it has started construction on a $19 million, three-story, 70,000-square-foot LEED-registered office building at the southwest corner of Diablo and the I-215 frontage road north of Russell Road. The for-lease project is slated for completion in the second quarter of 2008.

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 (702) 259-4011 or by e-mail at wargo@lasvegasun.com.

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