Mar. 04, 2007
Copyright © Las Vegas Review-Journal
HOUSING: SLACK OF APPRECIATION
Gain rates
for local home prices lose steam as housing market cools
By
Hubble-Smith. Home appreciation in Las Vegas has slowed
dramatically from the torrid pace of two years ago and
turned negative in some areas of the valley last year, a
local housing market analyst said.
Median
existing home prices increased 3.6 percent valleywide to
$285,000 in 2006, based on more than 90,000 existing home
closings recorded by the Clark County assessor's office in
2005 and 2006, Larry Murphy of Las Vegas-based SalesTraq
reported.
Murphy's
breakdown of 52 ZIP codes in the Las Vegas Valley showed 35
areas with positive appreciation, seven unchanged and 10 on
the negative side.
The
largest declines were 4 percent in ZIP codes 89044 and
89085, while gains reached 18 percent in 89030 and 89103.
"These
results fly in the face of the doomsday sayers who only a
year ago were predicting that property values in Las Vegas
would drop precipitously when the real estate bubble burst
in Las Vegas," Murphy said. "It also flies in the face of
local analysts who have been declaring all year long that
property values are dropping. The fact is that following the
boom of 2004 when we saw appreciation rates of 40 percent,
the only thing that has dropped has been the appreciation
rate itself."
Murphy
has had to make adjustments over five years of reporting
appreciation by ZIP code, "tweaking" his calculations to
account for factors that can skew the numbers. For example,
he separated luxury high-rise condominium sales in ZIP code
89109, which includes the resort corridor east of the Strip,
from single-family home sales to come up with 5 percent
appreciation for 2006.
Some ZIP
codes were omitted due to small sample sizes that would
result in unreliable calculations, he said. New ZIP codes
that were created in 2006 but did not exist in 2005 were
also omitted.
One of
several boundary changes came in 89011, which was
exclusively Lake Las Vegas in 2005 and was expanded west
past Boulder Highway in 2006. The median home price for that
ZIP code is $399,000, or $310.99 a square foot, and the
average home age is 11.6 years. A year ago, the median was
$894,750, or $440.94 a square foot, and average age was 3.1
years.
Murphy
had to compare only sales at Lake Las Vegas from 2006 to the
numbers from 2005 to come up with 4 percent appreciation for
89011.
"Otherwise we'd have the erroneous conclusion that prices
dropped 40 percent. It would look like a disaster and it
wasn't. It was ZIP code changes," he said.
Murphy
said people need to keep in mind when they look at the ZIP
code appreciation map that a 2 percent increase in 89134,
for example, does not necessarily mean that their specific
home appreciated by 2 percent. It means that half the homes
in 89134 appreciated by more than 2 percent and half the
homes appreciated by less than 2 percent.
With
nearly 18,000 homes for sale on the Multiple Listing Service
and sales of existing homes down 24.1 percent in 2006,
prices started to slide at the end of the year. The Greater
Las Vegas Association of Realtors reported a 2.6 percent
decline of median home prices in January to $302,000.
Kurt
Lehman of Realty One Group found it "hilarious" that
consultant Steve Bottfeld predicted positive home price
appreciation at the Crystal Ball 2007 housing seminar in
February. Lehman said prices have to come down after the
spikes of the past few years.
"Simple
economics says that 25 (percent) to 35 percent appreciation
in housing asking prices doesn't work when wages and
salaries only go up maybe 3 percent," he said. "It's an
oversupply and an inability-to-buy thing. The market cannot
bear these prices."
A January
report from the Washington, D.C.-based Heritage Foundation
ranks Las Vegas-Paradise near the bottom in its Housing
Opportunity Index by Affordability. With 2006 median family
income of $58,200 and median home price of $306,000, Las
Vegas is No. 174 in housing affordability out of 203 U.S.
metropolitan statistical areas.
The
percentage of people who could afford a median priced home
in Las Vegas dropped from 79 percent in 1999 to 14 percent
in 2006, John Restrepo of Restrepo Consulting Group said.
"We've
had (price) adjustments here, but it's not making homes any
more affordable," he said. "That's our challenge. There's no
magic bullet."
Lenders
were bending income-to-expense ratios three and four years
ago to get people into 100 percent mortgages, literally more
house than they could afford, Lehman said. Now Las Vegas has
the second-highest foreclosure rate in the nation, he noted.
U.S.
homeowners are seeing a slight decline in home values on a
year-over-year basis for the first time in years, according
to home value data from Zillow.com. The appreciation rate is
measured by the Zindex home value indicator, which measures
the value of all homes in an area, not just those that sold.
Despite a
surge in values in many regions over the past several years,
national home values are down by 0.5 percent year-over-year
and 4.8 percent quarter-over-quarter.
A local
homeowner who asked not to be identified put his home on the
market last year at $430,000 when comparable homes in his
northwest neighborhood (ZIP code 89131) were $450,000. It
sat for months. He kept lowering the price and recently sold
it for $350,000. His home appreciated 37 percent in less
than three years of ownership.
"I still
do not know why this home did not sell in the $400,000
range," he said. "I have just about every conceivable
upgrade in this house. We did make a lot of money in a brief
period of time, which of course I am thankful for."
Debi
Averett of Phoenix-based Housingdoom.com said home sales
will increase in the next few months, but it's only a
seasonal thing and won't say much about the market.
"The
inventory is going to grow faster though and that is going
to continue to put a damper on prices," she said. "At the
current rate of sales, it would take 13 months to sell all
of the current single-family inventory, assuming no other
homes are listed. Given all the homes taken off of the
market last year, 2007 may be the year of deferred pain as
sellers return to the market and the market continues to
transition down."
Median
prices for existing homes in Las Vegas have more than
doubled from $125,000 in 2000 to $285,000 in 2006, Murphy
said. The smallest increment of dollar increase came in 2002
when prices rose $9,000 from the previous year to $145,000.
ZIP codes
with the highest appreciation are in more mature areas of
the city and had median prices substantially below the
valley's median.
West of
Interstate 15 between Flamingo Road and Tropicana Avenue,
89103 had 758 sales at a median price of $215,000, compared
with 966 sales at a median of $192,750 in 2005. Average age
is 24.8 years.
In the
middle of North Las Vegas, 89030 had 842 sales at a median
price of $195,000, compared with 939 sales at $160,000 in
2005. Average age is 40.4 years.
The
largest declines were in 89044, a new development south of
Henderson Executive Airport, where 212 homes were sold at a
median of $358,000, compared with $372,450 in 2005; and
89085, a new ZIP code north of the Beltway in North Las
Vegas, where seven homes were sold at a median of $376,515,
compared with one sale for $441,000 in 2005.
Clark
County Assessor Mark Schofield said appreciation and
depreciation throughout Las Vegas Valley will have "zero
impact" as it relates to property taxes.
Even with
the market correction, home values didn't drop enough to get
to the relief level of the 3 percent property tax cap on
owner-occupied, single-family homes, Schofield said.
"If for
some reason values dropped to reach the 3 percent cap, then
we all ought to move out of town," he said.
Home
owners saved $245 million on property taxes in 2005-06 and
will save an estimated $790 million in 2006-07 with the cap,
Schofield said.
The
Office of Federal Housing Enterprise Oversight ranks Las
Vegas 79th out of 275 metropolitan statistical areas with
9.8 percent appreciation as of third quarter 2006. Nevada is
23rd among states at 8.63 percent appreciation. The office
uses mortgage lending data from Fannie Mae and Freddie Mac.
Bob
Hamrick, president and chief executive officer of Coldwell
Banker Premier Realty, said what happened in Las Vegas is
not that properties are worth $100,000 less than they were a
year or two ago, but they may not have been priced
accurately then.
Contrary
to predictions of falling prices, the National Association
of Realtors showed Las Vegas average home prices actually
appreciated 2 percent as of third quarter 2006, Hamrick
noted.
"Our
market continues to grow, our economy continues to grow and
our population continues to grow," he said. "Those factors
offset whatever hyper-appreciation that existed."
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