Increases in housing prices by as much as 30 percent are being posted in some submarkets of Las Vegas, but an analyst of Home Builders Research, Dennis Smith, doubts that this pace can be sustained. The research firm reported that 593 new home were sold this October at an average price of $216,614, which is 10.3 percent higher than $196,360 of a year ago.
The current price levels for new homes manifest the effect of a thinning home inventory, Smith observed. Upward adjustments of up to 30 percent were seen at some real estate sales offices in Mountain’s Edge, Summerlin, and Anthem.
Smith noted that each month, it is becoming more evident that a market correction will emerge. This, he maintained, is an eventuality that will occur despite the government initiatives to have banks and mortgage servicers help stimulate home market recovery.
The analyst monitored 4,098 resale closings this October, which brings to 41,596 the year-to-date total for a 4 percent gain from a year ago. The average resale price increased by 18.2 percent from the year-earlier level to $130,000. While the statistics do look positive, the much-segmented increases bring some concern for Smith. In the Las Vegas Valley, he noted that there are still communities under downward pricing pressure emanating from distressed residential properties. What Smith is worried about is that an unknown number of homes maybe released as “instant inventory” should banks pursue foreclosure proceedings on these properties.
The analyst cited a recent CoreLogic report showing that 63 percent of Las Vegas home mortgages are underwater, meaning that their owners now owe more than what their home is worth. The percentage of these underwater homeowners is actually lower than the 68 percent level of a year ago. But still, Smith maintained that the current percentage level is three times that of the national average. He estimated that there will be over 100,000 potential defaults if half of the 225,000 underwater homeowners hang on to their properties. In turn, half of the foreclosed housing could end up going back to the bank and eventually the market, he said.
In the meantime, the low inventory of homes for sale continues to steer the Las Vegas housing market. Competition among buyers has intensified and multiple offers go to the best-priced homes available. Cash buyers account for 48 percent of home sales, further manifesting the dynamics that dictate the current pace of the market.