Observers see sentiment improving in Las Vegas housing market
Observers see sentiment improving in Las Vegas housing market
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BY JENNIFER ROBISON
LAS VEGAS REVIEW-JOURNAL
LAS VEGAS REVIEW-JOURNAL
Posted: Jun. 18, 2012 | 5:08 p.m.
Confidence among U.S. builders ticked up this month to a five-year high, an indication that the housing market is slowly improving.
The National Association of Home Builders/Wells Fargo builder sentiment index rose in June to 29, the highest reading since May 2007. It increased from a reading of 28 last month, which was revised down one point from its initial figure.
The index, which was released Monday, has risen in seven of the past nine months, suggesting builders are starting to see the seeds of a recovery taking shape after years of stagnation.
Local building analysts don't track builder optimism the way the association does, but observers say sentiment is increasing here as well.
"Having builders return to the confidence levels they were accustomed to, even pre-boom, remains a ways off," said Brian Gordon, a principal in research firm Applied Analysis, which monitors local building activity through its Salestraq division. "But there are some small signals that confidence is starting to gain momentum."
Those signals include asking prices and new-home permits.
Builders have increased new-home prices anywhere from $1,000 to $5,000 on average in the past two months, Gordon said, and the number of permits pulled in April jumped to 596, a 90.4 percent increase from 313 permits a year earlier. Both indicate growing optimism about future sales, Gordon said.
StoryBook Homes in Las Vegas is feeling the better mood.
Prices at the builder's three communities are up at least $10,000 the past three to four months, and the company has pulled 12 building permits in June, up from five a year ago, said principle Wayne Laska.
"I'm cautiously optimistic. We are seeing extremely good sales right now. In fact, we can't keep up with construction based on the number of sales we have," Laska said.
Laska said he expects StoryBook to sell 75 homes this year, up from 42 in 2011, but below the 100 homes it could close on if it had staff to handle the business.
Why the turnaround?
Resale inventories have plummeted to 4,000 units, down from about 23,000 at the peak of the recession. Banks have pulled back on foreclosures thanks to tightened requirements in a new state law, and that's curbed inventory. What's left on the market "is not good product," Laska said.
"There's a big shift right now back to new homes because people feel the bottom has already hit, and the market is on the way back up," he said. "All builders are experiencing high volumes right now."
Yet the market has a long way to go, both nationally and locally. Any index reading below 50 indicates negative sentiment about the housing market. The index hasn't reached that level since April 2006, the peak of the housing boom.
In June, builders reported seeing the best sales since April 2007, according to a separate measure in the survey. Their outlook for sales in the next six months, however, hasn't changed from May.
In Las Vegas, sales remain well below 2007 levels. Builders here sold 19,462 units five years ago. In the past 12 months, they've closed on 3,972 homes.
"Optimism here is not anywhere near healthy, but we're feeling a whole lot better this year than last year," Laska said.
Cheaper mortgages and lower home prices in many markets have made home buying more attractive. Many economists believe that housing construction could contribute to overall economic growth this year for the first time since 2005.
Sales of both previously occupied homes and new homes rose near two-year highs in April. And builders are breaking ground on more homes and requesting more permits to build single-family homes later this year.
Jennifer Lee, senior economist for BMO Capital Markets, said that June reading on builder sentiment was welcome news. She said even with recent weak readings on employment, builders' outlook for sales over the next six months did not decline .
Still, the pace of home sales remains well below healthy levels. Economists say it could be years before the market is fully healed.
