New-home sales are up from 2014, but report delivers bad news, too

A worker removes scaffolding from a Christopher Homes construction site in the Ridges Las Vegas, a luxury residential community in Summerlin, Thursday, June 11, 2015.

Las Vegas homebuilders are selling more houses than last year and ramping up construction plans, but a number of issues still are weighing down the valley’s economy, a new report says.

Builders sold 636 new homes in Southern Nevada last month, bringing the year’s total through August to 4,212, up 12.7 percent from the same time last year, according to Las Vegas-based Home Builders Research.

“Not a bad year for new-home sales, right?” company founder Dennis Smith said in the report.

The median sales price of last month’s closings was $305,047, up 5.3 percent from a year earlier. Builders also pulled 647 permits in August, putting the year’s tally at 5,457, up 16 percent from the same period in 2014, Smith reported.

The market has likely been buoyed by cheap, available money: Interest rates are low, lenders have been issuing more mortgages in Las Vegas and buyers have been making smaller down payments.

Smith said he wasn’t surprised “at all,” given the economy’s “anemic” recovery, that the Federal Reserve this month decided not to raise interest rates. Among other things, a rate hike would boost costs for mortgage borrowers, potentially dampening demand for home purchases.

The central bank has kept rates near zero since 2008 to boost the economy amid the worst recession in decades and the country’s slow recovery from it. Smith said the continued rock-bottom rates will not affect new-home sales too much, but he was pleased the Fed implied the recovery “has a ways to go before they might feel warm and cozy about raising interest rates at all.”

“Whatever happened to the conversations about Nevada still leading the nation — by a notable margin — in negative equity? What about the high delinquency rates?” he said.

Las Vegas’ housing market and broader economy have improved since the depths of the recession — as Smith noted, job growth is better and unemployment is roughly half what it used to be. But a number of problems remain.

The valley, for instance, has some of the nation's highest rates of upside-down borrowers, foreclosures and unemployment.

• 25 percent of Southern Nevada homeowners are underwater, meaning their mortgage debt outweighs their home value. That’s far below Las Vegas’ peak of 71 percent in early 2012 but still highest among the 35 largest U.S. metro areas, according to Zillow.

• One in every 507 homes statewide received a foreclosure-related filing last month, the highest rate in the country and more than double the national average, according to RealtyTrac. Among metro areas, Las Vegas’ rate tied for eighth-highest in the country in August.

• Las Vegas’ unemployment rate was 7 percent in July, down from more than 14 percent in 2010. But it was still tied for second-highest in the nation in July with Detroit and Memphis, Tenn., among the 51 largest metro areas, according to the U.S. Bureau of Labor Statistics.

• There also remain an untold number of residents who haven’t made a mortgage payment in years. Whether they can’t afford to pay or just don’t bother to, locals have been skipping payments without consequences because banks, under closer scrutiny from government officials, have been waiting years before seizing homes from delinquent borrowers. In many cases, homeowners have been spending that money on cars and other consumer goods.

“We were just told of a businessman who was bragging about not making a payment on his mortgage since 2008!” Smith wrote in his report. “How can this be classified as a sustained, real housing recovery?”

Eli Segall can be reached at 702-259-2309 or [email protected]. Follow Eli on Twitter at twitter.com/eli_segall.

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Real Estate

CORRECTION: This story has been updated with revised permit totals from Home Builders Research. | (October 8, 2015)

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