A California economist who tracks the Las Vegas housing market said home prices will start rising in 2012 but won’t take off until after a greater number of jobs are created in 2014 and 2015.
Mark Boud, owner of Irvine-based Real Estate Economics, said in an interview that the value of existing single-family homes in Las Vegas will fall 2.6 percent in 2011 to a median price of $133,175. That’s a 58 percent decline from the annual peak of $316,575 for single-family homes in 2006, he said.
By 2012, the median price will increase 2.5 percent to $136,942 and gradually appreciate 3.4 percent in 2013; 5.2 percent in 2014; 7.7 percent in 2015; and 8.8 percent in 2016, when the median price will reach $174,500, Boud said. (Boud tracks single-family homes and doesn’t include condos or town homes in his pricing.)
Boud, who has appeared at Las Vegas housing conferences, said the home price recovery will take time because of the excess supply and lack of demand to absorb the inventory.
About one in 10 Las Vegas homes and apartments are vacant, and the market has 30,000 distressed homes either held by banks as inventory or being taken back by lenders, Boud said.
That Las Vegas’ annual employment will fall to a low of 798,750 in 2011 after peaking at 928,008 in 2007 contributes to weak recovery in the housing market, Boud said.
“Las Vegas as a whole has just been hammered like the whole country with job losses, and the economy can no longer support the (housing) base that’s there,” Boud said. “And that bank inventory needs to be cleaned out. That is going to take several years.”
Boud predicted Las Vegas will add 8,875 jobs in 2012, but start to see bigger gains in following years. Job creation could grow by 22,183 in 2013, 34,283 in 2014 and 41,658 in 2015. Las Vegas won’t surpass its 2007 peak in jobs until 2016, he said.
Boud said that even though Las Vegas housing prices will remain weak for the next year, the market is undervalued by 45 percent.
“The amount of the undervalue is due to an enormous amount of job losses and the financial crisis that has made it difficult in getting a loan,” Boud said. “The way to get it back is by economic growth and normalizing in the mortgage market, and that will take four to five years to reach.”Las Vegas has been helped by investors buying homes and holding them, Boud said.
While there’s interest from foreign buyers, it will take time to generate sales from buyers in California and other states looking to move to Nevada, Boud said. The economies of those states need to grow so potential buyers can move, he said.
“That’s going to be a slow process,” Boud said. “But we have seen growth in California. It’s several quarters ahead of Las Vegas, which has dug itself such a huge hole.”
Boud said he remains optimistic for the Las Vegas economic recovery over the long run, but it’s going to be painful for the balance of 2011 and early 2012. When job growth does occur, that doesn’t mean home prices will jump overnight because it takes 12 to 24 months to impact pricing, he said.
“It does get the wheel turning again, and that’s what Las Vegas needs,” Boud said. “I think in 2012 and 2013 the economy hits its stride and in 2013 and 2014 we have (a sales boost) in the housing market and that leads to a price increase.”