May 21, 2006
Home sellers beware
Buyers are in control as number of houses for sale soars in Las Vegas Valley
By Jennifer Shubinski <js@lasvegassun.com>
[SIZE=-2]Las Vegas Sun[/SIZE]
Home sellers better prepare for whiplash. Buyers are in the driver's seat these days, steering for bargains that haven't been offered in years.
Gone are the waiting lists and overnight campouts as anxious buyers competed among one another for new houses. Gone too are the bidding wars for resale houses and above listing price offers.
Instead, a number of home-sale indicators show how the Las Vegas Valley is now experiencing a buyer's market.
A record number of resale houses - 18,467 in April - are on the market, along with another 4,000 new homes.
Resale houses are taking longer to sell - up to three or four months, compared to two weeks or less when the market was hot - and some sellers are accepting lowball offers.
Builders are offering purchase incentives, including free lawn maintenance, swimming pools, washers and dryers and even the cost of packing and moving customers into their new residences. Some incentive packages have been valued by builders at up to $100,000.
Builders are offering higher commissions to real estate agents - up to 6 percent in some cases.
With contract cancellations reaching 38 percent in some new subdivisions, builders are cutting staff and prices on new homes by tens of thousands of dollars.
Real estate agents who represent sellers aren't hitting the panic button. With the valley's continued population and job growth, demand for housing, they say, hasn't lessened.
What has changed: there are more homes for sale than there are buyers. Housing prices started escalating dramatically at the end of 2003, triggered by a relatively small inventory of new and resale homes. The inventory shrunk in March 2004 to 2,583 homes - such a paltry amount that they were selling within hours of being listed.
But the dynamics of who's calling the shots have changed. In April, 18,467 resale houses were listed for sale and builders' inventories showed another 4,000 or so homes. Additionally, another 6,000 condominiums are - or will soon be - for sale after being converted from apartments.
Buyers can now go after the pick of the litter and negotiate for better prices.
With about 30 houses entering the market daily, one broker expects the number of resale houses for sale to reach 20,000 this year - a first for the valley.
"Buyers understand there are deals out there to be had," said Ken Perlman, vice president at the California-based Sullivan Group Real Estate Advisors. "They hear the market is slowing down and they expect incentives or prices to be in their favor as they go out to look for homes."
The increase in the housing inventory is largely attributable to real estate investors and speculators who are now trying to cash in before the market cools too much, said Dennis Smith, president of Home Builders Research Inc.
Homeowners also are cashing in their equity, either to move up - or out of the valley altogether, he said. They're hoping to capitalize during the spring, traditionally a time of increased sales activity.
The market fluctuations are bittersweet for homeowners like Mason and Bonnie Hall, who purchased their 3,200-square-foot home in the northwest Las Vegas Valley five years ago for $248,000.
They listed it for $699,000, but accepted $660,000 in April after the house had been for sale for almost three months.
The Halls bought a new home in Enterprise, Utah, that cost about $200,000.
With the softer market, homeowners are being advised to offer incentives, just like the production home builders.
Linda Rheinberger, president of the Greater Las Vegas Association of Realtors and broker/owner of One Source Realty, advises her clients to help with closing costs, throw in the appliances or offer flooring allowances.
And contrary to traditional advice that the home should look warm and inviting, she suggests that sellers vacate their house to show that it's ready for a buyer.
The market has especially chilled for houses priced between $400,000 and $600,000, said Mike Smith, broker at Century 21 MoneyWorld.
Housing prices will drop in some areas of the valley - it's the basic economics of supply and demand, he said. By how much is harder to determine.
"I don't think it will be excessive, but anytime anybody's taking $20,000 to $30,000 off a house, if you're the guy it's happening to, it's a lot," Mike Smith said.
Price drops may help some first-time homebuyers enter the housing market, he said.
With the market softening, buyers are aggressively trying to push prices down even further, said Shelley Brown, a real estate agent at Prudential American Group Realtors.
"Some buyers are making offers of $20,000 to $30,000 less on homes that are priced right, and they can't do that; sellers won't sell," she said. "Buyers with unrealistic expectations are not getting houses."
Prices for resale houses have doubled from March 2002 to March 2006, and nearly doubled for new homes, according to Home Builders Research.
But in the past nine months, prices for resale houses have barely moved from a median price of $280,000, and median prices for new homes leveled off in December at about $343,000 and have remained stagnant, Home Builders Research reported.
Fortune magazine ranked Las Vegas as one of the nation's "dead zones" while a study by Fiserv Lending Solutions, a national financial services company, indicated that prices in Las Vegas could fall as much as 8 percent this year.
Price cuts, incentives and downsizing the staffs of home builders are all a part of the normal real estate cycle, Dennis Smith said. Other markets in the Southwest, especially in Northern and Southern California and Phoenix, are also showing signs of softening.
Inventories throughout the Southwest are increasing, prices are flattening and it is taking longer to sell a house.
"We've been spoiled in the Southwest; if you didn't get an offer in the first week you think something is wrong, but that's not the way the rest of the country works," said Tim Sullivan, president of the California-based Sullivan Group Real Estate Advisors.
Price drops are occurring already in the Las Vegas new-home market.
"From a builders' standpoint, they really have to work to sell their product," said Perlman. "They have to deliver what the buyers are asking for. It's not a matter of putting a sign up on an empty lot."
Some homebuilders are reducing prices of their high-end homes by as much as $100,000, according to Larry Murphy, president of SalesTraq, which monitors real estate trends.
KB Home recently reduced prices up to $30,000 at 16 of its 38 subdivisions.
"We had to make sure that we were priced correctly to the market," said KB Home division President Don DelGiorno. "The amount of competition out there, especially in the resales, is in reaction to that."
Steve McCafferty took advantage of Pulte Homes' pack-and-move program, and received another $26,000 worth of incentives on his new Anthem home.
McCafferty, a professor at UNLV, paid $260,000 for a 1,248-square-foot home - including a premium lot, kitchen appliances, and a washer and dryer.
He said similar resale houses in the neighborhood were selling for $278,000.
"I ended up getting the parcel of land that I wanted in addition to the house I wanted for a very reasonable price," McCafferty said.
Jennifer Shubinski can be reached at 259-8832 or at js@lasvegassun.com.
