RISMEDIA, Nov. 23, 2007-(MCT)-Las Vegas is headed for a housing shortage by late 2009 that will intensify the affordability crisis for a growing work force, a report from the Southern Nevada Home Builders Association predicts.
The next five years will show a decrease in demand for single-family homes, but increased demand for condominiums, town homes and apartments, the report said. Specifically, the Southern Nevada market will demand 24,800 new condos in the next five years, compared with 18,400 in the last five years. The supply of single-family housing is projected to grow to 470,984 units in 2008, an increase of about 12,000 from this year.
Owner-occupied units will fall from nearly 60% of all housing units in 2007 to 57% in 2012, according to the report, while renter-occupied units are predicted to grow from 40% to 43%.
“Southern Nevada’s housing trends are historically cyclical,” said Jeremy Aguero, principal of Applied Analysis, the Las Vegas research firm paid to do the study for the home builders group.
“Though perhaps not to this degree, we have experienced this sort of trough before,” he said. “When you look at the data, we are in one of the stronger buyers’ markets in recent history.”
The market started to slow in 2006 and built a supply-demand imbalance this year as the inventory of homes for sale grew to 28,500 and sales dropped below 1,000 a month. Some 9,200 homes have gone through foreclosure in the last 12 months.
There’s little doubt that the local residential market is experiencing one of the worst downturns in the last 20 years, Aguero said. The 794 single-family residential building permits issued in August were the fewest monthly total since August 1988.
However, current housing instability appears linked to short-run factors, not a change in the region’s fundamental competitiveness, Aguero said.
“Simply stated, the fundamentals that made Southern Nevada’s economy the nation’s most prolific during the past two decades — investment, employment, population — remain sound,” he said.
Aguero’s report projects 3.7% population growth in 2008 to more than 2 million people and 4.5% employment growth to 986,358 total employment in the valley. Housing analyst Dennis Smith of Home Builders Research said he doesn’t necessarily agree with the report’s conclusion that there will be less demand for single-family homes. Almost any family with children would prefer a detached home with a large yard, he said. Affordability is another issue.
“There may be a shortage of single-family homes. Does that translate that there’s no demand for single-family homes? No way,” Smith said.
Builders have cut back on permits by 39.3% this year and new home sales have exceeded permits by about 4,000 units, Smith reported.
“My point is builders have been getting rid of inventory since January 2007 and they haven’t been replacing it,” he said. “I don’t disagree that builders are slowing and there will be a shortage, but demand is still there.”
The number of finished lots being processed by builders since the beginning of the year has been “practically nil,” Smith said.
Alex Edelstein, developer of Manhattan mid-rise luxury condos on Las Vegas Boulevard South and Manhattan West under construction in the southwest valley, said the home building industry looks at housing as single-family versus condos, but when people look at buying a home, they’re more concerned about how far they have to drive to everything.
“We tell people that almost every single megatrend in America right now favors growth of condo demand,” he said.
Those trends include the decline of the family nucleus; increase in single women in the work force; downsizing by baby boomers; longer life spans for retirees; heftily rising U.S. population; and an increased premium placed on convenience and saving time, Edelstein said.
Copyright © 2007, Las Vegas Review-Journal
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