What's in store for the Las Vegas housing market in 2008?

Dennis Smith, president of HomeBuilders Research, says 2008 can't be any worse than 2007 and a "flat and steady year" should position the market for improvement in 2009 and 2010 with the creation of jobs because of the Strip resorts.

Smith says he expects new home prices to show year-over-year decreases of 10 percent to 15 percent during the first quarter. By midyear, it will be 8 percent to 11 percent and by the end of the year, price reductions should be about 5 percent over the last months of 2007.

That means, he says, there isn't much more of a bottom when it comes to the new home market.

"Homebuilders are very near the end of their price cuts in Las Vegas," Smith says.

An appraiser, he says, recalled going to subdivisions and seeing concessions as high as 33 percent with the typical concession offered by builders at 20 percent. Many subdivisions have lowered prices by as much as $80,000.

Richmond American Homes is one builder that raised prices at some of its communities, and those who continue to wait for more price declines are gambling, he says.

Smith expects new home sales to improve by the middle of the first quarter, but that won't last long. By June, he says, they should soften to their late 2007 levels and remain that way for the rest of the year. That will be a second bottom to the market, and the duration of it depends on the availability of mortgages, he says.

Smith predicts 20,000 new home sales in 2008, which will be close to 2007's numbers.

Builders will be slow out of the gate when it comes to getting permits, but by the beginning of the second quarter, activity will pick up and pulled permits will average 1,300 a month the rest of the year, he says, adding there will be 15,000 to 16,000 permits, which is similar to 2007.

In the resale market, the number of sales should improve this year, but not by much, he says. It will depend on the credit crunch. The number of resales won't exceed 24,000, he says. As for prices, the median price should drop to $240,000 by mid-2008, down from $253,900 in the latest available number in November.

KB Home and the housing market: This may be another reason why KB Home sold 78 acres of high-density mixed-use property in the Inspirada Town Center for $62 million to Las Vegas Holdings. KB last week reported a mammoth fourth quarter loss of $77 million versus a loss of $49.6 million in the fourth quarter of 2006.

"We believe 2008 will be another tough year for the homebuilding industry," said Jeffrey Mezger, KB's president and chief executive, after the release of the earnings report. He said the company would continue its efforts to strengthen its balance sheets and streamline costs.

Mezger blamed a persistent oversupply of new and existing homes for the increase, more foreclosures, heightened competition for home sales, reduced affordability, turmoil in the mortgage and credit markets, and decreased consumer confidence.

Grubb & Ellis report on 2008 for nation and Las Vegas: The real estate brokerage and management firm is calling for sluggish growth in 2008, but enough to keep commercial real estate leasing markets stable.

Real estate investment transactions will continue, but they will be down from the record levels of 2007 because of the postcredit-squeeze property pricing levels, says Robert Bach, senior vice president and chief economist.

As for Las Vegas, Joseph Kupiec Sr., managing director of Grubb & Ellis Las Vegas, says the Southern Nevada commercial market continues to be one of the most resilient in the country.

"Even with some of the challenges presented in 2007, and those expected in the coming year, it is reasonable to assume that 2008 will be another dynamic year and for all growth sectors to continue," Kupiec says.

Nationwide, the firm projects the amount of office space absorbed in 2008 will be nearly half of 2007. The forecast calls for Class A asking rental rates to increase 3 percent for central business district space and 2 percent for suburban space. It suggested rents will be under pressure as landlords dangle more concessions to fill their buildings, Bach says.

It called the future of the Las Vegas office market positive with large amounts of Class A and B space scheduled to be completed in 2008, pushing vacancy rates up slightly over the course of the year. Average asking rents for Class A office space in Las Vegas are projected to be $42 per square foot in the fourth quarter of 2008, up from $36 per square foot in the fourth quarter of 2007, placing Las Vegas at eighth of 81 suburban markets in North America at the end of 2007.

Bach says the nationwide industrial market is in good position to weather the economic slowdown but vacancy rates should increase to 7.8 percent nationwide. If the economy slows as expected, it could boost demand for warehouse space because importers and manufacturers will need to store their excess inventories, he says.

Bach says a combination of demand, moderately tight market conditions and new construction charging premium rents should be enough to push rents up 2 percent for distribution and warehouse space. Rents in the Inland Empire in California will jump 5 percent to 10 percent, he said.

But in Las Vegas asking rents will increase 2.6 percent from $6.12 per square foot a year in the fourth quarter of 2007 to $6.28 per square foot by the fourth quarter of 2008.