Are Home Prices Ready to Bounce?

Here’s the good news: Southern Nevada saw mild growth in employment and economic output through the end of 2011, according to a recent Brookings Mountain West report. Here’s the bad news: Housing prices haven’t been appreciating. And here’s the possible antidote to the bad news: The Valley is in the midst of a strong housing supply contraction, with available housing units hovering around 6,000 and dropping.

And it’s a reasonable expectation that the constraints will boost housing values.

Brookings Mountain West director Robert Lang thinks the expected appreciation will stick even when more supply hits the market.

“I don’t see it as a dead-cat bounce at all,” he says.

Housing has been trading for well below labor, land and materials costs for so long, he says, that appreciation will likely spur buying of beat-up homes that investors up to now have been unwilling to purchase. Some appreciation, he adds, could justify the gamble.

His greater concern is a robust resale market crimping residential construction jobs. Nationally, new home permits increased 5.1 percent from January to February, and locally sales have increased from 0.3 to 0.6 units per week since the start of the year, spurring small construction-job gains. For many years, construction’s role in the regional economy was about 12 percent.

It is now down to 5 percent, a figure Lang sees as more realistic. But to maintain even that modest figure, it’s crucial for the sector to stop shedding jobs.