Home Prices On The Rise Across U.S.
ROBERT SIEGEL, HOST:
House prices are going up. According to the S&P/Case-Shiller house price index in March, prices were up nearly 11 percent over the past year in the 20 cities surveyed. That's the fastest increase in seven years.
The cities with the three biggest increases were Phoenix, San Francisco and Las Vegas. For Vegas, prices have risen over 20 percent. It reminded me of touring ample vacant housing there with realtor Terri Monroe about a year-and-a-half ago.
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TERRI MONROE: They're asking 219.
RICHARD SMITH: 219.
SIEGEL: $2,000 for a...
SIEGEL: ...over 2,000 feet, a three-car garage.
MONROE: A three-car garage. It comes out to $103 a square foot.
SIEGEL: What's the history of a house like this? What would it have sold for?
MONROE: In 2005, it would have sold for $450- to $500,000.
SIEGEL: Lost more than half of its value...
MONROE: Lost more than half of its value.
SIEGEL: ...since that time?
SIEGEL: And that was typical. On the same trip, I met Rob Lang, a professor of urban affairs and director of the Brookings Mountain West Center at the University of Nevada, Las Vegas. Welcome to the program once again.
ROB LANG: Thanks for having me.
SIEGEL: So is it a chicken in every pot and three cars in every garage again in Las Vegas?
LANG: Well, not quite. People are a little jittery when they see house prices start going up. The memory is too recent for them to be totally happy about it.
SIEGEL: How much of that 20.6 percent 12-month increase in home prices is accounted for for a reduction in the number of foreclosures and bank sales?
LANG: It's partly. It's also just demand for a product that is priced below what it would take to build it and buy the land for it. So it's still housing that is cheap relative to what it is in the rest of the country and even what it would cost to build in Las Vegas.
SIEGEL: The biggest industry in Nevada is, of course, gaming and hotels. But as you explained to me, construction used to be 12 percent of the state's economy. Are enough existing homes being sold so that new home construction can make a comeback?
LANG: Partly, but nowhere near the peak from the last decade.
SIEGEL: Well, what does this feel like to you? Is it just that Las Vegas real estate is cheap and hardly anything is a great investment these days, so why not buy some? Or are people showing confidence in the economy of the city and buying for that reason? What's going on?
LANG: Consumer confidence is up. And the other thing is that these are very attractive homes for the price to this point still. I mean, you were in a house and it was just over 200,000, maybe it's 250,000, and it's maybe $112 a square foot.
We're talking houses that have pools and spas in them and, you know, and amenities that in the rest of the country would be considered luxurious. This is part of the equation, I think, people were missing when they imagine that these Phoenixes and Las Vegases were done for all time. That they're still attractive to retire in and the climate is mild, you know, the taxes are low. It's an easy place to have fairly modest assets and buy a nice house and live a high-quality life.
SIEGEL: But what about, say, school enrollments? That would be a sign that families with children have moved into the area.
LANG: The numbers are up slightly. They're fairly stable. But what is really interesting is that in a region where everybody assumed that there was no future growth in the last two years - and the data goes from 2010 to 2012 - the region added 50,000 people. And when we get the estimates for July 1, 2013, we could have added 50,000 people in just one year. And we were at 75 to 100,000 in some of the boom years.
SIEGEL: Yes. It always used to be said Las Vegas was the fastest growing city in the U.S. It's not that at this point, but you're saying it's growing.
LANG: Yeah. I mean, we don't want to be the fastest growing again. That's something that covers a lot of problems when you grow the fastest, but in the end they catch up with you.
SIEGEL: What do you mean it covers a lot of problems?
LANG: Well, you know, everybody thinks, well, I'm doing everything right. The region is booming. The houses are selling. The jobs are growing. And, in fact, what happens is that if you grow in just one way, let's say tourism, and then you face a contraction in tourism, then you pay a bigger price than you would if you had more broadly grown or you'd grown at a slower rate and had a sense of, you know, having to hustle a bit for those jobs.
SIEGEL: And you think that might be happening?
LANG: Yeah. I think the city is working it a little more for its growth. No one here assumes that we just put out a little sign that says welcome to Las Vegas and, you know, U-Haul starts showing anymore. And that's healthy and that the region has faced the consequences of its deepest recession and determined to change its course and to produce more resilience in the future by adding more sectors to its economy.
SIEGEL: Rob Lang, thank you very much for talking with us.
LANG: Thanks for having me.
SIEGEL: It's Rob Lang of University of Nevada, Las Vegas, where he is director of the Brookings Mountain West Center.
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