The head of an independent Southern Nevada research firm told lawmakers Monday nearly 60 percent of homes in foreclosure there are not occupied by their owners.
That means they are either rentals or homes purchased by speculators during the housing boom of the past couple of years.
Jeremy Aguero, of Applied Analysis in Las Vegas, said of the nearly 30,000 unsold homes on the market, 42 percent are vacant and another 11 percent occupied by renters.
He was joined in testimony before a legislative committee studying the housing market in Nevada by Doug Duncan, economist for the Mortgage Bankers Association.
Duncan said Nevada, California, Arizona and Florida are in the same situation and the cause is a mix of over-development and speculative investment.
"Housing construction should be in proportion to population growth but there's been a dramatic increase in housing construction compared to population growth," he said. "That probably indicates over-building. There's a massive supply of houses on the market."
The housing market took off, especially in Southern Nevada, in 2004-2005. Homes sold within hours after they went on the market, driving prices up relentlessly. The demand drew developers from around the nation, getting permits to put up thousands of new homes, especially in the Las Vegas Valley.
Aguero said the average sale prices of a new home in 2001 was $170,000. Now, he said, it's $305,000 and that's down a bit from last year.
Many of them were bought by speculators in Nevada and California hoping to score big profits.
But the market has effectively collapsed, not just in Nevada but nationwide. Homes are now on the market for months, selling sporadically when owners agree to drop prices. And with adjustable-rate mortgages beginning to trigger, many homeowners and investors are finding they can't afford their new, higher payments.
Duncan said the percentage of loans delinquent in Nevada was 2.8 percent in June 2006. This past June, he said, it was 4.8 percent. He said it's still lower than the national delinquency rate but said it's probably tied to the high percentage of homes owned by speculators.
He said large numbers of those speculators who see their investment dropping in value and the market stalled "will simply turn in the keys and walk away." When they do that, he said, the house doesn't show as delinquent.
Aguero said there are more than 6,000 foreclosures in Nevada "in the pipe" today. And Duncan said the situation won't turn around soon.
"We expect sales will continue to fall for some time," he said.
He said up to 45 percent of loans made during the boom are "subprime," which effectively means they were made to people who probably didn't have good enough credit for that large a loan, and 42 percent have adjustable-rate mortgages.
Both men said prices of homes on the market are dropping.
Duncan said he expects housing prices to decline two years in a row for the first time since World War II. Compared to a year ago, he said, housing prices are down 9-10 percent, "and we expect them to fall further."
Aguero and other economists and experts told the legislators that Nevada's problems related to foreclosures and overbuilding are likely to get worse during 2008.
Duncan predicted that the problems with Nevada's foreclosure rate and other housing industry woes won't bottom out until late October 2008.
Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas, added that a drop in building permits should continue in 2008. But he said upcoming resort expansion should cut deeply into the number of vacant housing units - more than 27,000 - now on the market.
With some $36 billion in megaresort construction occurring in Las Vegas in the next few years, Aguero said the people holding new jobs created by the building activity will buy up homes now available on the market and probably need more.
"You won't have enough housing stock for all the jobs in the near-term pipeline," Aguero said after the legislative hearing, adding, "How many markets can you point to with a $36 billion investment in their core industry alone that have long-term housing problems? Very, very few."
Nevada's economy should be so strong by 2009 that a housing shortage may be the big concern rather than the current mortgage crisis and heavy surplus of homes for sale, he told lawmakers Monday.
• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750. Associated Press reporter Brendan Riley contributed to this report.