Metrostudy’s 2Q14 survey of the Las Vegas housing market showed builder confidence in the market strengthening as price levels approach 2008 levels. New home demand remains strong as the Valley continues to enjoy steady in-migration; however affordability may be reaching a point which may begin to force first time buyers out of the market for single family homes and into different product lines.
“One of the most challenging issues over the past year for the Las Vegas market has been the availability of lots and the impact on land prices,” said Greg Gross, Regional Director of Metrostudy’s Las Vegas Market. “2013 marked a turning point as land development increased 81%. The second quarter of 2014 is no exception as lot development has increased 76% compared to 2Q13.”
New home prices have risen dramatically this year, and pricing in the resale market is improving rapidly. Average sales price for Single Family Homes increased 9% this year with Median sales price also increasing 14%. Compared to June 2013, the average list price of for-sale homes is 17% higher at $309k. Production under $200K represents only 13% of all housing starts for the quarter compared to 2Q13 when 14% where under $200K. Our median “offer to build” price for active projects is $279K; 5% higher than one year ago.
Through 2Q14, annual single-family new home closings were 6,124. That’s 3% LESS than in 2Q13. The annual closing pace slowed slightly, as did the quarterly start pace. We counted 1,565 new home starts during the 2nd quarter of 2014 which is 24% less than the 2Q13 starts. The annual start pace decreased by 12% YOY. All of which can be indicative of both slightly weaker demand and very tight lot supply.
Total Finished Vacant housing inventory has declined 21% this year. Single Family product which represents 32% of all inventory, has only 1.1 months of supply at current pace. Attached finished and vacant inventory is 1,200 with months of supply at 22. However annual closings of condos improved dramatically during 2013 which lowered the condo supply considerably.
“The high rise market has seen a significant flurry of activity this year as investors have realized the value of Las Vegas,” said Gross. “Entry and mid-level product will be opportunistic as the market slide ends. The attached home market has seen sales prices increase 10% this year.”
The lot inventory level has eroded steadily since the first quarter of 2008. “Class A” positions have quickly become in short supply over the past two years. Total finished lot supply has fallen considerably over the past year and lot deliveries have remained slow. Months of supply stands at 14 and supply has decreased 18% since 2Q13. The net absorption of lots highlights the dearth of deliveries as we continue to deplete the supply even as nearly 1,100 new lots were added during the second quarter.
The overall supply of finished SFD lots is declining and development opportunities for delivery in the next 4 years must be considered today. The majority of the new lots in development are in Summerlin, Inspirada and Cadence. It is worth noting that finished lot supply is the lowest level since Metrostudy began counting in 2002.
Metrostudy expects demand to remain steady yet the year may end slightly lower than 2013. The tightened lending standards, lower FHA limits, rising home prices and interest rates and the expected increase in resale homes entering the market, are all factors which may cause new home buyers to rethink their home-buying decisions during 2014.
Learn more about markets featured in this article: Las Vegas, NV.