Builder confidence in the Vegas market continues to strengthen, and is, in fact, back to 2008 levels. But the new normal will be steady absorptions, increased construction costs, and a tightened labor supply.
Starts and closings are both up
Through the third quarter, annual single-family new-home closings were up 53% (to 6,632) year over year, and the annual closing pace continues to increase. The quarterly start pace flattened—we counted 1,811 new-home starts during the third quarter of 3Q13 compared with 1,802 starts during 3Q12. Despite the flat quarterly rate, the annual start pace increased an impressive 38% from 2012 levels.
Single-family inventory is tight; multifamily is booming
Total finished vacant housing inventory has declined 25% this year. Single-family product represents a quarter of all inventory; which is a little over a month of supply at the current closing pace.
Attached finished and vacant inventory is 2,082 units with 21.6 months of supply. Because annual closings of condominiums are way up (142%), condominium supply is lowering quickly. “The high-rise market has seen a significant flurry of activity this year as investors have realized the value of Las Vegas. Entry and mid-level product will be opportunistic as the market slide ends,” said Greg Gross, regional director for Metrostudy's Northern/Central Calif and Nevada. The attached home market has seen sales prices increase nearly 63% this year.
Long-term land supply is a challenge
“Lot inventory levels began to erode at a staggering pace over the past 24 months. 'Class A' positions have quickly fallen into short supply this year,” said Gross. Beyond Class A, total finished lot supply has fallen considerably and lot deliveries have remained slow. Months of supply is down to 14.4, which is 46% lower than 3Q12.
With only 8,100 single-family detached lots available, and only about 8,000 more lots under development, immediate production capacity is still healthy for the next year. However, the last time we had this few finished lots was 2002. Longer-term supply looks to be more of a challenge.
“Metrostudy expects demand to remain steady, but with a slight decline in 2014. Economic uncertainty, rising home prices, rising interests rates, and the expected increase in resale homes entering the market are all factors that may cause new-home buyers to rethink their home-buying decisions during 2014,” said Gross.
Learn more about markets featured in this article: Las Vegas, NV.