The new-home construction market in Las Vegas posted its strongest third quarter since 2007 and shows no signs of slowing down as 2019 comes to a close — with a chance to equal last year after a slow start.
Home Builders Research President Andrew Smith said homebuilders reported 2,500 net sales — new sales contracts minus cancellations — in the period between July and September, an 8.5 percent gain over the same period in 2018. The valley hasn’t seen those kind of sales numbers for that summertime period since there were 2,760 in 2007 before the housing market began to tank.
Smith said the market has been helped by interest rates below 4 percent compared with 5 percent or higher a year ago. Builders are also doing a better job of constructing more affordable homes that people want, he said.
“I think we are in a good place,” Smith said. “It’s not overheated. With the population still coming into the market, the builders aren’t able to feed that demand. And that being the case, sales should remain fairly consistent.”
Builders have been helped by the supply of existing single-family homes closer in price to new homes at a median of $299,000 for resales compared with $390,000 for new.
“The resale market is affecting a new-home market in a positive way,” Smith said. “Pricing on resales are going up, and when you go and look at a resale that doesn’t have the interior upgrades for 10 years and is not too far off from a new home, people will think about a new home. It’s hard to find resales that are upgraded that aren’t overpriced.”
In a sign of the strength of the new-home market, Del Webb pulled its first building permits to open its first age-qualified community since 2006. It pulled nine permits for its Lake Las Vegas project and has plans for one in North Las Vegas too, Smith said.
Earlier this month, Lennar, Shea Homes and Woodside broke ground for the 630-acre Sunstone master plan in the northwest valley adjacent to Skye Canyon. Sunstone is expected to have about 3,000 homes.
Builders aren’t slowing down on their land acquisitions either, Smith said. There were the first closings for the next Summerlin village west of 215 Beltway and north of Far Hills Avenue. Toll Brothers, William Lyon Homes and Woodside Homes spent more than $51 million combined on three parcels totaling just under 80 acres. Toll Brothers paid the top price at $719,000 per acre, he said.
Also, builders pulled 2,816 permits during the third quarter, which is the highest in that three-month period since 2006, a number Smith attributed in part to new building codes going into effect in August.
On Thursday, KB Home announced it’s opening four new residential communities with the 13 it opened earlier this year in the valley with a focus on affordability. The new communities are the Reserves at Saddlebrook in Tule Springs in North Las Vegas, Cattara in Mountain’s Edge in the southwest valley and Bristle Vale’s two collections at Summerlin.
Unlike 2018, when home sales were the strongest during the first quarter and tailed off sharply in subsequent quarters, the Las Vegas market has been steady this year, Smith said.
During the first nine months of 2019, the difference between the highest month’s net sales — 1,037 in May — and the lowest at 758 in July is 37 percent, Smith said. That contrasts to a 83 percent difference in 2018 between the highest and lowest month, he said.
Based on the trends, Smith said it’s possible sales could come close to equaling 2018. Though the first quarter sales were down 19 percent, that dropped to 12 percent after the second quarter. It was 6 percent behind the 2018 pace after the third quarter, he said.
As for new-home closings, Home Builders Research reported that the third quarter total of 2,848 was the top-performing quarter of the year, Smith said. Through September, the 7,783 closings are 2.4 percent behind 2018 through the same period, he said.
Nat Hodgson, CEO of the Southern Nevada Home Builders Association, said he expects 2019 to finish close to 2018 in new home permits with about 11,500 units and expects that number to grow to just under 12,000 in 2020.
“The next two years will see this nice and steady leveling off,” Hodgson said. “I know there is a larger demand than we are supplying homes, but we can only do so much with our land and labor shortage. I would describe what’s happening as healthy and sustainable. That is something I haven’t been able to say in a long time.”
Single-family home closings, while 4.5 percent lower for 2019 compared with a year ago, had their strongest quarter of the year, according to Home Builders Research.
Attached products, which are primarily town homes, remain strong. The 1,134 closings through the first three quarters is 12 percent higher than 2018. The third quarter outpaced the second quarter by 22 percent, and attached products were 16 percent of all home closings, Smith said.
Buyers are pursuing affordability, and builders are following that lead.
The median price of single-family homes in September was $390,727, a drop of 1.7 percent from September 2018. The in-demand attached homes came in at a median price of $270,638 in September, a 3 percent gain over the last year.
Nine of the top-selling communities in the third quarter had a combined median price of $290,000 for single-family homes and town homes, Smith said.
The top seller, however, bucked that trend with Pulte’s Reverence in Summerlin, which had a base price of $705,000, Smith said. All of the other communities in the top 10 were under $400,000, he said.
Reverence had 42 sales during the quarter, followed by Lennar’s 39 sales for its Heritage collection at the Cadence master plan in Henderson. Four of the top 10 were in Henderson master-planned communities, one in Cadence and three in Inspirada.
Third was KB Home Autumn Winds town homes with 33; followed by KB Home Inspirada Reserve, 32; KB Home Inspirada Garden, 29; DR Horton Mosaic Falls, 28; DR Horton Vela Pointe, 28; KB Home Inspirada Groves town homes, 28; Beazer Cliffs of Dover town homes, 27; and Harmony Homes Brookfield with 27.
KB Home takes top spot
The top 10 homebuilders in sales during the third quarter were public builders after Pulte acquired local private builder American West Homes this year.
The top four builders in KB Home, Lennar, Pulte and Richmond American accounted for 56 percent of sales during the quarter, Smith said.
Overall, the top 10 had new-home product that was a “mix of master-planned living or affordable pricing,” Smith said.
KB Home was first with 421 sales ahead of Lennar’s 391. It’s the first time KB has jumped over Lennar since the third quarter of 2018, Smith said.
KB is positioned to keep the top spot with by adding new inventory with its four new communities, especially with an eye on affordability. Its Mountain’s Edge and North Las Vegas homes start just below $300,000. The Summerlin homes start at $350,000.
“It’s been an exciting time for KB Home in Las Vegas, where the region’s dynamic economy offers plenty of potential for growth,” said Brian Kunec, president and regional manager of KB’s Las Vegas and Seattle divisions. “Our strategic pursuit of new land opportunities has positioned us well as we are able to offer a wide range of new-home communities and locations to meet the various needs of our customers.”
Pulte/American West is third with 299, followed by Richmond American with 291 and DR Horton with 240.
DR Horton had 161 closings in September to lead all builders and eight communities with 10 or more closings for the month, Smith said. Five of those eight were in the new Valley Vista master plan in North Las Vegas, where there have been 183 closings since March, Smith said. The median closing price is $331,245, with 14 percent of the closings being attached product types, he added.