Southern Nevada’s new-home sector posted solid gains, though uncertainty looms.
New-home closings jumped 7.4 percent to 449 units in April, putting builders on track to close at least 6,400 units in 2015, Home Builders Research reported in its May 29 Las Vegas Housing Outlook event at the Las Vegas Springs Preserve.
If closings can keep up their current pace, they’d improve 6.3 percent on 2014’s 6,020 closings. Based on available lots, closings could reach 7,000 in 2016, said Dennis Smith, president of Home Builders Research.
The median price increased 7.5 percent year to year in April to $305,704. Prices should keep trending upward because of limited land supply, plus lagging notices of default against delinquent homeowners.
Despite land constraints, builders are scrounging up enough lots to post a “nice rise” in permitting activity, Smith said. Builders pulled 6,632 permits in 2014, and could pull at least 7,300 in 2015, for a 10 percent gain. Look for another jump, to 8,000 permits, in 2016. That’s well below a permitting peak of nearly 33,000 units in 2004, but an improvement on 2011’s 3,700-permit low.
Panelists at the Outlook pointed to economic recovery for the improvements.
At more than 3 percent, the Las Vegas Valley’s job growth is roughly double the national rate. The population is growing as well. Affluent baby boomers in particular are relocating with cash in hand to spend in the move-up housing market, Smith said.
The city’s economic expansion is set to continue, at least in the near term: There’s roughly $9 billion in new building projects and renovations planned across the valley in the next three years, said Outlook panelist Scott Russell, senior manager of research for the Las Vegas Convention and Visitors Authority.
But possible hurdles could block further gains.
First, panelists said they’re concerned about affordability. Wage growth has mostly been flat, even as home prices have surged by double digits since 2012.
Rising interest rates could complicate the outlook as well. Panelist Michael Sweeney of Alpine Mortgage said the Federal Reserve will likely boost interest rates by half a percentage point before the end of 2015.
“We’ll see how the world reacts,” Sweeney said.
But panelist Mike Brunson, of Las Vegas real estate consulting firm Brunson-Jiu, said he doesn’t expect substantial falloffs in borrowing activity.
“They’ve been floating an increase for four or five years now, so interest rates have to go up. I think initially, people will freak out and act like the sky is falling, but then everyone will say, ‘Well, this kind of had to happen,’ ” Brunson said.
Panattoni Development Co. continues to build on its Southern Nevada portfolio.
The commercial developer broke ground June 3 on its Henderson Freeways Crossing project, at the northeast corner of West Lake Mead Drive and Eastgate Road. The development will include 452,710 square feet of industrial space in six buildings.
It’s a spec project with no announced tenants — a product type that Panattoni officials said is vital to generating interest among businesses that might relocate to Southern Nevada.
Panattoni started construction in April on Jones Corporate Park, a 416,000-square-foot spec industrial project at the northwest corner of Sunset Road and Jones Boulevard. It also has been buying and upgrading smaller industrial properties of 50,000 to 100,000 square feet, including the February purchase of a $5.25 million, 103,000-square-foot building at 1841 E. Craig Road.
The Southern Nevada Home Builders Association is relaunching its Southern Nevada Green Building Partnership program.
Job growth noted
Nevada got a nod from a national trade group for improvements in its construction industry, though it also warned that labor shortages could make growth difficult.
The Associated General Contractors of America noted in a May 27 report that the Silver State ranked No. 4 in construction job growth in April, with a 3.4 percent jump in job counts from March to April. Builders added 2,200 jobs in the month.
Despite the gains, construction employment remains well below its high.
The state has about 65,000 building-sector jobs, compared with 148,000 positions in mid-2006. Today, many of those former employees simply aren’t available to return to work.
“Contractors are struggling to find workers with the right skills in states that had really deep losses in construction employment, such as Nevada, where employment remains 51 percent below the peak,” said association economist Ken Simonson.