Sheryl Palmer said she feels like she’s coming home again and couldn’t be more optimistic about a “tremendous opportunity” in the new home market in Las Vegas after working here during its peak in the 2000s.
The 58-year-old CEO of Arizona-based builder Taylor Morrison, a position she’s held since 2007, recently toured the homebuilding operations of William Lyon Homes in Southern Nevada ahead of its acquisition of the builder during the first quarter of 2020. In November, a $2.4 billion deal was announced between the two publicly traded companies that will take Taylor Morrison into Nevada, Oregon and Washington for the first time and add to its inventory in California, Colorado, Arizona and Texas — making it the fifth largest builder in the nation.
Palmer worked in Las Vegas as an area president for Pulte Homes from 2003 to 2005, and while she moved from Las Vegas last year, she keeps strong ties here where she regularly visits her daughter and two grandchildren.
“I’m very bullish about the marketplace,” Palmer said. “I’m over the moon. It feels so right, and I couldn’t be more excited about coming into the marketplace with the team on the ground and seeing what we can do to support their growth here. I have worked here and lived her for the last 18 years so I have a tremendous appreciation for the marketplace and opportunity.”
Palmer worked for Pulte at the height of the building boom when builders were churning out homes to meet the demand that was in part driven by speculators who drove up the prices. Builders pulled an average of 32,000 permits in 2004 and 2005, a growth of 10,000 from 2002. In 2018, by contrast, builders pulled fewer than 12,000 permits and a similar number is expected this year, according to the Southern Nevada Home Builders Association.
“I look at what has been done in the market, and there’s responsible development, which is great for the consumer and longevity of the marketplace,” Palmer said.
When people ask where Vegas is, Palmer said she points to demand, pricing and land prices. The demand continues to be solid and the appreciation has slowed, helped by a decline in interest rates, she said.
“Land prices continue to move, and I say that in Vegas and across the country, land sellers and builders are being very responsible in how they are approaching the market to make sure it doesn’t get overheated,” Palmer said. “The natural (controlling factor) is the number of lots to build on and labor. You put those two in place, and I think about where we are at today for housing starts compared to the peak. It’s giving me a lot of optimism about where we are going in the next few years.”
Building in Nevada has been one of the strategic priorities in geographic diversification for Taylor Morrison along with the Pacific Northwest, Palmer said. They wanted to enter those markets the right way and by acquiring William Lyon it did that but added depth in Austin, Denver and Phoenix, she said.
“It is difficult to start up,” Palmer said. “You can do it, but it’s a slow jog getting into the market. You bring on one community and two communities and you don’t have the scale in the market to demand the best cost base. From a land seller you don’t have the relationships that are so valuable in a market like Vegas where you got a land seller environment with tremendous concentrations of great holdings.”
Palmer recollected how Las Vegas had a difficult time following the Great Recession. Home closings fell to fewer than 4,000 in 2011 and the market didn’t bounce back until 2017 and 2018 to average more than 10,000 closings.
“I remember those times well,” Palmer said. “I think a lot of things in our environment and on a macro level that have changed that. Certainly, the mortgage industry disproportionately affected Vegas more than other markets. I don’t see this market returning to those kinds of challenges.”
Las Vegas has a lot going for it with one of the fastest-growing job markets, affordability, good weather and attractiveness, Palmer said.
“It’s a great lifestyle, and it’s evolved when you look at sports teams,” Palmer said. “You look at the tax situation, and it’s such an attractive market for boomers.”
The builder plans to sell homes under the Taylor Morrison brand, but that will be done on a community-by-community basis at first. Any community that would sell out in mid-2020 wouldn’t be changed as not to confuse buyers, she said.
“We’re looking to be a Taylor Morrison marketplace I would hope by the end of next year,” Palmer said.
In Las Vegas, William Lyon is building about a dozen communities, and that number is expected to grow in 2020, Palmer said. Since the recession, William Lyon has been known as a high-end builder in Las Vegas, but its product offerings in recent years have become more diverse, including town homes.
When the acquisition was announced, the company said the deal will “significantly increase” its offerings of entry-level homes. Palmer also said for Las Vegas they want to focus on first-time move-up buyers as well.
William Lyon has plans to open Palmer Ranch near the VA Hospital during the spring in North Las Vegas. It will have single-family homes priced in the low $400,000 to high $400,000s.
“I think that will be the sweet spot and the bread and butter of the marketplace on a go-forward basis,” Palmer said. “I think there are places in the market they are hoping to be in the low $300,000s. I know they are working on (affordable segments) in many parts of the market. They will have new affordable positions in Summerlin next year. We are so supportive of strategy that (William Lyon Nevada division president) James Gomez and team have really started executing on.”
Palmer said there will be “a nice combination” of product offerings with affordable first-time and first-time move-up homes. The team understands the market and is making sure it hits the right mix, and that includes not only a focus on single-family homes but duplexes, triplexes and fourplexes, she said. It also sells home in The Ridges in Summerlin for more than $1 million.
In the last 12 months, William Lyon has taken control of more than 1,000 lots in Las Vegas, said Palmer, who called that “exiting.” She said when Gomez entered the market, William Lyon looked at their positioning and made sure it offered product to address the needs of the market and got aggressive to fill those opportunities.
“I’m delighted about their holdings, and the continued year-over-year growth that they’ve planned. It’s great for a growing business,” Palmer said. “They recognized the growth that’s going to come at the first-time buyer and affordable price point when you think about the service industry when you think about the population here. I think the market is trying to find a solution, and I think they’re trying to find it in attached and detached (housing). I think everyone is approaching the market in a healthy way and not lose sight of what happened 10 years ago.”
William Lyon falls just outside the top 10 in Las Vegas builders for home closings. Palmer doesn’t want to predict how high the builder will rise but expects to be in the top 10 in the future with their capital and support.
“Our commitment to the Las Vegas market and strength of bringing the national platform to Las Vegas only makes a bigger, better and stronger business,” Palmer said. “I feel like I am coming home again but as an organization we have patiently waiting for the right opportunity to enter Las Vegas and we are confident we got the best of the best.”
In Las Vegas, William Lyon has 75 employees and Palmer said there’s no plan to cut staff because Taylor Morrison doesn’t operate in Nevada.
“We don’t have a business here in Las Vegas, and we will support them with growing the business and workforce as they need it,” Palmer said. “We can do that through our talent around the portfolio and what we can find locally. It’s a really good team here with a lot of historic knowledge of the market and organization.”
The William Lyon Signature Series, which is an ultra luxury brand of multimillion homes, will continue, but there’s no product with that name currently in Las Vegas, Palmer said.
“We have quite a price range around the country from the high $100,000s; to the highest end is close to $8 million in Southern California,” Palmer said. “We have a strong respect and belief of what William Lyon built and we thought in his honor we would retain the William Lyon Signature Series. They use that in their most luxurious multimillion dollar communities. Where we look at those opportunities, we would retain that brand. That brand is not here in Las Vegas, today, and it’s hard for me to say if it will be or won’t.”
Taylor Morrison has a 55-plus brand called Esplanade that originated in Florida and has been spreading westward. That brand could show up in Las Vegas, Palmer said.