Town homes continue to be in strong demand in the Las Vegas Valley as builders are bringing on a new supply to meet that interest and provide a more affordable option to buyers dealing with elevated interest rates.
The 262 closings of town homes in November were 27 percent higher than November 2022 after October was up 31 percent year-over-year. For 2023, the 2,561 closings are 22 percent higher than the first 11 months of 2022, according to Andrew Smith, president of Las Vegas-based Home Builders Research.
That’s in contrast to the single-family home market that has seen year-over-year closings decline 12 percent.
Las Vegas is well-positioned to set an all-time record for percentage of town home sales and that pipeline isn’t slowing. Smith said he expects once December’s numbers are tallied that about 25 percent of sales will end up being town homes and other attached products, up from 19 percent a year ago.
Driven by affordability, builders are turning to town homes to capture buyers in a marketplace where higher interest rates over the past year have put more single-family homes out of their price range. Town homes made up 5 percent of the marketplace in 2015 as reduced land prices coming out of the Great Recession allowed builders to focus on single-family homes.
A builder can construct as many as 12 to 18 town homes per acre while single-family homes average about five homes per acre and eight to 10 per acre in higher-density areas.
That growth has been aided by a change in state construction defect laws in 2015, from ones in place since the 1990s that slowed the construction of condos and town homes. With that reform, builders are less concerned about lawsuits.
“It’s been five years since basically coming from nothing and started picking up activity again,” Smith said. “I expected (it) to come sooner, but all of the factors on the market are finally coming together to where it makes sense for new homebuilders to go that direction to keep the end price down for the buyer. They have to go density to provide a product that is more affordable. I would expect it to continue in the near future for sure.”
Several projects have been unveiled this fall by builders such as Touchstone Living’s east valley Independence project with 1,300 lots at the former Royal Links Golf Club in a first phase. It has town homes with solar panels that start as low as $286,990 and duplexes for $393,990, according to its website.
Two other new product lines that opened recently offered attached products. Those include Aqua by Lennar and Gardenia by Beazer Homes, according to Home Builders Research. Gardenia starts at $368,900 while Aqua in the Water Street District in downtown Henderson prices start in excess of $400,000 compared to the median price of single-family homes in November at $498,899.
Touchstone Living founder Tom McCormick said sales at Independence, which opened models in early December, have gone well with about 40 sales far.
“The reception is really strong and our traffic during this time of year is solid, too,” McCormick said. “We’re very optimistic about it.”
The entire project has 1,600 lots with 1,300 on a south parcel and 300 on the northern side, McCormick said. That northern phase is likely to be town homes.
“Affordability is so important and density goes hand in hand,” McCormick said.
Since Touchstone sells finished homes, it has 40 completed out of the 120 under construction, McCormick said. The builder is offering special financing through its preferred lender.
“We sell them when they get close to getting finished,” McCormick said. “The demand has been strong. Our buyer is extremely sensitive to interest rates because typically with your first home you’re stretching to get into it. When the rates go up you have to stretch further and further. When rates came back down, we’ve seen a positive response to that.”
McCormick said he expects rates to come down slowly in 2024 but isn’t counting on those rates of the past in the 3 percent and 4 percent range but more likely to see rates that start at 6 percent.
McCormick said builders continue to add town home products because of affordability. Town homes and condos have only increased in sales because they’re able to offer a lower price point unless they are luxury products.
“To reach the market for the bulk of people working in Las Vegas, town homes are great options, especially since we have parks and pools and grounds maintained by the HOA (homeowners association.) You don’t have to pay for it in your own backyard nor do you have to take care of it. We’re incredibly optimistic about people’s acceptance of this product, and the lifestyle we offer within our neighborhoods. Our performance has proved that out.”
As for the decision to add solar panels and make the home electric, McCormick said homeowners could save about $100 to $150 a month on their electricity bill. Solar panels can cost $15,000 to $20,000 per home on an individual basis, but builders can do it for less with their buying power, he said.
“It’s built into the home, and there’s no extra payment for the solar so when you see that price it includes the solar and you won’t pay anymore for it over the life of the system,” McCormick said.