Tyler Jones is spitting into a strong headwind by starting construction on new luxury homes in the Seven Hills community, where prices will range from $750,000 to more than $3 million.
With new-home construction at a 30-year low and housing prices still falling, the founder of Blue Heron will probably raise a few eyebrows with the $55 million housing development in Henderson.
The 33 custom lots at Marquis Seven Hills, abutting the Rio Secco golf course, offer striking views of the Las Vegas Valley and the Strip -- a nice selling point, but not enough to save previous developer KB Home from having to bail on the project.
KB Home completed and sold two model homes. Blue Heron has two more under construction and five in permitting as of Thursday's grand opening.
Blue Heron struck a joint venture agreement with landowner Diversified Real Estate and decided not to be victimized by the change in housing market conditions, Jones said. He focused on adding value to the homes through green-building technology and unique architectural design.
Blue Heron, the builder of the New American Home on Tomiyasu Lane that was featured at the 2009 International Builders Show in Las Vegas, has sold 70 homes at luxury prices since the design-build firm was founded in 2004, starting with Stone Canyon loft homes at Buffalo Drive and Del Rey Avenue.
"We're a little old school in that we believe if you build a better mousetrap, there will always be a market for your product," said Jones, a Las Vegas native who studied architecture at the University of Colorado. "We've proven that we created demand for better options on custom homes and we continued to sell. We sold out the last project under the worst of circumstances."
The new-home market is showing signs of improvement. Home Builders Research reported 90 net new-home sales for the week ended Feb. 13, led by KB Home with 12 and Richmond American with 10. Overall, 18 of 25 reporting builders posted positive net sales for that week.
Home Builders Research reported solid traffic counts at several new-home subdivisions, including a successful grand opening event for Dunhill Homes at Rhodes Ranch. D.R. Horton began reporting Buffalo Estates near Buffalo Drive and Tropicana Avenue, and Lone Mountain Estates in northwest Las Vegas. Lennar Homes began reporting Coronado Hills in Henderson.
Residential building permits increased 18 percent in 2010 to 4,550, but housing analyst Dennis Smith of Home Builders Research noted they peaked at 730 in March and declined after the federal tax credit expired.
"Looking forward to 2011 and given many weak economic fundamentals that seem to be firmly entrenched, we think the permit tally will be a little less, probably near 4,000," Smith said.
Blue Heron's Jones said Marquis Seven Hills will create hundreds of construction jobs as trade subcontractors are scratching for work.
"We've got 35 contractors and suppliers on every home," he said. "We've got banks, title companies, appraisers, five different legal teams, real estate agents. When we sell a home for $2 million, it's a huge trickle down. It's a significant amount of work."
Jones said he believes Las Vegas is highly undervalued and views the economic downturn as an opportunity to reinvest in the market. Because of his partnership with the property owner, he didn't have to take out a large construction loan.
"It took a little more creativity to make this work in this market," Jones said. "Everything is total custom. We try to bring value through architecture and design. We're bringing in a custom home at $750,000. You've never been able to build a golf course home all-in for $750,000."
At Rhodes Ranch, Dunhill is building homes starting in the mid-$100,000s with new floor plans ranging from about 1,500 square feet to 3,650 square feet.
Some 2,500 to 3,000 prospective homebuyers came to Dunhill's grand opening on Feb. 12-13, Dunhill Homes Division President Don Boettcher said. While demand for new homes is not what it was during the boom, the market dictates how many homes need to be built, he said.
"I think folks will always want the ability to buy new homes, more so for owner-occupants than investors," Boettcher said.
Roughly three-fourths of homes sold in Las Vegas are distressed properties, which may not be in decent condition, Boettcher said. Foreclosures and short sales, or sales that require lender approval, can be delayed for six months or longer.
Boettcher said the time was right for new floor plans designed with flexibility in mind, including downstairs guest suites, kitchen islands, added storage areas, optional bedrooms and different office space configurations.
A December report from New York-based research firm Radar Logic showed home prices nationwide declining 3.6 percent from a year ago and sales of foreclosed homes by financial institutions increasing 0.6 percent, while all other sales declined 25 percent over the same period.
As a result, home sales out of foreclosure increased to 29 percent of total sales across the 25 metropolitan statistical areas Radar Logic tracks.
"The housing market is still stalled and showing no real signs of recovery. If we do not address the overhang of housing supply, the situation is likely to get worse before it gets better," Radar Logic President and Chief Executive Michael Feder said.
Contact reporter Hubble Smith at firstname.lastname@example.org or 702-383-0491.