Saturday, July 12, 2003
Copyright © Las Vegas Review-Journal

Average lot size shrinks

Home lots smaller than 4,000 feet twice that of '01

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Lot sizes for new homes in Las Vegas continue to decline in the face of higher land prices, a local housing expert said.

The average lot size for a new home this year is 6,429 square feet, a drop of 500 square feet in the last two years, Larry Murphy, president of SalesTraq, said this week.

"Ultimately, this means that (housing) product sizes will be relatively static because there's just so many square feet of house you can fit on a 6,429-square-foot lot. Or smaller," Murphy said.

Twenty-six percent of new-home residential lots are smaller than 4,000 square feet in 2003, compared with 13 percent in 2001, he added.

Just as the lack of new-home supply was an ominous blip on last year's radar screen, the decline in average lot size is sending warning signals to city planning officials.

North Las Vegas recently placed a moratorium on small lots while it drafts an ordinance governing lot sizes.

"It's a pretty lofty step to say this is what you can do and that's all," said Jackie Risner, community development director for North Las Vegas. "We want to make sure what we do in the ordinance is good for developers and good for the city."

With land prices at $200,000 an acre, home builders are challenged to provide affordable housing. One way to keep new-home prices down is by squeezing more lots onto each acre.

Builders are putting about six homes on an acre now, and are looking to push it up to eight to 10 as the valley's population grows to a projected 2 million by 2010.

"It's not that we don't want density," Risner said. "We just don't want density without amenities, park land or whatever we're willing to exchange for more density."

Las Vegas Valley land prices rose by about 4 percent prior to 1992, increasing by 12 percent from 1992-97 and 15 percent since then, said Marta Borsanyi, principal of the Concord Group.

Despite concerns about escalating land prices, local real estate and housing experts see the market continuing to thrive in Southern Nevada.

While land costs are certainly affecting home prices, levels of home sales in Clark County have not tapered off.

Sales of existing homes were a record 3,842 in May and the year-to-date total is up 24.7 percent, according to SalesTraq. New-home sales are down 4 percent but are expected to pick up in the second half of the year.

For the second straight month, the median price of a new home is above $200,000 at a record $202,900.

"The number of permits for new homes is holding up and we are still seeing a low inventory of existing homes, despite the discussion about high land prices," said Dale Puhl, president and chief executive officer of Southwest Title Co.

"Large national homebuilders represented in Las Vegas are doing well here and across the nation because they have access to capital for land purchase and they are forming strategic alliances."

On the down side, Puhl said smaller companies in the housing market have felt negative effects of increasing land prices.

"These companies are hurt by land prices because they have not banked land or don't have the means of purchasing new land at the high prices," he said. "High land costs also cut some potential home buyers from the market as median home prices increase. Low interest rates are the only factor allowing some first-time buyers to afford a home in the valley's housing market."

Murphy said he expects housing prices to continue to rise by 10 percent to 12 percent annually over the next two years.

Existing homes may enjoy a competitive sales advantage against new homes because of their lot size, he said.

"If you're planning (housing) product for 2004 or 2005, it has to make incredible use of space. The real competition in the next few years may not be based on price. It may be based on how well the product provides privacy and space."

On the other hand, some homeowners don't want the lawn maintenance and water bills that often go with larger lots.

Home builders such as KB Home, Beazer, Richmond American and Astoria have thrived on providing so-called "cluster housing" on lots as small as 1,500 square feet.

"At some point you hit the wall (on minimum lot sizes) and I think the wall is in sight," Murphy said. "I don't care how good of a land planner or architect you are, you can't put a 2,000-foot house on a 1,500-foot lot. That's overstated, of course, but we're almost to the limit.

"When we can no longer make lot sizes smaller to keep new prices lower, you're going to see another substantial (price) increase. Don't look for it to level off because supply and demand isn't going to change; there's no (available) land and construction costs will stay the same."