Saturday, January 17, 2004
Copyright © Las Vegas Review-Journal

LV new-home sales hit record in '03

Sales for year total 25,230, surpassing previous top mark of 22,940 set in 2001

Home construction continues in southwest Las Vegas. Data show new-home sales in Las Vegas reached a record 25,230 in 2003. Photo by Gary Thompson. An aerial photo taken Sept. 5 shows development near Southern Highlands. Several real estate experts say they expect the local housing market to remain strong in Las Vegas. Photo by Jeff Scheid. Click image for enlargement.

Las Vegas continues to be the hottest housing market in the nation, setting records in almost every category last year, a local researcher said.

Dennis Smith, president of Home Builders Research, counted 2,831 new home sales in December, bringing the total for the year to 25,230 and smashing the previous record of 22,940 set in 2001.

It was a 12.1 percent increase from 22,502 new home sales in 2002.

"I'm always auditing the numbers," he said. "It could change by maybe 10, not much. When I segment (sales) by price range, floor sizes, subdivisions, they all have to add up."

Smith said 2003 was "a year that took our market to a new level of demand" and could be the benchmark for a number of years to come if mortgage rates rise later this year, resulting in softening consumer demand.

"If the rates remain close to their present level, we could see another record year in 2004," he said.

The resale market better, jumping nearly 30 percent in sales from a year ago to 49,792, including 4,894 transactions in December.

The existing home segment increased its market share to 66.4 percent of all sales, moving it closer to the market share in more "mature" U.S. metropolitan areas, Smith said.

"It is the most active housing market in the country, looking at total sales and the existing market," said Marta Borsanyi, principal of the Newport Beach Calif.-based Concord Group. "Orlando (Fla.) and Phoenix are hot markets, but Las Vegas, in percentages, is the most active."

She said the housing market will remain strong in Las Vegas because of job growth and the number of second-home buyers who have discovered the benefits of living here in the last few years.

"We sell Las Vegas as a Sun Belt (city). The tax situation is just incredible and the climate ... we've got a growing senior market, people retiring here," she said.

The three top-selling communities in 2003 were Sun City Anthem (934), Siena (434) and Sun City Aliante (400), all age-restricted.

The level of demand for new homes in 2003 was so strong, production couldn't keep up.

Generally, it takes six to 10 months to build a house from contract as builders go through the entitlement process with city and county planners, which some say is getting longer.

Low standing inventory led to home builders selling by lottery and people camping out at sales offices to be first in line for new releases.

This was fueled by investors and speculators who wanted to buy early in order to take advantage of expected price increases.

One of the pitfalls of investor sales in new subdivisions is the number of "For Rent" and "For Sale" signs that pop up in the early stages of building.

"This is disconcerting for new owner-occupants that don't have a clue as to how many rentals will be part of their new neighborhood," Smith said.

Investors often put in minimal upgrades and basic landscaping, which tends to drag down values for remaining owner-occupants.

Builders have gradually begun restricting investor sales, said Shawn Cunningham, a Realtor for Re/Max Advantage in Las Vegas.

Cunningham said he made phone calls about more than 20 current new home tracts. Most of them had nothing to sell anyway, but even in future releases, the builders weren't selling to investors or second-home buyers.

"We've seen nearly every community in the valley restrict investors or in some cases eliminate them entirely," he said. "The reality (is) that our investors simply will not be allowed to buy new homes in 2004."

Richmond American Homes, the No. 2 builder in Las Vegas with 2,059 sales in 2003, is no longer accepting any investor sales.

Richmond American President Liesel Cooper said she's concerned about building "good quality neighborhoods."

She believes housing demand is strong enough to capture 2,700 sales that Richmond American is projecting for 2004.

Final building permit numbers for December were not available yet, but they were up 11.1 percent through November at 22,285.

The median price of a new home in December was $209,611, up $22,784, or 12.2 percent, from the same month a year ago, Smith said.

He expects prices to increase by another 10 percent this year.

The median price of a resale home was $180,000, a year-to-year increase of $23,000, or 14.6 percent.

Double-digit price increases are threatening the affordability of Las Vegas' housing market, but Borsanyi said first-time home buyers are still able to enter the market here, either with "cluster homes" on smaller lots or in older neighborhoods if they want larger lots.

"When the market slows, then prices are going to level off," she said. "The market has the ability to balance itself. There's just so far you can push the market and then the market says, `To hell with you.'"

KB Home was the No. 1 builder in Southern Nevada with 3,381 recorded sales, one of six home builders to top 1,000.

"This is not just the result of an excellent housing market, but also because of the trend of big public companies swallowing the local privately owned home builders," Smith said. "Any privately owned builder who has a decent inventory of lots is a target for the public companies."

Only two private builders, Rhodes and Astoria, made his top 10 list.

Shelly Stewart, sales and marketing executive with KB, said the company sold more than 4,000 homes in 2003, though some of them have yet to be built.

"We don't see any slowdown. We're building over 40 communities in the Las Vegas Valley market and we're continuing to see great demand in all of them," she said.

The attached-housing segment (townhomes and condominiums) accounted for a market share of 10.4 percent in 2003, down from 11.9 percent the previous year.

Smith anticipates an increase in attached building activity this year, primarily in the midrise and high-rise types.

Also, in an effort to reach more entry-level buyers, there will be quite a few apartments converted into condos, he said.

"This is not a new scenario. It was done successfully by some in the early 1990s," he said.