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Las Vegas homebuilders’ sales keep tumbling

Updated August 24, 2022 - 7:59 pm

Last month, Southern Nevada builders sold the fewest homes in at least two years and now, fears of more housing industry layoffs have started to swirl.

Builders logged 434 net sales — newly signed purchase contracts minus cancellations — in July, down 61.5 percent from the same month last year, according to figures from Las Vegas-based Home Builders Research.

This marked the fourth consecutive monthly sales drop and the lowest tally “since the start of the pandemic,” the firm reported.

“The slowdown is real and the effects are real,” Home Builders Research President Andrew Smith wrote in the report.

Builders also pulled 539 new-home permits last month, down 50 percent from July 2021, indicating a shrunken construction pipeline.

There have been hundreds of layoffs nationally in the housing industry, and “word has also started to get out” in Southern Nevada that builders and contractors are “having to come to these difficult decisions,” according to Smith.

With builders selling fewer houses and pulling fewer construction permits, “we unfortunately will not be surprised to hear of more downsizing in the near future,” he wrote.

‘Sharp drop’ in sales

Homebuyers are pulling back locally and nationally as higher mortgage rates wipe out the cheap money that fueled America’s unexpected housing boom after the pandemic.

Across the U.S., the pace of builders’ sales last month dropped 12.6 percent from June and 29.6 percent from July 2021, federal data shows.

All told, sales fell to the lowest level since early 2016, the National Association of Home Builders reported.

“The sharp drop in new home sales is another clear indicator that housing is in a recession,” Danushka Nanayakkara-Skillington, the association’s assistant vice president for forecasting and analysis, said in a news release Tuesday.

On the resale side, Southern Nevada is seeing fewer home purchases, fast-rising inventory, plenty of price cuts and more negotiating power for buyers.

Amid the pullback, sales prices fell month to month in July for the second consecutive time after not dropping for more than two years.

The median sales price of previously owned single-family homes — the bulk of the market — was $465,000 last month, down 3.1 percent, or $15,000, from June, according to trade association Las Vegas Realtors.

Across the U.S., resales “sagged” for the sixth consecutive month in July, the National Association of Realtors reported.

‘Unseasonably low’

Fueled by low borrowing costs — and by an influx of out-of-state buyers as people worked from home — Las Vegas’ housing market accelerated to its most frenzied pace in years in 2021.

Prices hit new all-time highs practically every month, buyers flooded properties with offers, houses sold rapidly, and the annual number of resales hit a record high.

Amid the buying spree, homebuilders put buyers on waiting lists, regularly raised prices and in some cases, drew names to determine who could purchase a place.

However, house hunters started hitting the brakes this year as mortgage rates climbed higher.

The Federal Reserve has been raising interest rates in an effort to cool inflation, and in the housing market, borrowing costs have fluctuated but are well above last year’s rock-bottom levels.

The average rate on a 30-year home loan last month was 5.41 percent, down from 5.52 percent in June but up from 2.87 percent in July 2021, according to mortgage buyer Freddie Mac.

Locally, builders’ sales tally last month was “unseasonably low,” and their asking prices “have started to plateau,” Smith, of Home Builders Research, reported.

Some builders are still raising prices, “but more and more are adjusting in the other direction,” he wrote.

Contact Eli Segall at esegall@reviewjournal.com or 702-383-0342. Follow @eli_segall on Twitter.

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