Las Vegas land prices show steady increases through third quarter

Las Vegas land prices, though still far below their peak, have steadily increased through the third quarter and will probably level off in the beginning of 2013, Sunbelt Development managing partner Bill Lenhart said Tuesday.

The average price for an acre of medium-density residential land in Las Vegas surged to $170,450 in the third quarter, up from $117,949 in the previous quarter, according to a preliminary land sales report from Sunbelt Development and Realty Partners.

There were 36 land sales totaling $55.2 million in the third quarter, though some end-of-quarter transactions had yet to close, Lenhart noted. Overall, land sales volume has increased to $175.7 million for the year to date, compared with $143.3 million a year ago.

"We're seeing a significant amount of homebuilder activity," Lenhart said. "The market started to surge in fourth quarter 2011 as a result of limited home supply, so buyers were forced to go to the new-home market."

Builders typically carry a finished lot supply of 24 months to 36 months. As absorption of new homes increased, their supply has shrunk to about 18 months, the broker said.

D.R. Horton, Pulte and an investment group led by Tom McCormick of Astoria Homes have all made major land acquisitions around the valley this year.

The southwest valley has led the market in sales activity for much of the past decade, but the market is starting to migrate to the northwest, Lenhart said. North Las Vegas, which has always been a "value play," will be next, he said.

"Over the last few years, value could be found anywhere. Now that we're seeing prices creep back up, builders are migrating to cheaper land," he said.

Home Builders Research reported an inventory of 13,511 finished residential lots as of September, including 4,612 in the southwest and 3,153 in the northwest. The master-planned Mountain's Edge community in the southwest has 1,825 finished lots remaining, while Providence in the northwest has 1,597 lots.

"We're definitely out there looking," said Rob Beville, president of Las Vegas-based Harmony Homes. "Our focus is in the southwest and south, although we have looked at North Las Vegas. It is difficult to make it work because you're dealing with raw land, so there's a time factor of about 12 months. That's why we like to get land that's already entitled."

Harmony closed escrow on 75 smaller lots formerly owned by Concordia Homes near Lake Mead Drive and Boulder Highway in the third quarter and sold some lots near Rhodes Ranch to Lennar Homes, Beville said. He said Sunbelt's report of $170,000 an acre for residential land is accurate, depending on location.

While Las Vegas has seen a spike in new-home sales and permits this year, builders should beware of the number of homes in some stage of foreclosure, as well as investor homes that may be coming back on the market, said Rick Shelton, owner and broker of Better Homes and Garden Realty.

"All I can say is I'd be extremely cautious if I was a homebuilder going forward. I think it'll be quarter to quarter," Shelton said.

Bank-owned land sales are decreasing, with mostly smaller, less desirable parcels left on the market, Lenhart said. They're generally 2.5 acres or less. Whereas distressed sales once accounted for about half of total volume, they're now down to about 30 percent, he said.

The largest bank-owned transaction of the quarter occurred at Lake Las Vegas, where New York hedge fund manager John Paulson and Rain Tree Investment acquired 875 acres for $17.3 million from Credit Suisse Bank.

Lenhart said he has more transactions at Lake Las Vegas in the works with Rain Tree.

"They're still active, picking up additional pieces," he said. "It makes sense. They're the declarant and it's cheap."

The problem with buying land at Lake Las Vegas is the extraordinarily high carrying cost, Lenhart said. While the Paulson deal breaks down to about $20,000 an acre, the cost for special improvements runs several hundred thousands of dollars a year, he said.

"That's a speculative play for Rain Tree," he said.

Residential and planned community development accounted for 52 percent of third-quarter transaction volume.

Among nonresidential land-use categories, the highest average price per acre was $268,370 for business and design research park, though it represented only 2 percent of total sales. Commercial land was $232,886 an acre and represented 13 percent of the total.

Lenhart said Wal-Mart Stores Inc. purchased bank-owned land near Rainbow Boulevard and Blue Diamond Road. Wal-Mart officials have not released details of the purchase.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.