Las Vegas builders optimistic about market

Las Vegas new homebuilders are optimistic about the market after recording their best three-month stretch since interest rates started rising in 2022.

The 3,422 net sales in the first quarter — sales minus cancellations — surpassed the 2,659 in the first quarter of 2023 and fell just below the 3,478 in the first quarter of 2022. Thirty-year fixed interest rates started 2022 at 3 percent and surpassed 4 percent in March before reaching 7 percent in November 2022. After dipping at the end of 2023, rates are back over 7 percent in May.

Luke O’Loughlin, director of sales at Richmond American Homes, points to limited inventory on the existing home market side for helping to boost new-home sales.

“That’s driving more people to new homes,” O’Loughlin said. “And one of the big drivers is we’re fortunate to have our own mortgage company. We are doing everything possible to do right (by offering) buy-downs (of interest rates) to continue to try to make new homes affordable for people.”

O’Laughlin said their goal is to make homes affordable to buyers and if interest rates continue doing what they’ve done, “we’re going to continue to try and make it affordable,” he said. “That’s one way we have seen and found to be successful doing that is helping with rate buy-downs, and I don’t see that going anywhere.”

Richmond American plans to roll out a larger two-story product this year in the upper 3,000 square feet, O’Loughlin said. Attached home sales continue to be popular at about 25 percent of the market since they are more affordable.

“All products have been selling but attached continues to do really well,” O’Loughlin said.

Aaron Hirschi, the president of KB Home’s Las Vegas Division, said it’s an exciting time because they’re well-positioned to respond to strengthening demand with favorable demographics. Millennials continue to gain market share in the new-home market and KB targets entry-level buyers and move-up buyers

“We have strong traffic and demand, and the sales results to go along with it,” Hirschi said. “There’s a high concentration of millennials and Gen Z buyers out there right now for us because they are our primary buyer segment. We’re encouraged by it and very active in the land market, acquiring more than 600 lots so far in 2024.

We’ve gotten a few thousand under control and in the process of acquiring and we’re opening three new communities (by the end of May).”

Arroyo Trails is in the southwest and Brevi, a single-family home community, is in the Southern Highlands area, Hirschi said. KB is also introducing a three-story detached town home product in the Southern Highlands area called Cameron Heights that will range from 1,600 square feet to 2,300 square feet and has strong interest with prices starting at $419,990, he said.

Hirschi said when mortgage rates started increasing two years ago, KB “pressed pause” on land buying to see what it meant. The builder has 18 new-home communities active, fewer than the last couple of years, which is why it was the only builder in the 10 during the first quarter to record a decrease year-over-year.

“We have 19 new communities that will come online over the course of 2024 and 2025, and we’re really active in the land market with exciting opportunities in the works and expect some strong growth over the next couple of years,” Hirschi said. “Demand has been good, but it’s just a matter of our community count at the moment.”

Hirschi pointed to guidance from the Federal Reserve that it plans to cut interest rates this year and that will lead to a decline in mortgage rates.

“With the amount of demand we are seeing, if rates come down, you are probably going to see demand increase,” Hirschi said. “It’s good for the future of the housing market but also makes right now a good time to get into the market and buy the home that’s right for you.”

Taylor Morrison Las Vegas Division President Kent Lay said potential buyers were shell shocked with interest rates rising over the last two years and didn’t know what to do — either they were in denial or expecting rates to fall.

“A year has gone by, and I think people have gotten used to interest rates being up and will be up for a while, and if they need a new home that’s going to be the price they pay,” Lay said. “There’s not a whole lot on the resale side with 1.6 months of inventory and that’s not growing much. A lot of those people locked into their loans at 3 percent and 4 percent aren’t going to sell their home right now unless they have to and jump into a 7 percent interest rate because it’s a dire need.”

There’s a lot of buyers thinking this is temporary, and that they will be able to refinance off this higher interest rate in 2025, Lay said.

“We had a more than 60 percent increase in the first quarter so we’re reaping the rewards of that demand, but we’re still giving incentives to help with the interest rates (to get it below 6 percent),” Lay said. “That’s the difference between the new-home market and the resale. The new home market is able to give incentives to buy that interest rate down a little bit. It’s going to be an interesting dynamic when the interest rates come down and these people who want to sell their resale start selling and how that movement happens.”

As long as resales stay down, new-home sales will do well, Lay said. He acknowledged there has been a little bit of a slowdown in sales during the second quarter as interest rates have ticked up slightly but expects consistency throughout the year.

“If the Fed does lower interest rates, that will create a spike in buying,” Lay said.

Taylor Morrison recently opened Kensington Estates, a collection of 62 single-story homes in south Las Vegas off Durango Drive north of Blue Diamond Road. The prices start in the high $500,000s for homes targeting move-up buyers.

“We’re optimistic because even though interest rates are where they are, we’re still selling and that will continue with the low resale side,” Lay said. “Our competition is resale. With rents the way they are, it makes more sense to buy than rent for a lot of people.”