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Several factors play into new home sales dip

New home sales in the four leading master-planned communities in Las Vegas are down during the first six months of 2019, but builders and analysts said they wouldn’t be surprised if they finish the year even or ahead of 2018.

Four master-planned communities remained in the top 50 in the national rankings in sales from January through June, but each dipped in the rankings, according to a reported issued by national real estate research firm RCLCO.

Summerlin fell from third to fourth in the nation after sales declined from 772 a year ago through the first six months to 675 this year, a fall of 13 percent.

Inspirada in West Henderson had the biggest decline of 28 percent going from 475 a year ago to 344 this year. It fell in the rankings from eighth to 12th.

Cadence in East Henderson had the smallest decline at 4 percent, going from 334 a year ago to 321 this year. Its national ranking fell from 12th to 14th.

Skye Canyon in the northwest valley dipped 8 percent from 284 a year ago to 260 this year. Its national ranking went from 17th to 23rd.

The good news for the master plans, despite the declines in the first half of 2019, is they’ve rebounded from a slowdown in the second half of 2018 after a strong start during the first quarter of 2018. Rising interest rates above 5 percent helped dampen the marketplace at the end of 2018, but they’ve come back down now to less than 4 percent that bodes well going forward.

The sales in all four Las Vegas top master-planned communities easily surpassed the last six months of 2018. Sales traditionally slow in the fourth quarter.

In addition, with exception of Inspirada, the other three master plans have significantly more sales in the first half of 2019 than the first half of 2017.

That’s 205 more in Summerlin and 90 more in Cadence. Skye Canyon, which was a new development at the time, didn’t even crack to top 50 in the nation in which No. 50 had 174 sales.

Todd LaRue, RCLCO’s managing director, said the decline in Las Vegas master plan sales during the first half of the year was also seen in Phoenix and Southern California. He said a labor shortage, lack of affordability and lower-priced competition outside of the four big master plans may be a big part of the decline.

Builders and analysts in Las Vegas attribute the decline to not being able to have homes ready and strong demand in the first three months of 2018 that’s hard to match.

LaRue said that could lead to higher densities by builders to improve affordability. The price of single-family homes closed in May was $399,636, a 7 percent increase over May 2018.

For the entire new home market in the valley, Home Builders Research reports sales are down 12 percent for the first six months of 2019 and closings, which have a lag time from sales, are down 5 percent.

Nat Hodgson, executive director of the Southern Nevada Home Builders Association, said the numbers are reflection of the cyclical nature and volatility of sales that can occur.

“We’re a little down, but we were superhot at the beginning of last year, which is an anomaly,” Hodgson said. “Now we’re comparing the first part of this year to the first part of last year. There’s nothing that is making me nervous.” Although he added he’s worried about rising land costs, tariffs increasing construction material costs, regulatory costs and the need for more construction workers.

Hodgson acknowledged that prices continue to increase, but interest rates have declined to help with home expenses. Also, Las Vegas is underbuilding for the demand based on its population growth, he said.

“I thought with new home permits for 2019 we would have 2 percent growth,” Hodgson said. “I think we’re going to be dead flat of what we did last year. And, I think we’re looking at a single-digit increase in 2020.”

Hodgson said he doesn’t buy suggestions that affordability has contributed to the decrease in the first six months because Las Vegas is more affordable than California and driving people to this marketplace. The percentage of town home development continues to increase at about 15 percent of the total home production, and that’s more affordable.

The median price of town homes sold in May was $294,039, a 4.2 percent decline over May 2018, according to Home Builders Research.

“We would be building more homes if we had the labor,” Hodgson said. “All the expert analysts said we should be building 14,000 to 15,000 homes a year given the demand, but we can’t with the labor force. That’s why we’re pretty much strapped at 11,000 right now. We have 50,000 people migrate here a year, and they need a place to live. They’re not all living in tents.”

Home Builders Research President Andrew Smith said even if 2019 sales are lower than 2018, that won’t be a “bad thing.” Population gains should help drive demand, he said.

“Last year we were trying to catch up, and maybe we’re leveling off and finding the volume that fits right now,” Smith said. “We could end up with more sales than last year because the end of last year was so bad. Is it slower than last year? Yes, but things have been consistent. If we can maintain that consistency, we will see how that plays out at the end.”

Smith said although permits are down 12 percent for the first six months, June recorded the first month-to-month increase. Permit numbers had decreased every month for five consecutive months.

“I would just look at it as a positive sign and a good correction to maintain the consistency or steady numbers throughout this year for all the major data points we track such as closings, permits, net sales and prices,” Smith said.

A labor shortage contributes to a lack of home construction, Smith said. Town homes, meanwhile, make housing more affordable and help with demand at lower price points, but not everyone wants to live in one, he said.

“Builders are doing what’s needed to do to maintain their numbers, but from a consumer standpoint if I want a new home that ticks all my boxes I better spend a half-million dollars, which is not doable for most people,” Smith said. “People with young families are trying to get away from those places. It might be good for someone downsizing or a first-time buyer to try and market a town home to those with families is a tough sell.”

Two of the developments that are among the top 10 sellers in the first six months of 2019 are attached housing with median prices of less than $230,000, Smith said. Those are Beazer Homes’ The Cliffs at Dover near Nellis Air Force Base. The other is The Hudson by Lennar Homes in North Las Vegas.

“If you want to sell a lot of homes you have to be under $350,000,” Smith said.

■ There are exceptions, however, Smith said. The top-selling community in the valley during the first half of the year is Reverence Heights, a Pulte Home community in Summerlin. It had 84 sales through the end of June.

“That’s surprising because the average closing price there is about $800,000,” Smith said. “That is product people like in a good location and is the newest thing.”

■ The No. 2-selling community during the first six months was The Heritage, an age-qualified Lennar community in Cadence with 83 sales and average base of $397,000, Smith said.

■ No. 3 are town homes by KB Home in Inspirada with 74 sales and average base price of $240,000.

“Those three cover the whole spectrum,” Smith said. “You have active-adult in Henderson, more expensive in Summerlin and town homes in Henderson.”

Summerlin’s President Kevin T. Orrock of The Howard Hughes Corp. said while new home sales in Summerlin during the first half of 2019 were down over 2018, he said they’re proud to be the only Nevada community in the top 10, and only one outside of Florida to be in the top 5. He’s optimistic about the rest of the year.

“Market-wide, new home sales in 2018 started out strong and slowed as the year progressed,” Orrock said. “This year, sales are picking up pace as the year goes on, so we may end up with similar year-over-year numbers.”

Orrock said Summerlin will continue to be successful by market segmentation and diversity.

New homes in Summerlin range from 874 square feet to more than 5,000 square feet and prices from the mid-$200,000s to more than $1 million.

At Cadence, Cheryl Gowan, vice president of marketing, said sales have been good in 2019 and the reason they’re down “a little” is availability of homes to sell with parcels being developed. A new builder, Storybook Homes, is coming on board in the fall and two new communities are opening later this year by Richmond American Homes, she said.

“Sometimes,a slowdown isn’t because demand isn’t there but because we don’t have parcels ready,” Gowan said. “We anticipate having those parcels ready and demand strong. We’re expecting to match last year or surpass last year.”

Brian Kunec, regional general manager of KB Home, said any decrease in sales at Inspirada should be attributed in part to “timing gap” from moving from the east village to west village with builders opening new communities.

“If anything, that impacted the year-over-year comp,” Kunec said. “I don’t think it had anything to do with the community or sales pace in general. KB is still selling strong at Inspirada. It’s just a matter more of getting some of the new communities online.”

Kunec said new communities will open this summer and by the end of the year. Toll Brothers and Pardee Homes have opened ones on the west side, he said.

As for the RCLCO report, LaRue said home sales at the nation’s 50 top-selling master-planned communities exceeded expectations in the first half of 2019, with a pace that indicates the potential for a 10 percent increase at year’s end compared with 2018. On average, communities on this year’s list experienced approximately 3 percent growth in sales over the same time period last year.

Texas, Florida, and California account for 66 percent of total sales among the 50 top-selling communities, with the share of total top-selling master plan sales in other states decreasing from 38 percent to 34 percent since midyear 2018, LaRue said.

The Villages in Florida is estimated to be the top-selling master plan in the country thus far in 2019 with approximately 1,000 sales. Sarasota’s Lakewood Ranch holds No. 2 spot at 824 sales through midyear. Another Sarasota area community, West Villages, occupies the third place.

California represents 15 percent of the total sales of the top 50 master plans, the same as last year’s top 50 list. Following California, Arizona and Nevada represent 11 percent and 10 percent of sales of this midyear’s top 50.

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