LAS VEGAS HOUSING 1Q17: Affordability is Everything: Shrinking Lot Supply Pushes Prices to New Highs
- Annual New Home Starts are at their highest levels since 1Q08 – through 1Q17 annual starts are up 12% YoY.
- Upward pressure on prices continues to build: New Home production under $200k has been eliminated and 2017 is the year that production over $500k will ramp up
- Pricing in the resale market has increased steadily: Through March, the average sales price for Single Family Homes increased 7.7% with Median sales price up 10%. YoY, the average asking price of for-sale homes is 11% higher at $415k
Metrostudy’s 1Q17 survey of the Las Vegas market shows that annual single-family new home closings were 7,925, up 19% from 2016. Annual starts are up 12%. 1Q17 quarterly starts are also up 6% compared to 1Q16 as builders remain confident in the market. The first quarter’s closing pace increased by 39%. All of which can be indicative of both increased demand, low levels of finished inventory, and tight lot supply. Annual new home starts are at the highest level since 1Q08.
“New home production under $200k has now been eliminated as base prices have shifted into the $200k-$400k range,” said Greg Gross, Regional Director of Metrostudy’s Las Vegas office. “2017 will mark the year that more product will be coming on line priced above $500k. Our average “offer to build” price for all SFD active projects is $417K; up 6% compared to year ago. Higher land and construction costs coupled with strong demand are forcing builders to raise prices. Entry and mid-level product will be opportunistic as the market continues to improve.”
Total Finished Vacant housing inventory has decreased 7% this year. Single Family Finished Vacant inventory decreased 2% as builders needed to replenish their vacant inventory to satisfy demand. Total Single Family inventory including units under construction has increased 11%, which may trigger a slight risk of over supply going in to 2017. Currently, there is only a 1.4- month supply of Finished Vacant homes at current absorption pace.
Pricing in the resale market has increased steadily through March. The average sales price for Single Family Homes increased 7.7% this year with Median sales price up 10%. Compared to March 2016, the average asking price of for-sale homes is 11% higher at $415k.
Total finished lot supply has fallen considerably over the past five years but lot deliveries did increase during 2016. There are now 8,959 Finished SFD lots today, that’s only 13 months of supply, even though 7,440 new lots were delivered during the past 12 months. A 17% decrease over the prior year’s lot deliveries. The net absorption of lots highlights the dearth of deliveries as we continue to deplete the supply even as 7,440 new lots were added over the past 12 months, we consumed 8,184 lots.
There are now 10,803 lots in development compared to 1Q16 when 12,521 lots under development, the total number of lots in development has increased 9% over last quarter, but 14% fewer than last year. The majority of the new lots in development are in Summerlin, Inspirada, Skye Canyon, Cadence and the general Southwest Valley. It is worth noting that this number of finished lot supply has declined over the past year, which will keep supply relatively tight, at least for the next 12-18 months.
“Las Vegas has experienced a very robust 2016, and 2017 is off to a strong start,” said Gross. Nevada is once again among the top relocation destinations, and more companies are beginning to consider Nevada. All economic indicators are expected to improve as many new projects along the resort corridor begin to materialize. The Tesla factory construction is in full swing in Reno, and has re-energized economic development for the state. Closer to home, electric automobile manufacturer Faraday Future continues to develop their North Las Vegas manufacturing facility, and HyperLoop1 has completed their test track. Within the past year, Las Vegas has attracted NHL and NFL! Both virtually impossible just a few years ago. Over-supply of lots along with diminished demand has driven down lot prices and land values in the past, but the quickly shrinking supply will force builders to pay more for lots, which will pressure affordability. With that said, Metrostudy is forecasting 9,140 total new home starts in 2017.”
For information contact: Greg Gross @ 916.231.9370
Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide. Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day.www.metrostudy.com
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