LAS VEGAS HOUSING 1Q19: Detached New Home Base Prices Fall for First Time In a Long Time as Builders Pivot to Smaller Product
- Median base pricing for new detached homes showed the first decrease since 2Q15, dropping about $4k to just over $410,000, a decline partially attributable to an overall shift to smaller product being built in an effort to keep prices down and cater to a larger buyer pool in an increasingly less affordable market.
- Annual detached new home starts are down 6% from 1Q18 levels, while annual attached starts are up 77% in the same time period.
- Attached product now makes up 14% of all share of new home activity versus two and a half years ago when it made up less than 2% of all new home starts.
- Home price appreciation as measured by Case Shiller continues to outpace all other US markets even though it has fallen back some in recent months (it was +9.7% YOY versus +14% YOY in the late summer last year).
Metrostudy’s 1Q19 survey of the Las Vegas housing market shows that annual detached new home starts for 1Q19 saw a decline of 6% from a year ago to 8,514, while quarterly detached starts dropped 17% from 1Q18 to 1,795 and down 9% from 4Q18. This figure represents three straight quarters of decline in detached starts in the Vegas market, an indicator not just of a slowing market the past couple of quarters but also of a shift into building more attached product. There were 8,797 annualized closings in the first quarter which was still a 2% rise from a year ago. The quarterly closings totaled 1,950 which was a 10% drop from a year ago and 13% below 4Q18.
Conversely, annual attached starts in 1Q19 hit 1,382, a 77% jump from a year ago and a more modest 5% growth over last quarter. Attached product now makes up 14% of all share of new home activity versus two and a half years ago when it made up less than 2% of all new home starts. Despite the increase in attached starts, total annual starts for all home types were up just 1% year over year to 9,896 while quarterly starts fell 12% from last quarter to 2,108. Annual closings for all home types were 9,874, up 9% from a year ago while quarterly closings in 1Q19 showed a 5% decline from a year ago to 2,220.
“Median base pricing for new detached homes showed the first quarterly decrease since 2Q15, dropping about $4k to just over $410,000 – just a 3.6% increase over 1Q18,” said Ryan Brault, Regional Director of Metrostudy’s Las Vegas market. “The decline was partially attributable to the slower activity in the beginning of the year but also an overall shift to smaller product being built in an effort to keep prices down and cater to a larger buyer pool in an increasingly less affordable market. In fact the NAHB Housing Opportunity Index dropped to just 46.4 in 4Q18. That means that the median priced home was affordable to only 46.4% of households given the median income. That 46.4 index number compares to 58.8 in 1Q18 – a massive drop. Part of that was due to home price escalation outpacing wage growth, but also to higher interest rates. As mortgage interest rates have dropped more recently that has seemed to have a positive impact in demand in more recent months, coinciding with the beginning of spring selling season.”
Home price appreciation as measured by Case Shiller continues to outpace all other US markets even though it has fallen back some in recent months (it was +9.7% YOY versus +14% YOY in the late summer last year). While the market did see some pullback in volume and pricing the last couple months of 2018 into early 2019 more recent data shows a strong resurgence as of March and heading into April in the Vegas market and some others.
Similarly, the resale market took a hit at the end of 2018 and into early 2019 as well with a spike in inventory that was frankly much needed given the tightness of the market for much of last year. There are 3.1 months of supply of inventory which is still below the equilibrium level of 4-6 months. Resale inventory overall was up 8% in the Las Vegas market compared to a year ago, while the average days on market was 47 days for all product types, compared to 87 days nationally. The median list price was $314,994 as of March versus $249,400 nationally. The median sales price was $302,000 in March, an increase of 8% from the $280,000 it was in March 2018.
Lot deliveries have overall remained flat even as demand for new housing has risen, which is helping to put upward pressure on land and home pricing. The Las Vegas market, like most others across the country, took a pause as a confluence of outside economic factors slowed things down over the past 4-6 months, but most recent signs show that the period of catching our breath might be short lived as sales are picking up again as we approach peak sales season.
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