LAS VEGAS HOUSING 2Q18: Price and Volume Growth In Housing Are Off To A Rousing Start the First Half of 2018, But How Long Can It Continue?
- Through 2Q18, Annual New Home Starts for detached product are up 10% YoY; Quarterly starts are up 12% from 2Q17 levels. Annual closings are up 9% while Quarterly closings are up 17% over 2Q17 numbers.
- While attached homes remain a smaller overall part of the market, annual attached home starts are up 182% YoY as builders try to deliver affordable product to Millennials and Empty Nesters.
- Median base pricing for new detached homes continues to climb and has now surpassed the $400k milestone, to $408,000 – 10.6% higher than in 2Q17. Production of all detached homes under $250k is extremely limited now, with higher land, labor, and materials (especially lumber) costs forcing builders to continue to raise prices in order to try to maintain margins.
Metrostudy’s quarterly survey of the Las Vegas housing market shows that the number of annual detached new home starts for 2Q18 jumped 10% from a year ago to 9,340. Quarterly detached starts jumped 12% versus 2Q17 to 2,586. There were 8,940 annualized closings in the second quarter which was a 9% increase over a year ago when there were 8,223 detached closings. The quarterly closings totaled 2,340, a big 17% jump over the same quarter a year ago. The attached market has seen a much more significant jump in activity even though it remains a much smaller part of the overall market. Annual attached starts in 2Q18 surpassed the 1,000 mark, hitting 1,029, a massive 182% climb from a year ago.
“Much of the significant increase in attached activity represents an effort by several builders to deliver affordable product to the growing Millennial and Empty Nester Boomers who either cannot afford single family or simply want to downsize or simply want less maintenance,” said Ryan Brault, Metrostudy’s Regional Director for the Las Vegas market. “The first half of 2018 has been the best start to a new year for housing since the banner years of the early 2000s. That said, while market volumes are substantially up from what they were post-crash, the market is still undersupplied relative to demand – for now.”
Median base pricing for new detached homes continues to climb and has now surpassed the $400k milestone, to $408,000 – 10.6% higher than in 2Q17. Production of all detached homes under $250k is almost nonexistent now, with higher land, labor, and materials (especially lumber) costs forcing builders to continue to raise prices in order to try to maintain margins. Most new housing under $250k is now attached. Price appreciation was the second highest in the country amongst major markets per the Case Shiller Index, a robust 12.7%. That won’t be sustainable for long, and time will tell how long demand will continue as the market becomes less affordable to the majority of potential homebuyers without significant wage growth. Will builders be able to respond and deliver product attainable to buyers? That is the burning question.
The resale market remains extremely hot locally. The local market now has less than a month and a half of supply of existing homes available, versus a six month supply in a balanced market. The median price of existing single-family homes was $290,000 in June, up 12.7% from the same month a year ago. That median is about $25,000 below the all-time peak in June 2006 when it was $315,000, but way above the post-recession bottom of $118,000 back in January 2012. The fact that supply of resale homes continues to tighten along with steady demand as indicated by a steady volume of sales means that the upward price pressure is not likely to alleviate soon.
Vacant Developed Lot (VDL) supply is now in its 7th consecutive quarter of decline in the Las Vegas market and is at a record low since at least 2000 when Metrostudy began tracking. VDL supply is now about 24% of what it was at its peak in second quarter of 2007 as the crash was hitting full swing. As annual starts have risen and lot deliveries have not kept pace the VDL months of supply continues to fall as well and is now at a staggeringly low 8.0 months of supply, down from 9.1 last quarter and 12.1 a year ago. Lot deliveries have remained flat even as demand for new housing has risen, which is helping to put upward pressure on land and home pricing. While the majority of lot development remains in the large master plans, North Las Vegas is beginning to see an uptick in activity, as well, and will continue going forward.
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