LAS VEGAS HOUSING 3Q16: The Market is at 2008 Levels – Affordability Squeezed as Production Moves to Higher Price Points
- Annual new home starts are at the highest level since 1Q08, and 3Q16 marked the highest quarterly start level since 3Q07
- Median Single Family Detached Homes Prices are at $321k, Up 6% YoY. Production under $200K has now been effectively eliminated
- A worrisome decline in lot supply will continue to pressure prices upward in the future, especially with the amount of higher end product coming to market. With that said, Metrostudy is forecasting 8,300 new home starts in 2016.
Metrostudy’s 3Q16 survey of the Las Vegas housing market shows that annual new home starts are up 13% YoY. 3Q16 quarterly starts are also up 13% compared to 3Q15 as builders remain confident in the market. Annual single-family new home closings were 7,088, 14% more than in 3Q15. The quarter’s closing pace increased by 14%. 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, and 3Q16 marked the highest quarterly start level since 3Q07,” said Greg Gross, Director of Metrostudy’s Las Vegas region.
“Production under $200K has now been eliminated, as base prices have shifted into the $200-$300k range. Our median “offer to build” price for all SFD active projects is $321K; up 6% compared to year ago. Higher land and construction costs coupled with strong demand are forcing builders to raise prices.”
Total Finished Vacant housing inventory has decreased 6% this year. Single Family Finished Vacant inventory remained flat as builders needed to replenish their vacant inventory to satisfy demand. Total Single Family inventory including units under construction has increased 20%, which may trigger a slight risk of over supply going in to 2017. But currently, there is only a 1.4 months of Finished Vacant home supply at current pace. Entry and mid-level product will be opportunistic as the market continues to improve.
There are now 10,934 lots in development compared to 3Q15 when 14,466 lots under development and immediate production capacity remains healthy for the next 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. 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 has broken ground for their North Las Vegas manufacturing facility. All of which is helping to solidify Nevada as a worthy consideration for the “Tech Industry”. 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 future lots, which may pressure affordability which is already worrisome, especially with the amount of higher end product coming to market. With that said, Metrostudy is forecasting 8,300 new home starts in 2016.
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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