LAS VEGAS HOUSING 4Q16: Affordability Still the Main Concern – Production Permanently Moves to Higher Price Points
- For 2016, Annual New Home Starts are at the highest level since 2008 – starts in 4Q16 were up 17% over 4Q15
- Production under $200K has now been eliminated, as base prices have shifted into the $200-$300k range. We are beginning to see more slightly affordable attached product entering the market.
- Higher land and construction costs coupled with strong demand are forcing builders to raise prices – the average price for all SFD active projects is $414K; up 7% compared to year ago.
Metrostudy’s 4Q16 survey of the Las Vegas housing market shows that that 2016 annual single-family new home closings were 7,330 – 11% more than in 2015. Annual starts are up 12%. 4Q16 quarterly starts are also up 17% compared to 4Q15 as builders remain confident in the market. The quarter’s closing pace increased by 13%. 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 2008.
“Our average “offer to build” price for all SFD active projects is $414K; up 7% compared to year ago,” said Greg Gross, Director of Metrostudy’s Las Vegas region. “Higher land and construction costs coupled with strong demand are forcing builders to raise prices. Production under $200K has now been eliminated, as base prices have shifted into the $200-$300k range. The market is beginning to see more slightly affordable attached product entering the market.”
Pricing in the resale market has increased a bit more modestly through December. The average sales price for Single Family Homes increased 6.4% this year with Median sales price up 8.3%. Compared to December 2015, the average asking price of for-sale homes is 10% higher at $395k.
Total Finished Vacant housing inventory has decreased 1% this year. Single Family Finished Vacant inventory increased 17% as builders needed to replenish their vacant inventory to satisfy demand. Total Single Family inventory including units under construction has increased 22%, which may trigger a slight risk of over supply going in to 2017. But currently, there is only 1.5 months of Finished Vacant home supply at current pace.
Entry and mid-level product will be opportunistic as the market continues to improve. Total finished lot supply has fallen considerably over the past five years but lot deliveries did increase during 2016. There are now 9,897 Finished SFD lots today, that’s only 14.7 months of supply, even though 8,128 new lots were delivered during the past 12 months – a 10% decrease over the prior year’s lot deliveries.
There are now 9,912 lots in development compared to 4Q15 when 13,790 lots were under development, the total number of lots in development has decreased 28%. 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.
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 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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