Our December housing statistics in Las Vegas came in pretty much as we expected. The annual totals leave us disappointed, but with an “it could have been worse” feeling. In our opinion, the 2014 results are less than anyone projected.
There were 611 recorded new home sales in December, putting the 2014 sum at 6,007. This is a year to year decline of 1,296 sales, or 17.8 percent. Is it a case of 2013 being a “banner year”, or 2014 a “bummer year” for most builders? We don’t think many builders feel 2014 was as bad as the year to year comparison of closings suggests. The 2014 closings were an increase of 463 sales, or 8.4 percent) from the 2012 total (5,544). The next chart displays the monthly trends of new home closings since 2011. It shows how quickly the pace improved in 2012 and 2013. Sales dropped steadily in the second half of 2012, and have trended upward at a much slower rate in 2014.
Delays in processing final maps of new communities in the Clark County jurisdiction were a factor why the 2014 closing figures aren’t higher. Possibly a couple hundred more homes could have closed in 2014. The closings from many new projects had to be pushed back into 2015. This same issue will occur again with losings projected for 2015 that will be delayed into 2016.
We think there will be a small rise in this year’s final closing figure, probably 6,300 – 6,500. There is no doubt that the forward planning, revenue streams, production schedules, and many other facets of a home building business have been affected by these delays.
The median price of the recorded new home sales in December was $291,785. This was $6,816 less (2.2 percent) than the median price in December, 2013. However, in 2013 there were significant jumps in prices during the 2nd and 3rd quarters. During most of 2014 the new home median price was pretty consistent. If we compare all of the 2013 closing prices with the 2014 closings, there was a change in the median price by 11.6 percent.
The monthly new home median price did not increase during 2014 as much as we expected it might. We still think the monthly median price will soon begin noticeably rising. It has to, as many of the new offerings are being built on lots that have a higher land basis. The delays of new subdivisions make it very difficult to project where the median price might be at the end of 2015. Presently, we expect it to be about another $20,000 – $25,000 higher. This is something to watch closely as we get deeper into the year.
The December new home permit total was 497. It brought the 2014 sum to 6,623, which is a year to year decrease of 343 permits or 4.9 percent. (Note – this does not include Mesquite). The number of permits during 2014 in the metropolitan area was a disappointment, because if not for the delays at Clark County in processing final maps, the total would have been a lot closer to the 7,000 permits we projected at the beginning of 2014. According to area home builders it now takes about 12 months to process final maps in the Clark County jurisdiction. That is about twice as long as it takes them in North Las Vegas, Henderson, and the City of Las Vegas. We are hoping that in 2015, Clark County finds a way to get the processing time back down to about 6 months as in the other entities.
Based on what the permit tally was in 2014, at this point we think the total in 2015 will be 7,000 – 7,250. We can’t count on much improvement in the processing time of new subdivisions in Clark County, although pressure from the industry through the “political network” may bring it down a few months. The demand is good, but still up and down. The good thing is it looks like even IF the FED starts raising rates, it won’t be by much.
In our opinion, the new permits tell the “story” of who is the “builder of the year” for 2014 in Las Vegas. By pulling 1,153 permits, which resulted in an incredible market share of 17.5 percent, Lennar leaped into the number one position. It is the first time they have been at the top of this list in Las Vegas. Division President Jeremy Parness and the team he has assembled at Lennar have done an incredible job. The Las Vegas new home market still has not recovered from the tremendous fall it took during the past recession. It has struggled to regain some of the past “luster” that had it positioned as one of the top new housing markets in the United States. Lennar expanded their presence from primarily being in the lower, affordable tier of homes to also include the upper luxury end of the market. They made some bold land purchases that turned out to be very successful. They are also well positioned for the next couple of years with enough lots to continue to be at or near the top of the Las Vegas builder list. Our kudos go out to Jeremy and his team at Lennar, for an exceptional year.
We sorted through 3,273 resale closings in December. (This is different than the MLS figures, because they only include the sales that go through the local MLS). It was a nice month to month jump in closings, and brought the 2014 total to 39,053. It was a year to year decrease of 3,883, or 9 percent.
The median price of the resale closings in December was $177,400. This is a 6 percent increase from the median price in December, 2013. Year to year, the median price of the resale closings rose by 9.3 percent. Not bad, and I think most will take it after the debacle we all went through for the last 5 years.
To summarize the current resale segment, we would begin by suggesting most parts of the metropolitan area have clearly morphed into a “seller’s market” during the last half of 2014. We talked to one experienced realtor active in the Henderson area who said after recently viewing some homes she has had listing agents call her (now that is a change!) to see what the sellers can do to help sell the home. There are actually price reductions taking place on some listings.
We believe the number of resale closings in 2015 will be very similar to the 2014 sum. So, the 39,000 level feels pretty comfortable. It appears that sellers have had to become more realistic about their prices, or they will sit on their listing for some time.
Consumers are more discretionary in their demands, and there is definitely more competition from the new home segment. The new homes that are being built today are full of technological advances and gizmos that appeal to everyone. Energy efficiency is a common feature in all new home construction today. Solar energy is available in many new homes, and the costs are within reach for many. Home builders as a group are using new and innovative marketing techniques that will soon be promoting the new home segment. Instead of individual marketing they will be pooling their resources to support and educate the public on the advantages of buying new homes instead of existing ones. We believe that the new home market share will improve beginning in 2015, which will probably work to keep the annual resale activity near 39,000 per year.
As better as many things appear to be in the press and to economists, there are still “roadblocks” that will keep the Las Vegas new and resale numbers in check. There are more of these roadblocks in Las Vegas than in most other large metropolitan areas in the United States. There is still too much negative equity (or homes close to negative equity) that exist in our market before it can be considered a normal housing market. There are also still many thousands of homes being occupied by people who are not making mortgage payments. This is still one of the major problems with all parts of town. At this point, it will just take more time for the market to “flush” these issues so neighborhoods can have a “normal” recovery.
Check out all of our reports at homebuildersresearch.com. Or, call us at 702-645-4200 to discuss any custom data request. Cheers to a very successful 2015.
Dennis Smith, President