By The Numbers, vol3

HBRLogoOur February housing statistics suggest the new home market segment is holding up pretty well in 2015. The current pace is pretty similar to what was present in the first quarter of 2014. We counted 474 new home recorded sales (closings) in February. The 2015 2-month sum is 835, compared to the 831 we counted in 2014 during the same period of time.

The median price of new home closings (all product types) in February was $297,860. Although this was a fairly significant 1-month decline ($20,330), it is about where it was expected to be relative to the new home pricing trend during the last half of 2014. The February median was a year to year increase of only $1,493, or less than 1 percent.

If we omit the 20 condo closings (including the high rises) in the February data, the median price of the remaining single family transactions was $293,692, a year to year increase of 1.6 percent.

There was good news with the February new home permits. We counted 661, which was a one month increase of 254. It put the 2015 permit total at 1,068, which is a rise of 27.7 percent. Our regular readers know that we have been expecting a rise in permit activity because of the jump in gross/net sales activity in the last 45 days. The data in our WEEKLY TRAFFIC/SALES WATCH REPORT indicates the overall pace is continuing, good news for the monthly permit counts going forward.


—————————————————————————————————– “THE LAS VEGAS HOUSING MARKET LETTER” – March 21, 2015 A monthly publication of HOME BUILDERS RESEARCH, INC., call 645-4200 for subscription details. E-mail at [email protected] web site – DO NOT REPRODUCE WITHOUT PERMISSION
We sorted through 2,842 recorded resales in February. It was a nice increase from what we counted in January (323) but before we start celebrating, we need to see the uptick continue for another month or two. The 2015 total is now at 5,361, a year to year increase of 3 percent.

The median price of the resale closings (all product types) was $177,000. Although this was very consistent with the previous 6 – 8 months, it does represent a year to year increase of $12,000, or 7.3 percent.

The number of overall listings is rising very slowly, but coupled with the increasing total under contract, the February figures from Residential Resources places the supply of listings at 4 months. This is still well below the “normal” figure of 6 months. The “street scuttlebutt” from realtors suggests that virtually any home that is listed at or below $200,000, and is in relatively good condition, should have multiple offers within a week of getting on the MLS. This time frame changes quickly as the price goes up. Once it gets to the FHA maximum loan amount ($287,500), it is a different story. Buyers are more discretionary, kind of like a “normal” market???

Summarizing the resale market by referring to multiple offers and price bidding isn’t accurate. It’s a prime example of how segmented the housing market actually is in Las Vegas. It can’t be generalized with any high degree of accuracy. The status of each price range, market area, product type, etc, all have their individual circumstances. An average size house/lot in the northwest sub-market area might list for $10 – $20 per square foot less than in parts of Henderson. The next graph illustrates the resale closing trend since January, 2012.
There were 393 resale condos in February that were included in the above resale data. If we omit the condos, the remaining 2,126 single family transactions displayed a median price of $185,000. The median price of the resale single family closings has been at roughly $185,000 – $190,000 for the last 6 months. We expected the SFR resale median to rise more during this period. The number of REO listings has risen a little, but certainly NOT enough to greatly impact the overall median price.
The percentage of cash transactions through the MLS in February was up a little at 29 percent, but basically this statistic hasn’t changed much during the last 6 months.
—————————————————————————————————– “THE LAS VEGAS HOUSING MARKET LETTER” – March 21, 2015 A monthly publication of HOME BUILDERS RESEARCH, INC., call 645-4200 for subscription details. E-mail at [email protected] web site – DO NOT REPRODUCE WITHOUT PERMISSION
Some of the lenders we have spoken to recently are still very positive when they are in front of housing industry groups or individuals who only like to hear only the “good news”. However, when we speak to them one on one, many are worried about what any rising mortgage rates could do to housing sales velocities. It seems not a matter of “if”, but “when” the Fed will begin raising interest rates. Based on our observations, we think the local housing market, both new and resale, do not have a strong enough “base” to hope that consumer demand can absorb any rise in monthly payments. The new home industry already took a huge hit from HUD when they lowered of the FHA maximum loan by 28 percent. Oh sure, there will be a short spurt of sales due to the fence sitters jumping in before the rates do increase, but that euphoria will likely be short lived. It could get bad enough that the Fed will have to re-instate another round of QE (quantitative easing) if the thump on the floor is too extreme! Even a small increase, as expected, could have a negative impact on the psyche of consumers. WE IMPLORE THE FED TO NOT RAISE THE INTEREST RATES, YET. More patience is needed. Only those not involved at the “street level” of the housing market think a small rate increase will have no adverse effect on new home production, and all the jobs that go with it.
We refer back to page one of this newsletter and the graph of new home permits. In 2014 there were 6,632 permits pulled in the Las Vegas metropolitan area. The pace we are on suggests a small increase in 2015, but NOT enough to think that the industry has regenerated itself to anywhere near its past levels of production. The following graph shows the annual permit totals going back to 2000. It gives a clear picture of how much production has changed, but also a very positive outlook of the POTENTIAL there is for growth in the new home industry in Las Vegas.



We suggest the local recovery is still in the early/mid stages of where it should eventually go. The permit count could double in Las Vegas and still be considerably less than what it was in 2000 – 2007. The Fed needs to be extremely careful about ANY interest rate change; it could delay this recovery by another year or more.
We believe there is a huge amount of pent up housing demand that is percolating in Las Vegas. Multitudes of homeowners have felt stuck in their mortgages and homes, unable to make a move to improve their life situation, whether it be moving up or downsizing. However, for our local market to continue to show ANY significant improvement it will have to keep relying on in-migration and baby boomers, rather than a surge of local demand. The loss of equity, savings, drops in FICO scores, losing confidence in the overall economy, and other factors have kept homeowners in their homes much longer than has historically been the norm for the southwestern part of the United States, about 5 – 7 years according to past reports from the US Census. Many people are ready for a change, and would like to upsize or downsize depending on their situation.

The lending segment seems to be treading softly forward toward the summer, waiting for the Fed with all the great wisdom we are led to believe emanates from them, to lead consumers into a brighter future. Do the policy makers at the Federal Reserve really think the real estate market is strong enough to withstand higher interest rates and therefore bigger payments? We don’t. Especially in a market like Las Vegas and other hard hit recession areas, where affordability is absolutely the key to greater sales velocities. According to almost everything that is written, rates will rise, but not too much. So, the next thing we wait for is to see how many “fence sitters” purchase and close a home before June. If they don’t bump the rates in June, then we wait until September. In either case, we don’t see much changing in consumer demand until then.
There are some significant changes on the horizon for lenders and their clients. According to Mike Sweeney (Alpine Mortgage) there have been approximately 1,000 guideline changes since the inception of the Dodd-Frank Act. There are a ton of more changes coming, as well. For example, after August 1st there will a 3 day right to rescind on a purchase. Think about that one …
And, Title Companies are going to be coming under more pressure to make certain that all Disclosures will have to be 100 percent accurate, or else the processing will have to start over. These are just a couple of things that home builders will be watching very closely.

Our updated Finished Lot Report (volume 9) is completed and ready for download from our web site, It is a listing of the finished and partially finished lots in the Las Vegas metropolitan area. We have listed and summarized the finished and partially finished lots in each sub-market area, by builder, and master plan. There are charts and graphs to illustrate the share of lot sizes by sub-market area, and more. A huge bonus is the Interactive Map that accompanies the report showing the location of all the data on a Google Earth™ satellite image. This is a very helpful tool for anybody interested in the Las Vegas area land market. You can call in your order at 702-645-4200, or download it directly from our web site,
You can also download from our web site our monthly Interactive Land Report. It not only locates the transaction, but when you click on the marker, a data box appears with all the pertinent data from the actual closing transaction. This is another part of our series of land reports for the Las Vegas area.
We have also added a new feature to our web site,, a monthly data chart that contains new and resale data from the most recent month. It should help with those internal company reports, press releases, and a myriad of other things for housing related professionals.
We always welcome your comments and/or suggestions, you can follow us on Twitter, @hbrlv.
Thank you,
Dennis Smith, President
“THE LAS VEGAS HOUSING MARKET LETTER” – March 21, 2015 A monthly publication of HOME BUILDERS RESEARCH, INC., call 645-4200 for subscription details. E-mail at [email protected] web site – DO NOT REPRODUCE WITHOUT PERMISSION