The housing industry is improving from its “ok” performance during most of 2014, and we have the data to prove it. In March, there were 543 new home recorded sales. The first quarter of 2015 ended with 1,378 transactions, which was an increase of 100 sales or 8 percent. It’s not a huge change, when considering some of the past (up and down) fluctuations that have almost become expected in the Las Vegas housing scene, but still a positive, upward movement of the new housing segment.
The median price of the new home recorded sales in March was $312,204. When compared to the median price of a year ago it is an increase of $26,729, or 9 percent. We have been waiting for the closing prices of the new homes to display some interesting changes, primarily due to new subdivisions that have a higher land basis. Many of the new home value ratios in the most active sub-market areas have risen in 2015. Some have been pushed upward by excellent net sales, but we think the chief reason for this is the higher cost of land and development costs. More on this later …
Even more impressive than the closings data, is the net sales and consumer traffic counts through the model homes. The next chart compares the net sales (new contract orders) and consumer traffic of the 1st quarter 2014 and 2015. We have segmented the data by sub-market area to make it even more useful. (This data chart is taken from our Quarterly Summary Report).
|1ST QTR – 2014||1ST QTR – 2015|
|AREA||NET SALES||TRAFFIC||NET SALES||TRAFFIC|
NOTE – The above chart is part of our QUARTERLY SUMMARY REPORT. It can be purchased and downloaded at homebuildersresearch.com
Overall, the traffic increased by 26 percent from what was reported during the 1st quarter one year ago. This is where it all starts … increases in sales and production begins as a “numbers game”. More traffic = more sales. Therefore, when the traffic rises, we expect more contract orders, permits, and closings. It’s actually pretty simple; builders have to get more bodies coming through their doors to view the products.
It should follow that the net sales increased in the 1st quarter, and they did overall by 36 percent. The biggest sub-market “gainers” were the southwest area, south, and Henderson. The southwest area saw a 1st quarter year to year rise in total consumer traffic of 62 percent. Yes, there was an increase in the number of active subdivisions in the southwest area (about 50%). However, during March the traffic per project year to year surged by 52 percent. The negative part of this quick analysis would be that the net sales per project (March to March) remained the same in the southwest, at 3.8.
There is a lot of interesting information to be taken from the above chart. For example, in the northwest sub-market area the net sales increased year to year by 21 percent. However, the total traffic decreased year to year by 3 percent. The same scenario took place in North Las Vegas(NLV). Total traffic declined by 4 percent year to year, but the net sales rose by 45 percent. That is a very good sign for the NLV sub-market.
We have said many times that the housing market recovery will not be “complete” until consumers start buying more new homes in NLV. There is a good supply of undeveloped land in NLV, which is something that is missing from other parts of the Las Vegas valley. Since the “Great Recession”, there have been few builders who feel comfortable enough with the level of demand to risk opening a new community in NLV. The City of North Las Vegas is trying to attract and accommodate new subdivisions that contain fresh products and new technologies. And most important, the new construction will help their severe economic situation that has lingered by bringing new revenue sources (taxes).
GOOD NEWS ON MARCH PERMITS … we counted 781 new home March permits in the metropolitan area. That ended the 1st quarter with 1,849 permits, which is a year to year increase of 464, or 34 percent. This is a great start, and if the pace continues the new home market will surge past last year’s 6,632 sum easily surpassing 7,000 permits in 2015. But, we are not convinced the current pace will continue for all of 2015. We think many of the home builders in Las Vegas feel the same way. “Cautiously optimistic” is an overused cliché, but in our opinion it is very appropriate in this scenario.
There was a very notable increase in the number of recorded resales in March. We sorted through 3,856 transactions, 1,014 more than we counted in February. That is an amazing one month change. The first quarter ended with 9,217 recorded sales, which is a year to year increase of 1,165 closings, or 14 percent. This is a very good sign. If the pace continues for a few months it would be a big help to the new home segment.
The local housing market needs to have more consumers looking to upgrade to a new home with equity dollars in their pockets. Judging from the anecdotes from active realtors, there are many baby boomers looking at Las Vegas (and other parts of the southwest) as potential destinations. Whether it is for downsizing or upsizing for retirement, wanting to be closer to their grandkids, getting to a warmer climate, or getting away from the many issues and taxes of California, Las Vegas is a great option for the maturing baby boomers.
The new consumers are great, but we will also need to see a larger number of locals moving up and purchasing new homes before a feeling of “normalcy” returns.
The median price of the resale closings (all product types) in March was $180,000. The resale median for all product types is trending upward nicely. The March median was $3,000 higher than February, which was $2,000 more than the January. The March $180,000 median was also $9,000 more than it was one year ago, a year to year rise of 5.3 percent.
When we segment the March resale closings by product, there were 3,229 single family transactions. Their median price was $192,000.
The condominium segment also had a very good month. Resale condo recorded sales have been running 425 – 525 per month for the past 6 months. In March there were 627 resale condo closings, a very strong increase. The median price of the condo transactions was $102,500, a month to month increase of about $3,000.
The inventory of existing single family (SFR) listings without a contingent offer continues to be very consistent, which is a little surprising. We were told by economists that the supply would slowly rise as more homes emerged from being underwater and the local jobs market improved. However, the next graph displays that it hasn’t happed yet. The last 4 months the inventory of SFR without offers has been flat. The “other side of this coin” would be that a continued tight supply of listings should result in better price appreciation, which benefits homeowners, and the new home segment.
The condo listings without offers have also been very flat, exhibiting small up and down monthly movements. At the end of March there were 1,844 condo listings without offers.
An interesting tidbit we have noted lately are some testimonies at recent hearings during the current 78th Nevada legislature for bills affecting the housing market that suggested lenders and investors have greatly increased the number of foreclosure actions. We checked the data, and found that the Notice of Defaults (NOD’s) doesn’t seem to indicate this. In fact, the number of NOD’s has been fairly flat for at least 6 months. According to First American Title Company, In March there were 911 NOD’s filed, and that put the total for the past 6 months at 4,640. This translates to 773 per month, hardly what we would term as “a great deal more foreclosures being processed”. Before the laws were changed in the prior 2 legislative sessions, the average number of monthly NOD’s was typically 1,500 – 3,000 per month. Just because some “notable person(s)” who is lobbying for a new Bill offers their opinion, or statistics to support their argument, it certainly doesn’t make it a fact. We heard the same kind of “questionable statistics” being tossed around the state legislature during the hearings for AB 284, AB 300, and SB321, and statements of “the new laws would have no ill effects on the housing market or local and state economies.” We’ll let History be the judge of those statements.
ON FRIDAY, MAY 29TH, we will be hosting our next LAS VEGAS HOUSING OUTLOOK
CONFERENCE. Once again, it will be at the Conference Center at the Springs Preserve. We will be presenting a detailed analysis of the current Las Vegas housing market, and how it has evolved from 2014 to where we are in the 2nd quarter of 2015. We will offer our new and resale projections for this year and going into the next couple of years. Market share of builders, master plans, sub-market areas, home prices, and other housing related topics will be addressed.
We also plan to discuss the status of pieces of legislation that are being considered at the 2015 Nevada Legislative Session (78) that might affect the housing industry. These updates will be provided by the Southern Nevada Home Builders Association and other groups. There will also be a panel of local housing professionals and others who will be available for questions and answers for about one hour. This panel will be selected based on the recent “hot topics” which anybody involved in the local housing industry will want to know.
The Housing Outlook Conference will start at 7:30 with a continental breakfast and networking. The program starts at 8:30, and will run until 10:30. You can register for this event at our web site, homebuildersresearch.com. The cost is $40, or if you are a member of the Southern Nevada Home Builders Association, it will be discounted to $35 per attendee.
We try to hold our Las Vegas Housing Outlook Conference about every 6 months. We have waited a little longer this time because we wanted to get as much feedback and data on hand as possible regarding the outlook of what the Federal Reserve might do with the interest rates, and how much it might affect the new and resale housing sales and production moving forward in 2015 and into 2016. We also wanted to get as much information that was available on the changes that might take place at the 78th Nevada legislative session. These topics and more will be part of the basis for our near term projections. The discussions with the panelists and housing professionals in the audience are always something we look forward to.
One of the topics that will be discussed will be the upcoming Integrated Mortgage Disclosures. Have you heard of this? We can assure you lenders and title companies are very much aware of it. It was brought to our attention a couple of months ago by Mike Sweeney at Alpine Mortgage. After hearing just a few of the general changes that it would bring to the process of new and resale closings, we were stunned. The Integrated Mortgage Disclosures will take effect where a loan application is taken by a lender on or after August 1, 2015.
According to First American Title Company, the Consumer Financial Protection Bureau (CFPB), which is an entity created by the Dodd Frank Act, issued a new Truth in Lending Act (TILA) that created two new forms (each with many variations) and NEW 3 business day delivery requirements. They basically deal with loan estimates (3 business days after application), and the closing disclosure (also 3 business days before consummation.) Some of the impacts to the closing process …
- Closings could take longer because of 3 business day review periods.
- There will be different forms for most transactions.
- The contact information and license number must appear on the Closing Disclosure form.
- Clients may receive multiple Loan Estimates due to,
- Changed circumstances – that cause the estimated charges to increase by more than the variance allowed.
- Multiple applications for different loan products with the same lender.
- Multiple applications with different lenders.
- Clients may receive multiple Closing Disclosures, – some with a 3 day business day waiting period and some without, and some before closing and some after.
Anything that can delay a closing is not good, and the added “monkey wrenches” that are going to be hanging over the heads of every closing transaction could be a royal pain. The sooner the industry understands and prepares for these changes, the easier the procedures should become. We can see these new requirements could have a big effect on lenders, title companies, and builders. We will have lenders and title companies at the upcoming LV Housing Outlook on May 29th to answer all of your questions on this disturbing subject.
Check out our web site, homebuildersresearch.com for listings and samples for all of our housing reports for the Las Vegas area. We are continually adding to, adjusting, or improving them to meet the needs of the local housing industry. Or, call us at 702-645-4200.
Dennis Smith, President