In May, there were 527 recorded new home sales. This places our 2015 sum at 2,360, which is a year to year increase of 8.9 percent. There were 14 new high rise units included in the total. When they are omitted, the annual change becomes a very respectable 11.7 percent.
The following graph illustrates the upward tendency of the monthly new home closings since January, 2014. The trend line is going in the right direction … albeit a little flatter than most would like to see.
The median price of the new home closings in May was $315,250. The upward pressure of new home prices continued, the monthly increase was $9,546, or 3.1%. Year to year the May median price was $35,350, or 12.6 percent. It certainly looks like at the end of 2015 we might see double digit price increases in most parts of the new home segment.
The next chart compares the market share of various price segments during three separate periods of time … 2013, September 2014, and May 2015. The affordable segment(s) continues to lose market share of new home sales. The market share of the new home closings that were under $300,000 in May was 43.6 percent. This is a decrease of 32.7 percent since 2013, and 17.9 percent since September 2014. The share of new home closings priced less than $200,000 has declined most noticeably since 2013, from 18.3 percent down to only 2.7 percent in May.
There were 680 new home permits pulled in May. This puts our 2015 tally at 3,289, which is a year to year increase of 621 permits, or 23.3 percent. That is an impressive annual gain in permit activity. We knew that based on the data from our Weekly Traffic/Sales Watch Report that new starts were on the horizon. Although the weekly net sales have been up and down week to week recently, the overall trend during 2015 has been pretty strong.
The builders who pulled the greatest number of permits in May were the following:
Lennar Homes – 96
DR Horton – 81
Ryland Homes – 80
KB Home – 63
Pardee – 56
Richmond American – 41
American West – 39
Woodside – 37
Century Communities – 29
There were 4,394 recorded resale transactions in May. It bought our 2015 sum to 17,480, a year to year increase of 2,633 closings or 17.7 percent. The May resale sum was a noteworthy month to month increase of 525 sales.
The median price of the May resale closings was $199,000. The existing home median price continues to rise; it was a 1-month change of $12,000 and is a year to year increase of $29,000 or 17.1 percent.
The number of existing condo closings in May was 640, a share of 14.6 percent. This is the third consecutive month there have been over 600 existing condo closings. Although the sales of resale condos have been strong recently, the prices haven’t changed very much. The May median price was $96,500. It has fluctuated each month in 2015 from $96,500 – $102,500.
The resale prices have been consistently trending upward during the last 12 months. It is due to the tight inventory of listings. We have been regularly showing the amount of SFR listings and how the number has been relatively flat for many months. This is an important factor in new home demand, as many potential resale buyers can get frustrated at the limited number of a type of home they might be trying to find. The depth of the shortage of listings will vary considerably by sub-market area and product type. It is pretty extreme for certain product types in some parts of the valley, and it will push potential consumers to the new home segment. This has been great for the home builders in Las Vegas, but if the number of listings all at once grows quickly, some new home sales could be lost to existing homes.
The median price “gap” between the new and resale homes was $116,250 in May. This difference might not mean much with new home buyers, but we suggest that most of them were at least made aware of it by a realtor. The bottom line is that new home sales have benefited from the overall tight supply of existing homes listed for sale. It certainly now appears the resale inventory won’t improve too much during the next 12 months … and maybe longer. The supply of distressed homes certainly doesn’t appear ready to overwhelm the housing market. There appears to be sufficient demand from investors and owner occupant home buyers, to keep the supply in check.
Even though the “traditional” listings now make up 82 percent (source – Residential Resources) of all SFR listings, the total is not enough to satisfy the demand in the most active parts of the metropolitan area.
More inventory isn’t arriving, because there are still too many mortgages underwater, or near underwater. According to a recent presentation by Dr. Frank Nothaft, senior VP & Chief Economist at Corelogic, there are still 25.6 percent of the mortgages in NV underwater. Most of those are in the Las Vegas area. If the loans that are “nearly underwater” are included, the percentage gets close to 30 percent. As a result, there are still a lot of homeowners in the Las Vegas vicinity who are unable to move for 5 or more years because of their negative equity. There are a lot of potential listings in this group, but their situation is SLOW to improve, so they will not have a big impact on the supply of listings in the near term.
Dr. Nothaft also said that the number of seriously delinquent (90 or more days delinquent, or in a foreclosure proceedings) loans in metropolitan Las Vegas was at 5.5 percent at the end of March, and still falling. This is especially impressive when we are reminded that in 2011 the number was 21 percent. In 2013 it was about 12 percent. Nationally, it is now near 3.5 percent. So, by the end of 2015 Las Vegas may be very close to the national average.
We have listened to and read a number of economic forecasts regarding the national and local economic outlook. Almost all of the predictions for the Las Vegas area are pretty positive. It is easy to suggest that the local economic atmosphere will keep improving when there is positive job growth. In fact, Las Vegas now is at or near the top of most national rankings for annual job growth for major metropolitan areas. Of course, we must remind folks that the current statistics are compared to some very weak numbers. The number of unemployed is improving steadily (although it was flat the past couple of months) suggesting Las Vegas has turned the corner on the recovery and growth is imminent.
On June 25th , we attended the “2015 Midyear Economic Outlook” Conference by The Center for Business & Economic Research (CBER) at UNLV. There were a lot of positive statistics regarding the recovery of the Nevada and Las Vegas economies, but also some “headwinds” that could cause a retreat in some parts of the economy. Gross gaming revenue in Clark County was down 1.2 percent year to year in 2014, however, has increased 2.2 percent so far in 2015. Visitor volume was up by 3.7 percent in 2014, and is projected to rise by another 2.5 percent in 2015. When the number one industry reports these kinds of revenue figures, it will cause some concerns. More people are visiting Las Vegas, but they are gambling less. More time (and money) is spent at shows or other forms of entertainment.
There was some discussion from Dr. Stephen Brown, outgoing Director of CBER, about the absence of many millennial age group home buyers. Student debt and the difficulty of obtaining financing are the primary reasons given for this large group of consumers not being a major part of current home sales. These issues for this large collection of potential home consumers will not leave for some time. The housing industry needs the millennial buyers to become a major part of the market. They could make up for the loss of investor sales, from which the existing home segment hasn’t fully recovered.
The Las Vegas Quarterly Condo Report was recently updated with data from the first quarter, 2015. We have teamed with Northcap to provide this great quarterly report of the high rise condo market segment. You can see samples and download the report from our web site, homebuildersresearch.com.
Volume 253 of our next Las Vegas Land Report and Interactive Land Report will be sent to those subscribers this week. There were some very interesting purchases listed, like the large assemblage in the southwest part of the valley by American West Homes that averaged $500,000 per acre. A purchase like this by one of the most respected builders in Las Vegas can “reset the bar” for others in the this submarket area.
You can check out samples of most of the weekly, monthly, quarterly, and annual reports that we publish at Home Builders Research, Inc. at homebuildersresearch.com. Many of the reports can be downloaded right from the web site.