The era of affordable housing in Southern Nevada following the Great Recession is over as quickly as it began.
Las Vegas resales are held down because sellers are asking for too much, and the product out there is not the best,” Dennis Smith, president of Las Vegas-based Home Builders Research said. “It’s not the best time to be a Realtor unless their clients go out and buy new homes.”
That’s not likely to change soon.
The median price was $216,000 for all existing home product types, which was a $26,000 increase or 13.7 percent, Smith said. He said the price could increase 10 percent by the end of the year and increase 8 percent in 2018.
Smith said the share of new home vs. existing home sales has moved to 18 percent, and he suggested it could eventually reach 25 percent of the market.
“We’re not going to see an end to this situation, because it’s deeply entrenched and came out of the recession for resales,” Smith said.
Some prospective buyers are choosing to live in apartments, McLaury said, because they want that simpler lifestyle and don’t want to be tied down to a home.
“The American dream of owning a home has diminished over the years, and we’re trying to build that up,” McLaury said. “A lot of people are thinking twice and think about renting an apartment nowadays over buying a home because of the lifestyle and amenities. That’s another competition.”
Smith said the homeownership rate in Las Vegas has fallen below 50 percent; at one time it approached two-thirds of the population.
“Will we get back there? I won’t see it in my lifetime in Las Vegas,” Smith said. “It’s going to be very difficult. A new product type will have to be introduced.”
New single-family homes had competition. During the first quarter, Smith said, closing of new condos and townhomes rose 32 percent from a year ago.
Some analysts have suggested the answer to affordability is building in Pahrump and other outlying areas in Coyote Springs and Northern Arizona. Restrepo said builders got burned by that strategy last decade and will be reluctant to build outside of the valley.
“The last experience was pretty traumatic, and companies and lenders will be hesitant to go that far,” Restrepo said. “It might be a bridge too far. I think we’ll go up before we go out.”
Apartments are helping to fill that void in meeting the demands of the housing market, especially since Las Vegas residents on average have some of the worst credit scores in the nation and have difficulty in getting a mortgage, especially if they lost their homes to foreclosure or a short sale.
High-end Class A luxury apartment construction remains strong and is being pushed by lenders who want builders to pursue that clientele, said Spencer Ballif, senior vice president of multifamily with CBRE. Some 90 percent of the new units are being built in Henderson and the southwest valley, where rents are higher.
Apartment rents rose 5.59 percent in the valley during 2016, Ballif said. High-end unit rents rose 4.16 percent. The next market tier, or B, rose 7.27 percent, and the lowest tier, named C, rose 6.12 percent. In 2017, he said, tiers B and C will outperform tier A in terms of rents, he said.
The secondary apartment market has been altered, because of acquisitions in the last two to three years of units that date to the late 1980s and early 1990s.
In the new-home market during the first quarter, Smith said, every submarket in the valley had sales increases except the northwest valley, which fell 22 percent from January through March compared to the same period in 2016. The southwest valley had the strongest growth, at 29 percent, from the first quarter of 2016. North Las Vegas rose 21 percent, Smith said.
The No. 1 selling subdivision during the first quarter was D.R. Horton’s Expressions in North Las Vegas with 48 sales. It has homes that measure 1,600 to 2,300 square feet and has an average price of $262,000, Smith said.
American West came in No. 2 with Jones Crossing with 45 sales. Lennar was No. 3 with Boulder Ranch with 43 sales.
“To me, that’s an upset,” Smith said. “I didn’t see that coming. Inspirada has a lot of new product and some smaller product.”
Smith said Summerlin will be interesting to watch in 2017 as its builders come out with more-affordable homes than its past average that had approached $600,000. Some of the new homes will sell for between $350,000 and $400,000, he said.
“They’re downsizing new and more-affordable homes, and it will be interesting to see how they do, because there are things called HOA fees,” Smith said. “When you are talking to millennials about their budgets, they feel these fees are too much with the addition to payments. It will be interesting to see how it shakes out. I think Summerlin coming out with product with a lower price is a great idea and well overdue, but people will buy in Summerlin because it’s Summerlin.”