Thursday, Sept. 9, 1999 | 10:52 a.m.
The booming new home sales market in Las Vegas shows no sign of slowing down, despite rising interest rates and escalating prices.
The Irvine, Calif., research and consulting firm the Meyers Group on Wednesday reported an 8.9 percent increase in second-quarter Las Vegas new home sales compared to the same period in 1998.
The company reports 5,780 new homes were sold in Las Vegas during the quarter, a period defined as running from mid-May through mid-August. Concurrently, median detached home prices increased 4.9 percent from the second quarter 1998.
"While virtually every major new home market in the country -- with the exception of Hawaii -- remains quite strong, each has a unique set of factors shaping its future," explained Meyers Group Vice President David Thikoll. "In Las Vegas' case, there was some concern last year about overbuilding in the resort sector and the decline of Asian tourists. Those concerns have diminished, and the continued migration into the city makes it a strong market for new homes."
Thikoll adds the Las Vegas market is "on track to surpass 20,000 new home sales" this year.
Although not stastically identical, the Meyers Group report mirrors the findings of Las Vegas-based Home Builders Research.
"According to our numbers, there were 5,669 recorded closings on new homes in the second quarter of this year, an increase of 5.4 percent from the 5,383 recorded during second quarter 1998," said Home Builders Research owner Dennis Smith. "However, there was also a decline of 4.2 percent in the number of building permits during that period, down to 5,503 from 5,739 a year earlier."
Smith adds that in the second quarter of 1999 the median new home price in Las Vegas stood at $143,000, up $3,000 from one year earlier.
Still, rising prices and interest rates fail to dampen Irene Porter's optimistic view of the Las Vegas home building sector.
"The continuing strong numbers of people migrating here remains the driving factor behind those (sales) numbers," said Porter, executive director of the Southern Nevada Home Builders Association. "But along with that, we're also finding the majority of new home buyers are those already in the (Las Vegas) market. At the same time, many new people migrating to the area remain more attracted to the resale market. That's been a growing trend for about three years now."
Industry watchers believe the increasing popularity of the Las Vegas resale housing market can be traced to lower sticker prices. Home Builders Research reports the second quarter median price for a resale home as $128,000, an increase of $1,600 from one year earlier. However, that still means that an existing Las Vegas home typically costs $15,000 less than a newly built house.
Recent sales numbers clearly illustrate the growing attraction of older homes: Home Builders Research reports 7,285 existing homes were sold in the second quarter, up 16.7 percent from the same period last year.
Industry experts concur that the first half of 1999 provided all the right ingredients for encouraging new home buying. However, there is disagreement as to what -- if any -- impact rising interest rates may have on home sales during the last six months of the year. Bank of America's 15-year mortgage rate currently stands at 8.25 percent, up from 7.5 percent at the same time last year.
"No question that higher interest rates can have a detrimental affect on new home sales, particularly in the entry-level portion of the market," said the Meyers Group's Thikoll. "Even slightly higher rates could easily squeeze a sliver of customers out of the marketplace."
Porter disagrees.
"Although (rising) interest rates are always an issue, they are still not what we would think of as high," said Porter. "It wasn't that long ago that we used to sell homes at 9 percent or more. I don't think that a slight increase in interest rates will have a major affect on new home sales."
A spokesman for Las Vegas' largest new home builder offers a different perspective. Wayne Laska, sales director for Kaufman & Broad of Nevada, is convinced that -- at least in the short term -- interest rate hikes may actually serve to boost new home sales.
"Typically what we've seen is that initial hikes in interest rates get many people to starting thinking 'hey, we better get into the market before rates go up higher,"' said Laska. "However, if those rates continue to go up, a certain segment of the populace is squeezed out of the market."
Kaufman & Broad has sold "over 2,000" new homes so far this year, about 200 more than during the same period last year, Laska said. Those figures reflect the combined sales of both Kaufman & Broad and Lewis Homes, purchased by Kaufman earlier this year.
In addition to interest rates, industry experts warn there's at least one other dark cloud looming on the horizon.
"This year, we've seen a spike in fees, development costs and a limited number of (affordable) lots available," said Laska. "Those factors, combined with higher interest rates, equal a double whammy leading to higher home costs."
Porter echoes those concerns.
"The rising cost of land, along with the costs associated with government regulation, are definitely adding to the price of a new home," she said. "That's really the most significant challenge confronting area home builders."
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