LV new home sales sizzle

Jennifer Robison

Friday, April 26, 2002 | 11:13 a.m.

Even as new home sales in Las Vegas are set to break last year's record sales, several key demographic trends are forcing changes in the way home builders design, build and market their homes.

Members of Generation X are coming into their prime homebuying years, bringing with them greater disposable income and smaller families.

And the aftermath of Sept. 11 has created a more homogenous homebuying public, with minorities, who are more concentrated in the service sector, bearing the brunt of the tourism industry slowdown and largely sitting on the sidelines as the new-home sales boom continues.

Despite such major upheavals, local new home sales may be poised to break the record number of units sold last year.

Las Vegas-area new home sales in the first quarter of 2002 surpassed new home sales in the same quarter a year ago by about 5 percent, say numbers jointly released Thursday by two real estate research firms.

SalesTraq and Marketing Solutions, at a quarterly update meeting Thursday, said local home builders closed on 5,329 new units in the first quarter of 2002, up from 5,119 sales in the same quarter of 2001.

The improved performance came despite earlier predictions by local home building analysts that though 2002 would be a strong year for home sales, it wouldn't surpass the record year the market enjoyed in 2001, when roughly 22,000 new homes were sold.

"There are four factors here," said Steven Bottfeld, executive vice president for Marketing Solutions. "The first is interest rates. Second is that even with the torrid pace of last year's sales, we had pent-up demand.

"Third, we're seeing an income shift here. There aren't just more jobs available locally, but better jobs as well. The fourth factor is equity transfer. A lot of local buyers bought homes three or four years ago, and we've had great appreciation over the last three years. People are trading up."

SalesTraq statistics also show the median new home price in the valley is now $178,324, a 5.5 percent increase over the same month a year ago. Larry Murphy, SalesTraq's president, said the firm expects a 10 percent rise in the median price this year over 2001.

In addition, SalesTraq's figures show a 21 percent increase in existing home closings in March, which totaled 3,042 units, compared to just under 2,500 units in March 2001 and 2,500 units in February.

The median price of existing homes in the valley dropped 1 percent in March to $139,000.

The National Association of Realtors today said existing home sales nationwide dropped 8 percent in March compared to February, from 5.9 million units to 5.4 million units.

The median existing home price nationwide rose to $153,000, an increase of nearly 7 percent in March when compared to the same month a year ago.

Though new and existing home sales in the local market continue unabated, Bottfeld said key demographic and economic trends are emerging that will require local home builders to adjust sales and marketing strategies.

Bottfeld said members of Generation X, who were born between 1965 and 1977, are increasingly affecting the home building market.

Whereas women of the Baby Boomer generation are the key decision-makers in a family's homebuying choices, Bottfeld said choices in housing are shared equally between men and women among Generation X couples.

"Builders need to market to both instead of one," he said.

Builders also need to market more to the local market, since fewer buyers are coming from California and other surrounding states than ever before.

"The issue is, (homebuyers) are here. More than 70 percent of the homebuying market is here now. This is the first time we've been over 70 percent since the beginning of the survey" in 1994, Bottfeld said.

In addition, Bottfeld said members of Generation X are having children later than their Baby Boomer forebears.

The median family size among local home shoppers is two people, down from 2.2 people a year ago.

Though part of the decrease in family size is due to more retirees moving to Southern Nevada, Bottfeld said local builders "have to look at the fact that Generation Xers are having children later, and they're having fewer children."

That demographic trend also means more disposable income among homebuyers.

Bottfeld said local median income and housing payments have both risen to record levels, hinting at an increasingly upscale market.

The median income of home shoppers in the valley is now $81,757, its highest level in the eight years Bottfeld has tracked data on the local market.

"The median mortgage or rent payment per month is now $996 -- the highest we've seen. We're going to crack the $1,000 a month barrier. Now think about having two people (in a family) who can afford that payment, and we have the makings of a higher market."

Local consumer confidence remained unchanged from last quarter in Bottfeld's survey, with 55 percent of those questioned saying they expect the economy to improve in the near future.

As the economy improves, 65 percent of respondents to Bottfeld's survey said they expect mortgage interest rates to rise this year, up from 51 percent last quarter.

This is bringing a higher volume of traffic to model home communities as consumers look to buy before interest rates go up. However, it is the lowest traffic quality in 18 months, with fewer home shoppers actually qualified to buy a home, Bottfeld said.

Other findings in Marketing Solutions' survey include:

--Buyers of second homes are still "missing in action" in the local market, Bottfeld said. Just 9 percent of those shopping for a home in the valley are hunting for vacation homes, down from nearly 18 percent a year ago.

Bottfeld said he is already seeing a recovery in the second-home market this month, and he expects that market "to be back by the time we do our mid-year seminar in July."

--The median size of new homes sold locally is 1,982 square feet, a historical high.

--Caucasians compose 68 percent of the homebuying market in the valley, compared to 57 percent last quarter. Bottfeld said the number of Hispanic buyers was cut in half in the last quarter, and the numbers of Asian American and black buyers declined as well. Bottfeld attributed the market's new demographic composition to the larger proportion of minorities working in the service sector, which was hard-hit following the events of Sept. 11.

"Look for them to come back in the second quarter," Bottfeld said of non-Caucasian homebuyers.

--Though the median new home price is near $180,000, Bottfeld's survey showed home consumers in the local market are willing to spend $195,000 on a new home. That's the second highest figure in the survey's eight-year history, and the eighth consecutive quarter over $170,000.

--Though 85 percent of home shoppers say they're concerned about energy efficiency in a new home, just 15 percent of local new homes offer the EPA's Energy Star package -- which includes energy-conserving appliances and improved insulation -- as a standard item.

Bottfeld said Energy Star is relatively new to the market, so builders are still adopting the program. In addition, the program has slightly higher costs for builders initially, though he said Energy Star homes sell more rapidly.

"They can make up that cost with speed" of sales, he said.

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