Fewer new-home permits issued

Jennifer Shubinski

Tuesday, Dec. 23, 2003 | 11:05 a.m.

While home sales in the Las Vegas area continued to exceed records for the year, new-home permits issued valley wide in November fell to the lowest level in almost two years.

The decrease doesn't signal an end to the home building industry in Las Vegas, industry insiders and Clark County officials said. Rather, it reflects a slowdown in the permitting process because of administrative, building code changes and continuing strong demand for new homes.

"The reason for the drop in permits is it takes so darn long to get them now," said Dennis Smith, president of Home Builders Research. "Sales are outpacing the ability for home builders to get the permits."

In November 1,547 new-home permits were issued in the Las Vegas Valley, a 6 percent decline from November 2002.

Month-over-month, the numbers show a more dramatic slide. The number of permits pulled in November dropped 16 percent from October and 37 percent from September. The September number -- 2,451 permits pulled -- was the highest in almost two years, Home Builders Research reported. The average number of permits pulled each month in 2003, through November, was 2,074.

While in the last couple of months there has been a drop in the number of new-home permits pulled, the overall numbers are positive. Through November, 22,285 new-home permits were pulled valley wide, 2,222 more than the same time last year, Home Builders Research reported.

Reasons for the month-over-month decline are almost as numerous as the 22,245 new homes sold valley wide through November.

Steve O'Connor, vice president of sales and marketing for Del Webb in Nevada, a division of Pulte Homes, said he thinks the decline in new-home permits is an abnormality. Pulte Homes and Del Webb combined are one of the largest home builders in Southern Nevada.

"I think it's just a glitch in the sequence," he said.

O'Connor said the decline could be caused by the overwhelming demand for new homes. That may sound strange, he said, but builders are running out of inventory, and limit sales so as not to get too far ahead of themselves, and thus don't pull permits.

Tom McCormick, president of Astoria Homes, said he hasn't seen a decline in new-home permits pulled for his company, but said the numbers "ebb and flow."

"One thing that might have happened, is that some builders might have pulled a bunch of permits before the end of the year, perhaps they really loaded up in September," he said. "It does fluctuate quite a bit and it depends on which municipality you are in."

Smith said another theory is that delays in getting maps lead to construction holdups and have kept the permit figures lower than they should be. Builders also have to wait longer for infrastructure to be completed -- such as sewer, water, power and streets -- in new master-planned communities before they can get to the permit stage.

Smith said the bottom line is that the local governmental agencies can't keep up with the demand.

"Demand is outpacing the ability to produce," he said. "Why is demand so far ahead of production? One of the reasons is it is taking so long to pull the permits."

Many industry experts point the finger at Clark County, which issues permits for unincorporated Clark County, for slowing the permitting process down and for the two-month decline in numbers.

In November Clark County officials issued 496 new home permits for unincorporated Clark County -- the lowest level in six months.

Dean Friedli, assistant director for the county's permits department, said many builders are blaming the county for the slowdown in home permits, which ultimately means a slowdown in the number of homes built.

"People say 'Gosh, it's tailed off,' but I say we're not slow, we're inundated with getting plans done. It has dropped off, but it's not a 50 percent reduction in permits (issued)," he said.

Through November, the county issued 10,184 permits for unincorporated Clark County, up from 9,675 in November 2002, Friedli said.

The primary reason for the month-to-month slowdown in permits being issued is the adoption by Clark County -- and all local municipalities -- of the 2000 International Residential Building Code, which will go into effect Feb. 6, he said.

The update in the building code occurs every three years and this time around is replacing the 1997 Uniform Building Code, Friedli said.

"We'll be having this discussion in three years; it's not the economy, it's an update in the building code," he said.

Friedli said builders can continue to pull permits under the old building code until Feb. 6, but at the same time are updating and filing plans under the new codes, creating a slowdown.

"Everybody is in the same boat," he said. "Everybody is in the process of changing to the same code, whether they are in unincorporated Clark County or the city."

Another reason for the decline at the county is a change in administrative procedures, which were instituted in August and are being phased in through February. Among the changes, permits have to be site specific, whereas before one plan could be used anywhere in the county, Friedli said.

While permits slowed, the number of recorded new-home sales continued to increase.

In November there were 2,213 recorded new-home sales, up slightly from October's new-home sales of 2,195. The November sales bring the year-to-date sum for new-home sales to 22,245, a year-to-year change of 2,105, or 10 percent, Smith reported.

The median price of a new home in November was $207,931, up from October's price of $206,852, Home Builders Research reported.

Resales saw a month-over-month decline of 415 homes to 3,996 in November. Despite that decline, the year-to-date numbers are 27.5 percent greater than last year. The total resale homes sold through November was 44,898, or 9,696 more than the previous year.

The median price of a resale home in November was $178,000, up from October's price of $172,000, Home Builders Research reported.

Smith said 2003 will end up as a record breaking year -- both in the number of new and resale homes sold and in the increase in home prices.

He expects 2004 to be just as strong.

"I see no reason for sales to be less than they were this year," Smith said. "There will be more resales because the market is getting bigger and because of the delays in new homes (being built)."