Friday, April 23, 2010 | 3 a.m.
Despite the low level of homebuilding in the past two years, the Las Vegas Valley has an 18-month supply of finished residential lots, according to Colliers International executives.
When the finished lots are used up, builders will either have to start land development again or pay premium prices to those who still have a supply of lots, said Matt Stater, a research manager for Colliers International in Las Vegas.
Stater said for homebuilders to consider buying land, finished-lot values must be near 25 percent of the new-home sales cost to be competitive with the foreclosure market. Most finished lots are selling for $40,000 to $50,000 an acre, Stater said. Because of the cost of improvements on lots, that means raw land is worth nothing in some cases or as little as $10,000 per unimproved lot, he said.
Builders who have cash are bidding existing finished lots up in price, Stater said. For example, DR Horton recently paid $85,000 per finished lot for 51 lots in Henderson. Builders and speculators are turning to partially improved lots and land, he said.
As for land along the resort corridor, Mike Mixer, Collier’s managing partner, said development will be driven by the time frame of the economic recovery. The demand for additional resort properties is five years or more away.
Banks would rather hold onto Strip land for years than sell at today’s prices, Mixer said. That means few transactions and few distressed sales are likely in the next few years, he said.
Property owners on the Strip are starting to grasp that values have fallen 80 percent to 90 percent from the peak of the market in 2007, Mixer said.
In areas of Paradise Road, Koval Lane and other peripherals of Las Vegas Boulevard, a “soft market consensus value” has been established at $1 million to $2 million per acre, Mixer said. At that price, that could open the land to uses other than resort or retail.
Las Vegas Boulevard land is harder to place a value on because of the lack of distressed sales or owners willing to sell, he said.
The most recent sale, at Las Vegas Boulevard and Harmon Avenue, is hard to comprehend, Mixer said. Two acres in front of Planet Hollywood were purchased from Clark County for $12 million per acre.
The transaction surprised many who expected the land to go for $4 million to $6 million per acre, Mixer said. He said it’s possible that an intensive retail use can work at that site for the price paid.