Housing rebounding, but numbers well below peaks

Life is better for local homebuilders these days, but a recent housing forecast shows more room for rebound.

Industry experts shared expectations for residential construction at the annual Las Vegas Housing Outlook on March 7 at the Springs Preserve. If their predictions are any indication, Southern Nevada will have a relatively flat new-homes market through 2014. That means the market will languish well below boom-era levels.

Take new-home permits. Builders pulled 6,966 permits in 2013, and should pull about 7,250 in 2014, said Dennis Smith, president and CEO of analysis firm Home Builders Research. The numbers are headed in the right direction, Smith said, but they’ll still be down from 32,000 permits a year before the recession. Consider that KB Home and Richmond American Homes alone pulled more local housing permits in 2004 than every builder combined pulled in 2013, Smith said.

New-home prices have returned to pre-recession rates, at a January median of $300,000. But builders are propping up those prices with incentives to encourage sales, Smith said.

As for closings, expect them to stay at or near 2013’s numbers, at 500 to 600 a month, give or take possible spikes to 700 when new subdivisions open in master plans including Henderson’s Inspirada and Cadence. Again, that’s a fraction of the 3,000 to 4,000 units closed monthly during the boom.

Few would argue that those indicators, which happened in the midst of an epic housing bubble, are sustainable. Yet, the city’s new-home market could do better than it is, Smith said.

Consider the share of new-home sales versus resales. Builders could “bump their share tremendously,” to half of the sales market, or about what it was in 2004, Smith said. New homes made up just 17.5 percent of local housing sales in 2013, so boosting their portion of the market to 50 percent would mean 14,000 more annual sales than builders actually closed in the year.

So what’s stopping builders? Land seems to be one of their biggest issues, with slim pickings for larger, contiguous parcels they need to make new construction pencil financially. Also, resales are stiff competition these days, at a median January price of of $165,000. That’s $135,000 less than a new home — a gap that was only $80,000 in early 2013. What’s more, resales are likely to stay less expensive, as Smith estimated the market has as many as 40,000 local homes not yet in foreclosure, but destined for it.

The panel also fielded questions about how real estate observers in other markets view Las Vegas.

Panelist Alex Barron, founder of the Housing Research Center, said Las Vegas’ “speculative mentality” makes it unique.

“People just associate this casino mentality across the whole spectrum of things. I wish they could ban speculators from the housing market, but who is speculating? Is it the guy buying the house, the builder buying the land, the developer, the lender? It’s a little bit of everybody,” Barron said. “I feel like (speculation) is one of the most unfortunate things that happens to housing. Households grow at steady rates, incomes don’t change very suddenly and even interest rates are relatively stable (over time). Housing should be a very predictable, steady growth industry, yet we’ve turned it into a wild casino roller-coaster ride where we worry about whether sales and prices go up or down.”

Barron also took shots at Nevada laws that have made it more difficult for banks to foreclose.

“I think the system would have flushed out (defaults and foreclosures) long ago if they had let a lot of builders go bankrupt and people lose their homes. Lots of other markets have flushed things out, but Vegas has shadow inventory. Politicians want to save the little guy, but there’s nothing to save him from. The best thing someone could do if they bought at the peak of the market and they can’t afford their house is to let it go and start again.”

■ A commercial real estate veteran has joined the leadership of Avison Young’s Las Vegas office.

Mike Hillis is a principal of the brokerage’s local operation. Hillis, who specializes in industrial leasing, tenant representation and investment sales, was previously a principal in the local office of Cushman &Wakefield.

Hillis has more than 30 years of real estate experience, and has closed deals in 24 states and Canada. He’s also the 2014 international president of the Society of Industrial and Office Realtors.

■ Recreation Development Co. won a subcontract for architectural metalwork for The Shops at Summerlin, a 1.6 million-square-foot regional shopping center under construction near the 215 Beltway and Sahara Avenue. The $5.5 million metalwork agreement includes sunshades and canopies, and is scheduled for completion in June. The mall is slated to open in October.

■ Neil Dela Cruz, a broker with MDL Group, represented Wyandotte Inc. in its $2.2 million purchase of a 24,034-square-foot retail building at 5050 E. Russell Road. Marcus &Millichap’s Katherine Bergh represented the seller, the Kathleen &Adrian Varni Trust.

■ Brokers with Newmark Grubb Knight Frank helped arrange several long-term leases of 60 months or more.

Ben Millis and Chris Beets represented landlord ASSAF Nevada in a $1.16 million lease of 37,151 square feet of industrial space at 7350 Prairie Falcon Road. Tymber Lee of John T. Arnold Associates represented tenant Gravady Nevada LLC in the 60-month deal.

Chris Godino and David Lipp, CCIM, helped landlord Cheyenne Pointe Holding LLC lease 1,881 square feet of space at 2175 E. Cheyenne Ave. to Las-Cal Corp. dba Taco Bell. Phillip Dunning of Colliers International represented the tenant in the 120-month, $449,183 deal.

And Eric Berggren represented landlord NLT Properties LLC in its 60-month lease of 2,360 square feet of space at 6135 S. Fort Apache Road to Casa Del Galivan LLC dba Yumez Gourmet Frozen Yogurt. Christina Strickland of CBRE represented the tenant in the $244,014 agreement.

■ Several Sun Commercial Real Estate brokers teamed up to close on a large retail sale on Feb. 11.

Cathy Jones, Paul Miachika, Jeff Berg, Mica Berg, Jessica Beall and Roy Fritz represented TME Red Rock Plaza LLC in its $6.35 million sale of a 42,246-square-foot building at 5191 W. Charleston Blvd. Brendan Keating of The Equity Group represented buyer Falkor Properties LLC.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com. Follow @J_Robison1 on Twitter.