April new-home closings in Las Vegas second strongest in eight years

Las Vegas recorded its second strongest April new home sales closings since 2008 and last month’s prices hit their highest point in a decade, but valley experts said that shouldn’t be considered a surge in the housing market in Southern Nevada.

The release of the Las Vegas numbers by Home Builders Research comes as the Commerce Department reported Tuesday that new home sales jumped 16.6 percent in April — an eight-year high — and that prices hit a record high. The Commerce Department projects an annual rate of 619,000 home sales, the highest level since January 2008. The percent increase is the largest since January 1992, according to the report from Reuters. Reuters reported the housing gains as offering further evidence of a pickup in economic growth early in the second quarter.

In Las Vegas, Home Builders Research, in numbers that the firm will release Wednesday, pegged the April home closings at 503, up nearly 11 percent from 454 in April 2015. Only April 2013 when there were 644 closings was that month’s number higher over the last eight years. The most recent low was 258 in April 2011.

No one should conclude that the new home market is back and fully recovered, said Dennis Smith, president of Home Builders Research. In April 2008 during the recession, Las Vegas sold 1,004 homes. In April 2005, builders sold 2,839 homes, he said.

“My first reaction to that is like anything that comes out of Washington or any place that’s trying to make things look good — it’s relative to what,” Smith said. “The last eight years has been a recession in Nevada (for the housing market). We’re doing OK now. You can throw out some positive numbers like in this report from the Commerce Department. The numbers are improving, and I could stop right there.”

Sales of new homes are up 6.8 percent through the first four months of the year at 1,983, Smith said. That’s still down from the 2,285 in April 2013 — a year that ended with builders selling 7,303 homes, the most since 10,504 in 2008, Smith said.

Smith projects builders will sell about 7,000 homes this year.

Las Vegas homebuilders sold 38,954 homes in 2005 but the market started turning in 2007 when 19,773 home closings were reported. It dipped to 10,504 in 2008 and 5,275 in 2009 before hitting a post-recession low of 3,894 in 2011, Smith said.

“When people tell me we might sell 7,000 homes and we’re setting the world on fire, I always tell them ‘Compared to what?’ ” Smith said. “We still have a long way to go in Nevada. Other markets are doing a little better, which is a good sign for us. We have people moving here and that’s good.

“I am not depressed about it nor suggest we should be. I’m just saying we’re going steady and slow, and the builders know that. The national builders aren’t jumping up and down and waving the flag in Las Vegas. They’re saying this a slow steady improvement and that’s what it will be, period,” he added.

Others like Brian Gordon, principal with SalesTraq, which also monitors the Las Vegas housing market, said he looks at the positive of where the housing market was in 2011 and where it is today — almost double in new home closings.

“It has been a roller coaster ride over the last decade when you think about the sales volume taking place in the new home segment,” Gordon said. “We’re now starting to see a more stable and sustainable pace of development activity. We’re miles away from the peak of the market, but the peak is where developers don’t want to go.”

The Greater Las Vegas Association of Realtors said the median price of homes sold in April was $220,600, which was up 3.8 percent from April 2015 despite a tight supply on the resale market. Gordon said many homes on the resale market are 20 years old, tend to be smaller than new homes and aren’t located in newer neighborhoods on the periphery of the valley like newer homes.

What’s holding down new home sales in Las Vegas is the price, Smith said. Prices have held fairly steady over the last year. The $325,307 median price in April is 6 percent higher than the $305,704 in April 2015. The previous April high was $328,702 in April 2006 and that dipped to a low of $188,450 in 2011. Last month’s prices were 73 percent higher than that.

The national median price for a new home increased 9.7 percent from a year ago to a record $321,100, according to the Commerce Department.

“If you’re a homebuilder, prices are where they have to be,” Smith said. “It’s due to rising land costs. If builders could sell houses for less, believe me they would because there’s a big demand for lower-priced houses. Affordability should be a concern. That’s why our sales numbers are what they are. If builders could build and sell a house for $200,000 or $250,000 they would, but they can’t.”

Gordon said not only have land costs bounced back from their lows during the recession, but construction costs remain hefty. Builders aren’t getting a windfall from these more expensive homes they’re bringing to the market, he said.

“They’re developing product that they can sell at the most reasonable price point given the cost dynamics,” Gordon said.

The goal among homebuilders to reach 10,000 permits again, and that’s going to take time, Smith said.

“We need to wait this out,” Smith said. “Thank goodness for the baby boomers. Now, if we could get the younger generation to buy houses, we will be OK. It’s a struggle.”