Homebuilders’ sales fall again after brief reversal

Homebuilders’ sales fell again last month after a fleeting jump in August, as higher mortgage rates keep throwing cold water on the market in Southern Nevada and other metro areas.

Nationwide, the pace of builders’ home sales last month was down 10.9 percent from August and 17.6 percent from September 2021, according to a report Wednesday from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

“Builders continue to face lower buyer traffic due to declining affordability conditions as the housing downturn continues,” Jerry Konter, chairman of the National Association of Home Builders, said in a news release.

In August, builders’ sales rose almost 25 percent from July amid a drop in mortgage rates, according to revised data released Wednesday. Before the sales bump, new-home purchases had fallen almost every month this year.

But industry experts did not expect the surge to last, as borrowing costs have since climbed higher.

More incentives

Robert Dietz, chief economist of the builders’ association, declared a “housing recession” this summer. Earlier this month, he told the Review-Journal he still views it that way.

Buyer traffic for new homes has fallen to its lowest level in years, and about half of all builders are now offering incentives such as price cuts or free amenities, he said.

In Southern Nevada, builders’ incentives weren’t common last year amid fierce demand from buyers, but developers are now covering closing costs or offering other perks to house hunters, said Kirby Scofield, owner of Las Vegas-based Scofield Realty.

Builders also are offering higher commissions to agents who bring in buyers, he said.

Not long ago, rock-bottom mortgage rates fueled a homebuying binge in Las Vegas and across the nation. Sales prices hit new all-time highs practically every month, buyers flooded properties with offers and houses sold rapidly.

Amid the buying spree, Las Vegas Valley homebuilders put buyers on waiting lists, regularly raised prices, took bids for lots and, in some cases, drew names to determine who could purchase a place.

Locally and nationally, however, the housing market has been hitting the brakes for months as the Federal Reserve fights inflation with higher interest rates.

The average rate on a 30-year home loan was 6.94 percent last week, up from 3.09 percent a year earlier, mortgage buyer Freddie Mac reported.

“Mortgage rates have increased at the fastest rate in four decades, quickly taking the wind out of the sails of the housing market,” Freddie Mac Chief Economist Sam Khater said last week.

‘Decreased to zero’

In Las Vegas, home sales have dropped sharply from year-ago levels, sellers have increasingly slashed their prices and inventory has skyrocketed.

On the resale side, buyers picked up 2,030 houses in September, down 36.7 percent from the same month last year, while 8,121 houses were on the market without offers at the end of last month, up 134.5 percent from a year earlier, trade association Las Vegas Realtors reported.

Single-family homes sold for a median price of $450,000 in September, unchanged from August after sliding for three consecutive months.

On the construction side, builders logged 488 net sales — newly signed purchase contracts minus cancellations — in August, down 44 percent from the same month last year, according to Las Vegas-based Home Builders Research.

Builders’ land buying activity had also “basically decreased to zero as they wait and see where things end up going into the end of the year,” the firm’s president, Andrew Smith, wrote in a report last month.

“Do not be surprised to see this lull continue for at least the next couple of months,” he added.

Contact Eli Segall at esegall@reviewjournal.com or 702-383-0342. Follow @eli_segall on Twitter.