Meritage Homes scales back Las Vegas operations

A glut of foreclosures and short sales has depressed new home prices in Las Vegas and has made it difficult for buyers to qualify for financing because appraisals are low, said Brent Anderson, vice president of investor relations for Meritage.

Anderson confirmed Monday that Meritage is reducing operations in Las Vegas and plans to sell its remaining undeveloped lots unless there’s a “resounding return” of the market.

Meritage, the nation’s 10th-largest homebuilder, recorded 79 sales in Las Vegas in 2010 and has just more than 50 so far this year, he said.

Meritage has fewer than 100 residential lots left in Las Vegas and is mainly building in two active subdivisions in the Mountain’s Edge community. Any lots remaining at the end of 2012 would be sold and the company will exit Las Vegas unless the market turns around, Anderson said.

“This market has been very slow for quite a while, when we look at other markets where we can sell at a faster pace and make better margins,” Anderson said from Dallas.

It’s tough everywhere, he said, but Meritage has been able to reposition in markets with pockets of demand such as Tampa, Fla.

“You have to be very surgical in building,” Anderson said. “It’s basically a supply-demand-price analysis. Some of the issues in Las Vegas are more on the supply side. There are too many vacant homes and too heavy of a foreclosure overhang.”

Housing analyst Dennis Smith of Home Builders Research said Meritage started downsizing in Las Vegas months ago, transferring the division president and management to other offices.

“They’re basically running it out of Phoenix, so if they did pull out, it wouldn’t surprise me,” Smith said.

Las Vegas has gone from about 200 homebuilders to 28 through mergers, acquisitions and bankruptcies. They include US Homes, Engle Homes and Rhodes Homes.

Meritage’s target demographic is the move-up buyer in the $250,000 to $300,000 range , Anderson said. That makes it tough to compete in a market dominated by foreclosures and demand for homes in the $100,000 to $150,000 range.

Home Builders Research reported a median new-home price of $196,360 in October, down 7.6 percent from a year ago.

Builders recorded 367 new-home sales during the month, bringing the year-to-date total to 3,155, the worst since Smith began tracking the Las Vegas market in 1989.

These numbers suggest Las Vegas is still many months from what could be considered the end of the housing recession, Smith said.

Just a couple of years ago, Meritage’s chief executive said he didn’t want to exit Las Vegas and was expecting the market to turn around, but the projections are not there yet, Anderson said. In March, the homebuilder unveiled its “extreme green” home in the Providence community.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.