Las Vegas home building to slow in 2019, economist says

Southern Nevada’s homebuilding market reached its most heated level in years in 2018, with developers fetching both record prices and the most sales in more than a decade.

But there were also some signs of cracks, and Las Vegas-based Home Builders Research expects the market to cool down this year, with closings and permits dropping by roughly 5 percent.

Robert Dietz, chief economist at the National Association of Home Builders, spoke with the Las Vegas Review-Journal last week during the International Builders’ Show at the Las Vegas Convention Center. The NAHB hosted the conference.

The interview has been edited for space and clarity.

To the best that you can predict, could there be an economic downturn or a recession in the next few years?

We’re expecting a soft patch or a slowdown in 2020; that’s defined as when GDP growth for the country as a whole slows below 2 percent. We’re looking at about a 1.3 percent growth rate in 2020. We’re a little more negative than other forecasters. We think that the stimulative effects of the tax bill will begin to peter out, and the gradual rise in interest rates will slow business activity and consumer spending activity.

Is there any way to predict how this could affect the U.S. homebuilding industry?

If we’re expecting a soft patch, we’re basically forecasting a slowdown in residential construction activity.

If I’m reading the numbers correctly, as of November, U.S. new-home sales were down 7.7 percent on a year-to-year basis.

On a month-over-month basis, if you compare November to November. But for 2018 as a whole, new-home sales were up more than 2 percent compared to 2017. 2018 was the best year for new-home sales since the Great Recession, and total housing starts for single-family homes were up 3 percent.

Locally, new-home closings last year were up 14 percent from 2017. Why do you think Las Vegas accelerated so much more than the nation did?

The geographic story that we’re seeing nationwide is one of individuals at the margins — not everybody, but enough to make a difference — leaving expensive coastal markets in places like San Francisco, Los Angeles, San Diego, Portland, Seattle, and moving east. So you see a lot of activity in Nevada, Idaho, Utah and Colorado. We’re predicting single-family housing starts to be up 1.5 percent nationwide. My guess is Las Vegas will be slower this year than it was in 2018 but more than that 1.5 percent, because of its affordability and its population gains.

Are you seeing any signs that the construction labor shortage is easing nationally?

When you have natural disasters and growth in remodeling, single-family and apartment construction, you need additional workers. I think this is the year where the shortage levels off, but I was wrong last year about it.

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