Although for sale inventories of existing homes in Las Vegas are elevated above the lows of last year, new homes remain a sought after option by many buyers. We have many buyers that have either recently closed on a home or have homes waiting to be built. Coinciding with this demand, incentives have been falling. Traffic levels have subsided generally, throughout the Valley but there are some home types that continue to receive a lot of interest. Single story homes with more than two garage bays have been getting substantial interest. Many of these homes are in smaller subdivisions of less than twenty lots and have been selling briskly. Many of these have 9 or 10 foot ceilings and occasionally have RV parking. In the North, we see a lot of military families moving into new homes. Buyers have often appreciated the ease of some of these transactions.
In new construction, some have questioned the depth of the market for new parcels, particularly since the BLM auction has proposed 520 acres. A few question how strong the interest may be since some builders have backed off from he aggressive offers of late last year and earlier this year. One thing we note however, is that closings may have been muted due to the type of land available. Many builders were building on prior maps and are fitting their product to existing lots rather than lots of their own dimensions. With some nice vacant land purchases, builders are developing some very nice options and this will likely help the market going forward. Summerlin and Henderson have some great examples of these clean slate purchases. Some of the Howard Hughes land that was sold in Summerlin last year will bear some awesome views and amenities.
Looking at some specific homebuilder news, the recent earnings season has brought some added color to the new home world. Toll Brothers, which announced in May for its fiscal Q2, noted lower land purchase commitments by about $200 million less than they had in late 2013. Locally, the company has already owned some prime land is has notably geared up its Providence community of Franklin Park. Nationally, net signed contracts were essentially flat from last year and were down slightly from 7.79 units on a community bases to 7.14 units.
In June 2014, Lennar provided some info on its land purchases, noting that they buy for delivery of 1-2 years out and have stayed constant with their land costs at 20% to 21% of home selling prices. Based on the trades we examined in the Las Vegas MSA, this seems to be in line locally as well. KB Homes, which has a large position in Las Vegas, has seen its net orders increase by about 5%. They noted a lot of repositioning to land constrained markets, supportive of higher margins. It’s unknown how we fit into that category. We do know that KB Homes is active in Inspirada, a Henderson area masterplan and the company sees a growth opportunity there for years to come.
Sale prices have moved high enough for smaller private builders to make use of some of the finished and partially finished lots that already existed, some of which was left over from the crash. These smaller firms have been very adaptive and there are some excellent examples in the Northwest, including Providence.
We love showing and previewing new home communities. We represent buyers on many transactions, particularly in the Northwest and Southwest and increasingly in Henderson. Give us a call if you want some options.
Reporting on BLM Land Auction:
Public Builder info came from the Q2 conference calls and 10-Qs.