Las Vegas Housing Starts Surge While New Homes Stand Vacant
Las Vegas has been one of the hardest-hit residential real estate markets of the past two years. More than 9,000 new homes are empty, and the foreclosures keep coming. Real estate prices are down by 60 percent from 2006.
But buyers want new houses, according to one builder: "We're building them because we're selling them."
There is a lot of truth in that statement, says David Crowe, chief economist at the Washington-based National Association of Homebuilders. The association's most recent survey, which polls its membership monthly to get its read on the market, reported its highest level of confidence in the housing market since August 2007. The survey asks builders -- mostly family-owned, local builders -- about their current sales, the amount of traffic they are getting in calls and model homes, as well as their expectations for the next six months.
"Older homes might not be as energy-efficient, or they have been abused," says Crowe. "If the cost to purchase an existing home and a new home are the same, many people will opt for the new home."
Still, with so many homes vacant across the U.S., does new construction in Vegas make sense?
In some regions, it does, says Crowe. "About 70 percent of those vacancies are focused on 11 states," he says, referring to California, Nevada, Florida, Arizona and others that have seen particularly high rates of foreclosure and declined in values. But, he said, "in many other states, including Texas and the middle of the country, where there was no overbuilding and no run-up in housing prices," buyers are well positioned to buy, They can obtain some of the lowest-rate mortgages available in months, and if it's new they want, there's a shovel with their name on it.
The U.S. Census Bureau reports that the homeowner vacancy rate increased to 2.7 percent in the third quarter of 2009, up from 2.6 percent. The latest figures show 2.09 million empty homes on the market. RealtyTrac projects 3 million foreclosures this year. Crowe noted that for the month of March, 228,000 of those empty homes were new construction.
The Census Bureau also reported this week that housing starts in April were up 40 percent over last year. While 40 percent of very little is not a lot, at least the numbers are headed in the right direction. Those numbers are strong in part because homebuyers were taking advantage of the home-purchase tax credit which expired on April 30.
The question remains, will the numbers hold up? Mortgage rates are at their lowest this year; a 30-year fixed-rate loan is at 4.83 percent. But so is the number of mortgage applications. For the first week of May, applications plunged 9.5 percent; last week they were down an additional 1.5 percent.
"Over the next six months, we'll have a bit of a plateau," said Crowe. "With the tax credits gone, the slow employment increases, and harder-to-get mortgages, we won't see rapid growth. But overall, I expect to see a 25 percent increase in single-family home construction for 2010."
That projection makes sense for most of the country. But as for Las Vegas, well, that's anybody's bet.
Americans' obsession with newer and bigger houses is what got us into this mess in the first place. Frankly, a pullback in new construction in the nation's most troubled markets might increase the odds of a speedy recovery.