Building continues but builders are gambling

By Brian Eckhouse

Friday, Dec. 12, 2008 | 2 a.m.

In a kind of slow waltz with the deepening recession, homebuilders in the Las Vegas Valley are trying to measure how many new houses to construct — just enough to meet the trickle of demand, and not so many as to add to the inventory of unsold homes — and debt.

Builders are encouraged by buyers who, despite the news of the day, are ready to act and have good credit, sufficient cash for a down payment, and a desire to move up or size down to match their changing circumstances.

But keeping in step with the economy is tricky business. Construction chiefs who decide the pace of building consider such factors as nearby competition, history of sales in the area and level of continuing foot traffic in the face of the sour economy. And then they throw in a bit of caution.

“We are careful not to build too much of an inventory,” says Scott Wright, president of Pulte Homes’ Las Vegas division. “We’re not speculating.”

Different builders lean toward different demographics — some favoring higher-end models for affluent buyers who are most prepared to move, and others lowering their prices to attract first-time buyers otherwise drawn to the resale and foreclosure marketplace.

But they’re not building too many new homes, having gotten burned a few years ago by the overheated market that eventually collapsed, saddling builders with thousands of unsold houses.

Home construction in Clark County peaked in 2004, when 32,658 new-home building permits were issued, an increase of more than 7,000 from the previous year.

Construction activity has been falling since then. In 2007, 12,658 permits were issued.

Through October this year, just 5,238 permits were pulled. Pulte and Del Webb, a Pulte company, represent 14.5 percent of home building this year.

Pulte is building less now than it was three to four months ago, though seasonal declines are one factor, says Larry Wright, president of SalesTraq. (Pulte executives say they are restricted by reporting guidelines to discuss its specifics.) Dean Friedli, assistant director of development services for Clark County, suspects the number of permits pulled in 2009 won’t dip too much more.

Home construction is ongoing in 16 Pulte and Del Web communities in the valley, including one in southern Henderson where six sales agents are poised for customers.

A dry-erase board promotes a “holiday special” written in green and red: oversized home sites, lofts, surround sound, stainless steel appliances, maple cabinets, 3 bedrooms, 2 1/2 bathrooms, 2,065 square feet, $262,737.

Outside, a woman from Mobile, Ala., is waiting to begin a tour of Pulte homes sprouting about a mile off Anthem Parkway, in a subdivision called The Paseo at Madeira Canyon. She’s ruled out buying a foreclosed home: The paperwork and process, she insists, are laborious.

“And I don’t want to deal with a mess,” she says of what many buyers of foreclosed homes encounter.

At the top of the hill, she is taken to 11 homes in different stages of construction on a cul-de-sac. Three are wood skeletons, and roofs are being added to a few others. Only one seems ready for occupancy.

Sounds of saws, hammers and men yelling fill the air. (A Pulte spokeswoman estimates the company is running about half the number of construction crews it did during the peak of building.)

The laborers are working diligently, preparing paint and cement, and mounting windows. Geraldo Fuente, 43, and his colleagues were cutting large tiles for a home’s central flooring on Thursday and plan to install it today.

Real estate consultant John Burns says a primary reason major builders continue to build is to pay off debt incurred buying land. “They’d all go bankrupt if they stopped,” he says.