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April 18, 2019

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REAL ESTATE QUARTERLY:

New-home communities take a step back

inspirada

IN BUSINESS LAS VEGAS FILE

Inspirada in Henderson was the one big local master-planned community to record a sales increase in 2009 despite the slow market.

Master plans

SalesTraq President Larry Murphy’s list of top planned community sales of new homes in the Las Vegas region and their sales in 2009 and 2008 and 2009 median price:

1. Mountain’s Edge – 537 – 1,021 ($190,000). (Murphy said he doesn’t know the reason for discrepancy between his numbers and the RCLCO numbers, but said his are based on county records as opposed to numbers reported by developers).

2. Summerlin – 350 – 410 ($282,791).

3. Providence – 349 – 666 ($201,010).

4. Inspirada – 228 – 199 ($206,315).

5. Anthem Mesquite – 155 – 235 ($252,715).

6. Rhodes Ranch – 136 – 313 ($217,565).

7. Madeira Canyon – 133 – 191 ($305,000).

Las Vegas is losing its edge when it comes to master-planned communities.

Mountain’s Edge, a development of Focus Property Group, has lost the No. 1 ranking it held in the country as the top-selling community nationwide in 2007 and 2008. It came in at No. 3 in the 2009 rankings compiled by RCLCO, a Maryland-based real estate advisory firm.

The drop is symptomatic of the state of the homebuilding industry in Las Vegas, which continues to suffer in comparison to the existing-home market.

Mountain’s Edge was displaced by two master plans in Houston, including one called Cinco Ranch developed by Newland Communities, which is overseeing the development of Symphony Park in downtown Las Vegas.

Mountain’s Edge sales fell by 32 percent in 2009, from 879 to 596, according to RCLCO.

Providence, another Focus Property development, fell from fourth to fifth on the 2009 list when its sales fell 25 percent, from 514 in 2008 to 388 in 2009.

Focus’ Inspirada in Henderson is geared to make the list in 2010 if it keeps up its pace of sales. It was the one local master-planned community to record an increase in 2009 despite the slow housing market. Sales rose 15 percent to 228, according to Las Vegas-based SalesTraq.

The rankings do not include Summerlin. It would have been in the lower half of the top 10 if it participated.

Laura Cole, an administrator who helped oversee the report for RCLCO, said she believes Summerlin hasn’t participated because its sales have declined, and filling out the required survey is time consuming. But Summerlin said the RCLCO study includes developments that are not true master-planned communities, so it doesn’t participate.

“The common thread in this year’s report is that the communities that had the more stable job market performed at higher levels,” Cole said. “Areas like Phoenix and Las Vegas that depended on retirees or second-home buyers — people who weren’t prepared to buy during the (weak) economy — suffered as a result of that.”

Master-planned communities that fared better were value-oriented and catered to first-time homebuyers looking to take advantage of the $8,000 federal tax credit, Cole said.

That hasn’t been the case in Las Vegas, were the price gap remains wide between existing homes and new homes. SalesTraq said the median price for new homes sold in 2009 was $212,638, about $85,000 more than existing homes.

The median price of homes sold in Mountain’s Edge in 2009 was $190,000, down from $256,026 in 2008, according to SalesTraq.

Dennis Smith, president of Home Builders Research, said median prices in Las Vegas are $225,000 for new homes and $125,000 for existing homes. Historically the gap has been less than $20,000, but with that discrepancy, buyers, especially first timers, are being pushed into existing homes.

That showed in 2009, when builders sold only 5,238 homes compared with 49,012 existing homes, according to SalesTraq.

Smith said builders simply can no longer lower their prices any further to compete with the existing-home market, which has been dominated by lower-priced foreclosures. The expense builders paid for land won’t allow them to do that, he said.

Through the first two months of 2010, sales by builders have been tepid at best. SalesTraq reports 637 sales of new homes during that period.

The concern builders face is the end of the first-time homebuyer tax credit, which is set to expire June 30, Smith said. Buyers have to have a contract written by the end of April.

That could lead to declining sales at a time builders face problems with appraisals not coming in for the value of the homes, Smith said.

Appraisers in some cases are pricing new homes at less than the buyer had agreed to pay the builder, thus preventing the buyer from getting a loan to cover the home’s cost. That has quashed sales, he said.

What’s happening is appraisers are looking at the value of new homes in comparison to foreclosures and not giving value to energy-efficiency features in the new homes that save on utility bills, he said.

“They would have a lot more sales and the prices wouldn’t have stayed as flat if they didn’t have that problem,” Smith said. “The builder has one option — to lower the prices. But they can’t, so they cancel the deal.”

Some buyers have been discouraged from buying in master-planned communities in Las Vegas because some developers don’t have the funds in some cases to finish off parks and other amenities that buyers desire, Smith said. Some buyers are reluctant to pay $100 a month in homeowners association dues if they are limited in what they can afford in their payments, he said.

“When you factor in the job situation, it is understandable that the master plans are going to have a tough go of it,” Smith said.

SalesTraq President Larry Murphy said sales at master-planned communities and new homes in general won’t pick up until the backlog of foreclosure homes is sold.

The good news for those communities in terms of attracting buyers is they tend to hold their values compared to subdivisions that don’t have any amenities. The perception is that the master plans are considered more secure, he said.

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