Wednesday, February 21, 2007

Las Vegas Land in Short Supply

This article from today's Las Vegas Review Journal provides an overview of land scarcity in the Las Vegas Valley. Our personal opinion is that in a few short years, once builders have sold most of the inventory being built in the newest master planned communities, traditional housing prices in Las Vegas will soar as new residents continue to move to the Valley filling jobs now being created in the latest casinos and Las Vegas high rise condo developments on the booming Strip.

Land scarcity may drive homebuilders away
By Brian Wargo / Staff Writer
Housing analyst Dennis Smith says don't be surprised if some homebuilders "close their store" in Las Vegas this year.

Smith, president of HomeBuilders Research, predicts one, two or three big public homebuilders will leave the market or merge, and it's not because of a lack of demand. Instead, Smith blames the shrinking supply of land that became even more of a problem in Las Vegas real estate when national builders cut back on their supply of land across the country.

"It looks like it's difficult for the builders to replace the lots they are absorbing," Smith said. "If a builder stopped buying land six months ago, they didn't stop selling houses. Call any builder and it's difficult for them to find land to buy for two or three years out."

Smith said he's been sounding warnings about the lack of available land for traditional housing development in the Las Vegas Valley. About five ago, he said he suggested there was about a 10- to 12-year supply of land remaining within the Bureau of Land Management disposal boundary for a typical builder to develop a typical single-family subdivision. Today, if a single-family homebuilder is not participating in Summerlin, the Focus Property Group master plans in Henderson and Las Vegas or the new Olympia Group master plan in North Las Vegas, where are they going to go to acquire any large number of lots to position them for the future?, Smith asked.

He added that 2006 was another example of the tight land supply. Some builders mistakenly believed land prices would decline as the demand for housing softened, he said.
"If they expected Las Vegas land prices to decline as a result of this change, they were mistaken," Smith said. "If there was a larger supply of land available, the prices would have decreased. Overall, land prices didn't change much. This is due to the overall short land supply. Builders will again soon begin buying land to maintain or increase lot supplies for future communities."

Some builders have also contacted other builders about their Las Vegas land, Smith said. As for Centex Homes, which in January pulled out of a deal to build homes in Henderson, Smith said he wouldn't be surprised if the builder started looking for land again in the coming months.