Tightening Credit Causing New Home Cancellations

Cancellations on Las Vegas new homes are rising around the Valley. Home Builders Research released statistics showing that the cancellation rate on purchases of new homes in the Valley jumped to 53 percent in August.

The rate had been closer to 30 percent two months ago before lenders starting tightening credit. Lenders are requiring higher credit scores, and those who don't have good credit are required to put down a greater down payment or pay higher interest rates. Even people with good credit are finding it harder to get jumbo loans of $417,000 and above. Those who can't document their income are also having difficulty getting loans.

"Buyers are certainly not canceling because they are changing their minds," said Dennis Smith, president of Home Builders Research. "They are canceling because something has changed in their monthly payments."

The good news for patient buyers who were waiting for the real estate market to bottom out is that builders have drastically lowered their prices and are offering incredible incentives in order to move inventory. And a few Las Vegas top real estate agents are negotiating even better deals for their buyers than the tracts are initially offering based on the volume of buyers they are able to bring to the tract. Smith reports Meritage Homes lowered prices in some of their subdivisions by $50,000. And Rhodes Homes is selling homes for $125 to $130 per square foot, way below 2005 levels.

But despite current soft market conditions, Las Vegas is continuing to grow at a rapid pace, and reports say recovery is likely to come faster here than in any other city in the country. A large shortage in labor and a retiring baby boomer generation spell a large population increase in the imminent future which should effectively eliminate the housing surplus and return the market to balanced buying and selling conditions. In order to take advantage of the existing builder discounts, contact our office at 702-985-7654 and ask to speak to one of our new homes specialists.

Las Vegas Housing Affordability and the Future

Las Vegas homes have risen dramatically in price over the past few years despite recent modest declines, and many families have been priced out of the market. Worse yet, many were the victims of predatory loans during the subprime bonanza and are struggling to make ends meet. The Las Vegas District Council of the Urban Land Institute has identified Las Vegas home affordability as one of its key target issues. According to the 2005-2009 HUD Consolidated Plan, in Clark County over 122,000 moderate and low-income households are estimated to be paying for housing they cannot really afford.

The National Association of Home Builders issued a report in the third quarter of 2006 indicating that only 14 percent of the homes in Clark County are affordable to households earning the median income (median household income approximately $53,000). Today, the median price of a resale home in Las Vegas is $278,000, more than five times the median income, while the median price of a Las Vegas new home is $326,750, or six times the median income. Traditional lending guidelines suggest buyers should qualify for home loans at about three times their annual incomes.

Two factors, among others, have played a major role in increased costs of housing:

1. There is a limited supply of Las Vegas land available for development in the valley. Rising land development and construction costs also contributed to the incredible increase in the land basis for home builders during 2003-2005.
2. Some of the strongest in-migration in the United States (6,000 - 7,000 per month) has been attracted to Southern Nevada by the robust job growth. This helped spur some of the strongest housing demand in the United States.

An anticipated labor shortage crunch due to hit in mid 2008 is expected to increase migration to the Valley and keep prices relatively strong. Decreases in 2007, while a bit helpful, have not come close to overcoming affordability issues for a majority of residents. This issue has long been crisis in California cities and it remains to be seen what local Las Vegas governments can do about it.

The Mercer - new Las Vegas mid rise condo project

The Mercer is a five-acre, 113-unit residential mid-rise development on Tropicana, just west of the newly constructed 215 exit and south of Summerlin. Providing a secluded living option in Las Vegas that has an urban feel similar to that found in other major cities, the Mercer has a common area located within the center of the buildings, creating a friendly environment for people to gather and meet. The interweaving of the courtyard into the life of the complex's community is not just another amenity, but a primary element in the life of the complex. The courtyard becomes the central gathering point for the community, with both private and public spaces.

Buyers can choose from one, two or three bedroom loft residences. They're designed with flair, with upscale materials and features that maximize space and light. Unit amenities, which would be considered upgrades in most developments, include 10-foot ceilings, hardwood flooring throughout and centralized phone, Internet and cable-television controls. The kitchens have stainless-steel appliances, custom wood and glass cabinetry with a choice of finishes, and a selection of one-and-a-quarter-inch granite countertops. The bathrooms offer custom vanities, detailed stone countertops and frameless shower enclosures, as well as a selection of stone flooring.



More than half of the project is sold and the development is fully funded. Move-ins are anticipated in summer of 2008. For more information on the Mercer and Las Vegas real estate in general, call our office at 702-985-7654.