The Southern Nevada home builders sold fewer homes during the first quarter of 2022 compared with the first three months of 2021, but Home Builders Research President Andrew Smith said builders are taking out a greater number of permits to prepare for strong demand in the coming months.
Smith will be unveiling his first quarter numbers Thursday when he hosts his annual event for the homebuilding industry. This year’s session, which is sponsored by Southwest Gas, will again be a webinar that starts at 10 a.m. and lasts for about an hour. Go to homebuildersresearch.com to register.
There were in excess of 3,000 sales during the first quarter (more than 1,000 each month) compared to just over 4,000 in the first quarter of 2021, Smith said. The first quarter sales, meanwhile, are still higher than the third and fourth quarters of 2021, Smith said. The end of 2020 and beginning of 2021 were well above average, he said.
“It’s increased from the second half of last year, but not at the level of the first quarter of 2021,” Smith said. “It’s a surprise that new homes are doing as well as they are. The mortgage rates have started to pick up and we’re not sure how long the activity from out of state is going to last. That still seems to be a big factor on the number of homes being sold.”
Las Vegas has benefited from Californians cashing out of higher-priced homes and seeking a lower-cost of living, no state income tax and a greater ability to work from home.
Smith said no one should be worried about the decline in sales during the first quarter, although there continue to be headwinds for builders with the supply chain, rising costs and higher mortgage rates.
“This is not a surprise and should not be seen as a ‘bad omen’ given the historic sales pace seen in late 2020 and early 2021,” Smith said. “Demand continues to be high and supply remains extremely low. It’s not going to be falling off a cliff by any means barring anything crazy. I wouldn’t be surprised if it slows down to (closer to) 2019 levels, which is still a healthy level of activity.”
Smith said net sales (new contracts minus cancellations) picked up in March to total more than 1,250, aided by five weeks of reporting compared to four for January and February. Builders, which recorded 12,902 net sales in 2021, had just under 10,000 net sales in 2019.
Nat Hodgson, CEO of the Southern Nevada Home Builders Association, said builders are preparing for the demand. The SNHBA’s tracking of permits issued in Southern Nevada during the first quarter shows 4,359, some 707 higher than the first quarter of 2021 when it was 3,652.
“Builders have increased their number of permits they have been pulling, even though we’ve had delays with getting materials and price escalations,” Smith said. “They may be permitting homes they sold a few months ago.
They are trying to keep up with what they’re selling.” Hodgson said the industry continues to face issues with the supply chain and availability of land being the biggest hindrance of selling more homes.
“I was hoping it would get a little bit better,” Hodgson said. “I think we were moving that away, but (Russia’s invasion of Ukraine) messed that up (with rising fuel prices). It’s hard to get projections when you have supply chain issues. Now, the fuel costs are getting crazy. Everything we get here gets transported by trucks. I am afraid of the pricing. I don’t see any way it doesn’t keep escalating.”
Hodgson said there should be an increase in net sales and permitting in the coming months as builders are able to get additional materials they need to construct homes.
“The hardest year to even build a home was last year, and this will probably duplicate it,” Hodgson said. “It’s incredible with supply chains. Is it getting harder to build? Yes, but we’ll keep trudging through. The only thing I can’t control is the cost.”
The median price of single-family new homes in February was $479,808, 20.6 percent higher than February 2021. Attached homes are 24.6 percent higher at $354,981, according to Home Builders Research.
Coupled with higher mortgage rates, Hodgson said that won’t price out buyers from California but those from Nevada.
Smith will announce the top builders for the quarter and top-selling subdivisions in Southern Nevada, including an update of the master plans.