First, the good news: Home and land prices have hit the bottom and bounced. There is plenty of buyer demand, and even condos are hot again. Banks seem more willing to lend. And even with the sobering subtext of scant inventory tied to housing appreciation, we can’t help but think things are getting better.
Meanwhile, we’re working to reinvigorate Downtown. Heck, our biggest local celebrity over the past two years isn’t an entertainer or casino mogul, but a shoes-and-technology guy who seems to like the erstwhile Glitter Gulch for its potential as a place to live. As for the suburbs, we’ve entered a phase of helpful infill, with developers finishing off abandoned subdivisions and bringing a dose of optimism.
Now the bad news: There could be some 60,000 to 80,000 distressed homes coming through the pipeline again. Notices of default are booming, and real estate analysis firm SalesTraq shows more than 60,000 homeowners are either past due on their mortgage payments or already in foreclosure right now. This comes at a time when homebuilders are enjoying solid demand for new homes, to the point that they are saying we’ve got an affordable-land drought in the market.
Land prices have climbed from just north of $100,000 an acre in the first quarter of 2011 to more than $170,000 today, and builders, while still far off from their boom-year production, say there’s a need for more land to meet demand. The Bureau of Land Management has about 30,000 acres it could auction in Clark County, according to a recent Las Vegas Review-Journal report, and another 110,000 acres outside of metro Las Vegas.
The agency also recently announced that it was considering selling 134 acres, after a public comment period ending June 13. It’s important to note that the BLM does not make the decision to release land; it is a mere facilitator. Under the division’s joint-selection process, it releases parcels after being approached by a city, which in most cases already has an investor wanting to buy a particular parcel by the time it calls the BLM, says BLM spokeswoman Hillerie Patton. So it’s safe to say these 134 acres have an investor tied to them—most likely one of your friendly neighborhood mega-homebuilding corporations.
The sprawl conversation, long dormant because of the Great Recession, may be awakening. The economic downturn forced this entrepreneurial city to look inward on matters of economic growth and development; to think about building real walkable, work-live-play environments in its urban core instead of in fringe destinations.
Undoubtedly, one reason to get the traditional suburban new-home market growing again is to provide jobs. New homes have also helped real estate agents and home-buyers tired of competing against cash investors in a tight existing-home market. The sprawl solution, though, is overly simplistic and sadly familiar. Buy another chunk of land and pack as many homes onto it as possible to grind out a profit—a “build it and Realtors will come” formula that seems to be working again.
These “solutions” to our immediate challenges are a mere facade of economic activity—moving paper and money around to serve the short-term needs of the few. If the real estate industry wants a robust local economy not just for a few years, but for decades to come, it may have to start working on its long game instead. In any case, before we start deciding that we don’t have enough homes, let’s also consider the impact of those 60,000-80,000 homes still making their way through the resale market as foreclosures or short sales.
Today’s rising new-home prices are inflated. Median resale-home prices climbed to $161,000 as of March; the new-home median price is now $235,000. In a stable market, the rule of thumb is that resales should be between 80 and 90 percent of new-home prices. If the market slumps with a dump of resale inventory, there’s plenty of room for a new-home price hit—and, yes, today’s fresh new communities could indeed be home to tomorrow’s fresh new foreclosure casualties.
In this context, questioning our sprawl-for-economic-good mindset is less an environmental concern than it is the fear of another economic smoke screen. Then again, Las Vegas has always been about image. Maybe what’s happening is just fine—until some very natural economic forces tell us differently.
Then we’ll just have to learn the same lessons all over again. If we choose to, of course.