Las Vegas homebuilders ended 2022 with a sharp drop in sales and construction plans from the previous year, capping a dramatic shift for the once-heated market.
Home builders had 416 net sales — new sales signed minus cancellations — in southern Nevada in December, down 57 percent from the same month in 2021, Las Vegas-based Home Builders Research reported.
Builders also recovered 427 building permits for new homes in December, down 67 percent from a year earlier, and their land acquisition activity has been “extremely slow for most of the last six months or so,” said the firm’s president, Andrew Smith, in the test report.
Overall, builders recorded nearly 8,600 net sales last year in southern Nevada, down 33 percent from 2021, and recovered about 10,970 home building permits, down 27 percent.
“We are all aware of the general state of the housing market these days and that 2022 showed a steady decline in activity on virtually every front,” Smith wrote.
‘Caused the end of the party’
Homebuyers in Las Vegas and across the country hit the brakes for months last year as soaring borrowing costs wiped out the easy money that fueled America’s unexpected housing boom after the pandemic hit.
Taylor Marr, deputy chief economist at brokerage firm Redfin, previously told the Review-Journal that the past year marked one of the biggest “turnarounds” for the housing market, noting that mortgage rates have risen at an all-time high.
“That caused the party to end,” he said.
Record low mortgage rates had sparked a spending spree in Las Vegas and across the country in 2021. Selling prices hit new all-time highs virtually every month, homes sold quickly, home seekers flooded properties with offers, and builders routinely hiked prices and sold off wait-listed buyers.
To combat inflation, the US Federal Reserve has raised interest rates several times over the past year. Mortgage rates skyrocketed and homebuyers withdrew.
In Southern Nevada, overall sales fell sharply in 2022. Sellers progressively lowered their prices and available inventory skyrocketed. Amid the slowdown, builders were offering more incentives to buyers and higher commissions to the agents who brought them in, property sources said.
Buyer demand thaws
Mortgage rates are still well above last year’s levels but have fallen recently, relieving affordability pressures.
The average interest rate on a 30-year home loan was 6.13 percent Thursday, up from 3.55 percent a year earlier, mortgage buyer Freddie Mac reported.
By way of comparison, last fall interest rates topped the 7 percent mark for the first time in two decades.
With interest rates falling recently, “demand for homebuyers is thawing after months of the housing market freeze,” said Sam Khater, Freddie Mac’s chief economist, in a press release.
Homebuilder confidence rose nationwide in January, ending 12 straight monthly declines, the National Association of Home Builders reported.
The group said a “modest drop” in interest rates helped boost confidence. However, it noted that sentiment “remains in bearish territory” as builders face increased construction costs, supply chain disruptions and “challenging affordability conditions”.
At the local level, home builders’ net sales rose 33 percent month-on-month in December, although cancellations also rose, Home Builders Research reported.
Contact Eli Segall at [email protected] or 702-383-0342. consequences @eli_segall on twitter.