With home sales recently falling in Las Vegas and around the country, U.S. builder confidence has dropped for the eighth consecutive month as developers face a “housing recession,” a new report shows.
The National Association of Home Builders said Monday that builder confidence fell in August as higher interest rates, ongoing supply-chain problems and high home prices “continue to exacerbate housing affordability challenges.”
In “another sign that a declining housing market has failed to bottom out,” confidence in the market for new single-family homes slid to its lowest level since the early months of the pandemic more than two years ago, the association reported.
The Federal Reserve has been raising interest rates in an effort to cool inflation, and in the housing market, borrowing costs have fluctuated but are well above last year’s rock-bottom levels.
Tighter monetary policy from the Fed and “persistently elevated” construction costs have brought on a “housing recession,” Robert Dietz, chief economist for the builders association, said in Monday’s news release.
Homebuyers are pulling back in Southern Nevada and throughout the United States, following a year of huge price gains, as higher mortgage rates wipe out the cheap money that fueled America’s unexpected housing boom after the pandemic hit.
The average rate on a 30-year home loan in July was 5.41 percent, up from 2.87 during the same month last year, according to mortgage buyer Freddie Mac.
Coldwell Banker Premier Realty agent Tricia Kiefer said recently that Las Vegas Valley builders have “totally switched.”
She said they are offering to apply money toward closing costs and are offering commissions again to buyers’ agents.
Real estate pros said last year that some builders had reduced commissions for agents who brought in clients or were offering them flat fees.
Some builders have also started to slash their base asking prices lately “for the first time in a very long time,” Andrew Smith, president of Las Vegas-based Home Builders Research, reported last month.
Century Communities, a national homebuilder with projects in Southern Nevada, recently announced that it was “bringing back its popular Purple Tag sale” through August.
The sale offers “major savings” through special pricing, closing-cost assistance, competitive financing and rate-lock programs, and move-in packages, the builder said in a news release.
‘More and more’ cancellations
Fueled by low borrowing costs, Las Vegas’ housing market accelerated to its most frenzied pace in years in 2021. Prices hit new all-time highs practically every month, buyers flooded properties with offers, homes sold rapidly and the annual number of resales hit a record high.
Homebuilders put buyers on waiting lists, regularly raised prices and in some cases, drew names to determine who could purchase a place. Builders notched just over 12,900 net sales — new purchase contracts minus cancellations — in Southern Nevada last year, the most since 2006, Home Builders Research previously reported.
However, sales have been tumbling lately.
Builders logged 713 net sales in June, down almost 24 percent from the same month last year, according to figures from Home Builders Research.
The sales tally in June was the lowest of the year and marked the third consecutive monthly drop, the firm reported.
Nationally, the pace of new-home sales in June fell 8.1 percent from May and 17.4 percent from June 2021, federal data shows.
“After months of racing to put up homes in order to meet the red-hot housing market conditions, builders are suddenly seeing more and more contract cancellations, sellers of existing homes cutting prices and homes lingering on the market,” Nicole Bachaud, economist with listing site Zillow, previously said.
On the resale side, Southern Nevada is seeing fewer purchases, fast-rising inventory, plenty of price cuts and more negotiating power for buyers.
Amid the pullback, sales prices fell month to month in July for the second consecutive time after not dropping for more than two years.
The median sales price of previously owned single-family homes — the bulk of the market — was $465,000 last month, down 3.1 percent, or $15,000, from June, trade association Las Vegas Realtors reported.
“We’re definitely seeing a shift in the housing market,” LVR President Brandon Roberts said in a news release. “We haven’t seen prices slow down like this in several years.”