Las Vegas homebuilders’ sales falling amid rising mortgage rates

Builders logged 713 net sales — new purchase contracts minus cancellations — in Southern Nevada in June, down 23.7 percent from the same month last year, according to figures from Las Vegas-based Home Builders Research.

Last month’s sales tally was the lowest of the year and marked the third consecutive month of sliding sales, the firm’s president, Andrew Smith, reported.

Buyer traffic rose month to month but remains relatively low for this time of year, according to Smith, who wrote that mortgage-rate sticker shock and increased cancellations “continue to be a factor in the market.”

Over the past two months, some builders have started to slash their base asking prices “for the first time in a very long time,” he added.

‘Buyers are balking’

Las Vegas is by no means alone. Across the U.S., the pace of new-home sales fell last month to their lowest level since April 2020 amid the early chaos of the pandemic, according to the National Association of Home Builders.

“Buyers are balking due to deteriorating affordability conditions and growing sticker shock,” Danushka Nanayakkara-Skillington, the association’s assistant vice president for forecasting and analysis, said in a news release.

Nationally, the pace of new-home sales in June dropped 8.1 percent from May and 17.4 percent from June 2021, federal data shows.

Nicole Bachaud, an economist with listing site Zillow, said in a statement that the decline was expected “given recent market shifts” and a reported slump in homebuilder sentiment.

“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,” she said.

Fueled by low borrowing costs, Las Vegas’ housing market accelerated 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 also put buyers on waiting lists, regularly raised prices and in some cases drew names to determine who could purchase a place.

Overall, builders logged just over 12,900 net sales in Southern Nevada last year, the most since 2006, Home Builders Research previously reported.

Prices still high

The Federal Reserve has been raising interest rates lately in an effort to cool inflation, and in the housing market, higher borrowing costs have wiped out the cheap money that fueled America’s unexpected housing boom after the pandemic hit.

The average rate on a 30-year mortgage in June was 5.52 percent, up from 2.98 percent the same month last year, according to mortgage-finance giant Freddie Mac.

Still, Southern Nevada home prices remain much higher than they were a year ago.

On the resale side, the median sales price of single-family homes was $480,000 in June, down 0.4 percent from May. This marked the first month-to-month price drop in more than two years, but prices were still up 21.5 percent from June 2021, trade association Las Vegas Realtors reported.

For new construction in Southern Nevada, the median closing price for single-family homes in June was a record-high $513,295, up 17.7 percent from a year earlier, according to Home Builders Research.

After a buyer signs a sales contract, it can take several months before the home is finished and the purchase can close.

Contact Eli Segall at esegall@reviewjournal.com or 702-383-0342. Follow @eli_segall on Twitter.