New single-family homes again affordable

It was only a few years ago when affordable housing was one of the great draws in Southern Nevada. Despite the city growing at a breath-taking pace supply and demand stayed in sync and kept prices relatively low. And then the secret was out of the bag, sometime in 2003 and 2004, and speculators in particular moved in to ply their trade and began driving prices ever higher. The ensuing frenzy predictably ended in a bust that still prevails.

Those home builders who still are operating in the valley have drastically revised their business plans because they had to. Not too long ago median new home prices were heading well past the $300,000 mark, but in doing so slowly started to become unrealistic to many buyers. The market eventually tanked, as we well know, and values are now marching the other way. Going toward where the annual household incomes can afford them again.

Builders are adjusting to that reality. They are now offering some single-family homes even below $200,000. Typically these houses are small, the yards resemble postage stamps, streets in the communities are narrow and out of necessity they are two-story designs to allow more of them per acre. These neighborhoods are normally situated in the outlying suburbs.

But they make great starter homes and that is what the builders have in mind. Get the first-time buyer into the ownership cycle, generate equity and later on move up.

It's good news for the working-class buyer, but it's still a niche market as the median new home price in Las Vegas is $312,639. Builders are barely making a profit with this special product line because the costs of land and construction remain high. Getting as little as $110 per square foot is very close to a break-even point, so anything less than that would force them to wait for better times or leave the area.

Source: SalesTraq, Home Builders Research