OPINION
VEGAS VIEWS
—Tom McCormick—
Supply and Demand
Make Housing Unaffordable
It's no secret that home
prices have soared in the past couple
of years. Anyone buying or selling
a house in the Las Vegas Valley, or
anyone who pays attention to the news,
knows that the supply of affordable
housing is not meeting the demand.
The lack of reasonably priced housing
has become such a problem that during
a meeting in July between the City
Council and City Planning Commission
on affordable or attainable housing,
Las Vegas Mayor Oscar Goodman urged
the city to stipulate that developers
provide affordable housing.
There are several reasons,
including increased costs associated
with building and investor speculation,
that have created this crucial issue
confronting Clark County. These factors
have pushed sales prices upward so
high so fast, that salaries can't keep
up, which has priced many home buyers
out of the market.
As a Las Vegas home builder
for more than 10 years, ASTORIA HOMES has
always tried to offer high-quality
housing for first-time buyers. In the
current market, however, we are challenged
to provide thte prices we would like
to.
Like all home builders
in the Las Vegas Valley, escalating
building costs have directly affected
our ability to provide more attainable
price points. In the past couple of
years, everything involved in building
a home has increased in price. In fact,
building costs are about five time
what they were five years ago.
The highest cost home
builders currently face is the price
of land. With the extraordinary amount
of growth going on in the Las Vegas
Valley, the supply of developable land
is being depleted, while the demand
created by the consistent inundation
of developers with projects in the
works or on the books continues to
escalate. As a result, land prices
have increased approximately 100 percent
to 200 percent over the past 12 to
24 months.
In addition to climbing
land prices, higher construction costs
have raised expenses for home builders
and therefore driven housing prices
up. Increased costs of materials as
well as higher labor expenses are the
culprits of this growing expenditure.
The cost of materials has gone up because,
similar to the land situation, the
supply is not meeting the demand.
Building costs are not
the only cause of higher housing prices.
Investor speculation also is contributing
to the problem. With continued interest
from all over the country and the world
to invest in Las Vegas' red-hot real
estate market, an abundance of investors
have bought homes with the intention
of flipping them, or selling them shortly
after they purchase them to make a
profit, causing a shortage of housing,
which raises sales prices.
Unfortunately, finding
ways to overcome these mounting costs
in order to create affordable housing
has proven to be a difficult hurdle
to get over. In an effort to keep prices
down, my company moved to higher density
neighborhoods, but while our Triumph
Homes and Neighborhoods offer the lowest
price points in their market areas,
sales prices have still increased significantly.
The underlying cost increases have
pushed our sales prices from $140,000
three years ago to $230,000 today.
With more than 5,000
residents moving to Southern Nevada
each month, the demand for affordable
housing shows no sign of slowing down.
While some real estate analysts look
to rising interest rates to slow down
the price hike, they still remain at
record low levels. Other pundits claim
that a slowdown in investor speculation
will stabalize the hosing market, but
currently the prices in Las Vegas are
still relatively inexpensive compared
with other areas of the U.S. and mortgage
rates remain low, which is holding
investors unwavering attention.
The solution really lies
in dealing with the biggest challenge:
the cost of land. The single best way
to make housing more affordable is
to increase the supply of land through
increased BLM auctions. Stabalized
land prices would go a long way towards
stabilizing home prices. And stabilized
home prices would give incomes a chance
to catch up, making housing more affordable.
