Las Vegas housing market going big — as in master-planned — again

Carpenters work on a KB Homes project at Inspirada in Henderson Tuesday, June 3, 2014. A number of formerly stalled or financially troubled master-planned communities are now back in business, with developers building and selling homes.

Home Builders Back In Business

Francisco Bernal pours piers for patio columns while working on a KB Homes project at Inspirada in Henderson Tuesday, June 3, 2014. A number of formerly stalled or financially troubled master-planned communities are now back in business, with developers building and selling homes. Launch slideshow »

Developer Mark Paris has sought for years to build a city within a city in Henderson, with schools, trails, a hotel and thousands of homes squeezed onto a former industrial-waste dump off Boulder Highway.

He delayed his plans when the housing market crashed, and nothing got built — but he’s not idle anymore.

Paris, CEO of LandWell Co., has sold roughly 255 acres of his Cadence community to homebuilders. The sales came in the past six months or so, and now, his sprawling dirt lot might finally get developed.

He’s not alone. Developers around the valley are gearing up to build mini-cities that, during the recession, either went bankrupt, were seized through foreclosure or were left on the drawing board.

No one expects a glut of new subdivisions anytime soon; the master-planned communities will be built in phases and aren’t scheduled to be finished for at least a decade. Nowadays, developers often build homes only after people agree to buy them, as opposed to the boom years when they frequently took out the hammers and hard hats without buyers lined up.

“Everyone’s more conservative,” said Klif Andrews, Las Vegas division president for Pardee Homes.

But if all goes as planned — and that’s a big “if” in economically wobbly Southern Nevada — the massive communities would bring up to 45,000 new homes to the region.

Projects would steer billions of dollars of work to the local construction industry, stretch the sprawled-out valley even more and likely raise concerns about water use in the parched region.

Las Vegas has some of the best-selling master-planned communities in the country, and local developers say there are few sites big enough where they can build a community from scratch with a range of amenities.

“We are running out, in the Las Vegas Valley, of quality home sites,” said Garry Goett, chairman and CEO of the Olympia Cos., a local development firm.

Cadence, at 2,200 acres, would have up to 13,250 homes, 1.1 million square feet of retail and a 1,500-room resort. Homebuilders are expected to start grading land this week.

Click to enlarge photo

The LandWell Co. has sold at least 200 acres of vacant land to a homebuilder and is working to develop another 18 acres at the Cadence master-planned community site in Henderson, as seen above on Dec. 11, 2013.

Skye Canyon, a 1,700-acre site in northwest Las Vegas that was seized by lenders during the national economic meltdown, is designed for 9,000 homes and hiking and biking trails. Olympia and its partners, which bought the site at a steep discount over the past year, are holding a groundbreaking ceremony Thursday.

North Las Vegas’ Park Highlands, which went bankrupt twice before a single house was built, is slated to have 15,000 homes on almost 2,700 acres, with construction poised to start by early 2015. And at Inspirada in Henderson, builders are ramping up work on the community, which was derailed for years after it went bankrupt. It still has room for another 7,500 or so homes.

Developers are reviving master-planned communities nationwide, especially in the boom-and-bust Sun Belt, said Taylor Mammen, a principal with Bethesda, Md.-based RCLCO, a real estate consulting firm.

In many cases, previous investors obtained government approval to sell units and installed underground utilities, giving the sites a good start for the projects, Mammen said. Many projects also were bogged down with lawsuits and other legal woes during the recession, but most of those problems have been resolved.

“They took forever, but we’re past that to a large degree,” Mammen said.

In Las Vegas, the renewed interest comes as the new-homes market, after recovering from the depths of the recession, slumps again.

Local builders sold almost 39,000 new homes in 2005, just 3,900 in 2011, then 5,500 in 2012 and 7,300 last year, according to Las Vegas-based Home Builders Research.

The Mountain’s Edge project in southwest Las Vegas was the No. 4 selling master-planned community in the country last year, with 841 sales, according to RCLCO. Providence, in the northwest valley, was No. 7 with 726 sales, and Summerlin, which runs along the western rim of the valley, was No. 11 with 566 sales.

However, buyers throughout the valley are pulling back this year amid rising prices and borrowing costs.

Local builders sold roughly 1,700 new homes through April, down 25 percent from the same period last year, while the median sales price of April’s closings was $287,000, up 20 percent year-to-year. The average interest rate in April for a 30-year mortgage was 4.3 percent, low historically but up from 3.5 percent a year earlier, according to mortgage-finance company Freddie Mac.

Despite the weak start, developers say business will bounce back.

“The market’s a little slow now, but over the long-term it’s going to have good health,” Cadence’s Paris said.

It didn’t look that way after the housing bubble burst.

Skye Canyon, for instance, was owned by a consortium of developers who bought the site for $510 million at a 2005 federal auction. Before they built anything, the former Wachovia Bank foreclosed on the property in fall 2008, less than two weeks after Lehman Brothers Holdings went bankrupt and helped set off the national financial crisis.

Park Highlands also was owned by a group of builders who bought the land at a 2005 federal auction, for $639 million. Plans called for schools, a fire station and 130 acres of parks and trails, but before anything was built, the housing market collapsed, the project went bankrupt twice and investors bought land there for cents on the dollar. A group led by investment firm KBS bought 1,375 acres — half the site — out of bankruptcy for just $21 million.

Inspirada, which opened in early 2007, was designed to have 8,500 homes, a casino resort, retail, restaurants, parks, schools and trails. But lenders, claiming they were owed almost $330 million, pushed the partially built project into bankruptcy in 2011. Roadwork and other communal projects in Inspirada stopped afterward and only recently resumed.

And at Cadence, a former legal dumping ground near Henderson’s chemical plants that has since been cleaned, LandWell Co. announced in 2004 that it reached a deal to sell the site to Centex Homes, but the buyer backed out in 2007.

In 2008, LandWell executives tried to sell 42 acres to Boyd Gaming Corp. for a casino, but that fell through.

LandWell has owned the site without any debt, so when the economy collapsed, it was able to wait until things got better before it launched development efforts again, according to Paris.

And though he could only guess when Cadence would be fully built, Paris dismissed the recent housing slowdown, saying the valley will remain a desirable place to live and work.

“We’re in this for the long haul,” he said.

Real Estate