Developers in Southern Nevada want more land

The lack of land in Southern Nevada for building new homes and other development remains a hot topic for builders and other developers.

The Southern Nevada chapter of NAIOP addressed the topic as did the Southern Nevada Home Builders Association.

Shawn McCoy, director of the Lied Center for Real Estate at UNLV, said the narrative is that the housing market “feels stuck in the idle of a long-term correction rather than a crash after the pandemic-era frenzy” that sent prices soaring and inventory to historic lows. The Las Vegas housing market looks more like an intergalactic roller coaster, with Las Vegas owners clenching their wallet as if they are precious oxygen tanks.”

In Southern Nevada, McCoy said while median prices are down 3.1 percent year-over-year, any repeat sales prices as measured by the Case-Shiller Index are down only 1 percent as the number of homes sold is down nearly 8 percent. Nationwide, the median prices are down 8.2 percent since 2022 while appreciation is up 7.3 percent.

“What you are witnessing in real time is the greatest reshuffling of the U.S. housing market that we have ever seen,” McCoy said. “We are seeing people moving and bidding up prices in lower-priced metros; and yet in the Southwest and Sun Belt, we are seeing home prices compress in Los Angeles and in the greater Las Vegas area.”

Home sales are down 7.7 percent year-over-year while new listings are down 8.2 percent, McCoy said of Southern Nevada.

“While prices are correcting, affordability remains a concern,” McCoy said. “There are a lot of ways we think through home affordability. Median homebuyers with a 20 percent down payment right now can afford a $355,503 house.”

Only 6 percent of 627 occupations in Las Vegas pay enough to afford a median-priced home, McCoy said.

The pockets of affordability in Las Vegas are in the northeast valley, along Boulder Highway and east and west of I-15, south of the Strip and north of the 215 Beltway, he indicated.

In Southern Nevada, interest rates, which are above 6 percent, need to drop to 2.9 percent to bring that affordability back in line where it was in 2019 before the pandemic. Income would need to rise by 44 percent to get back to that level and home prices fall by 33 percent, he said.

That’s better than the U.S. as a whole where mortgage rates would need to fall to 2.6 percent; income would rise 56 percent; and home prices fall 35 percent, McCoy said.

“It’s a benchmark, but that doesn’t work in practice,” McCoy said.

McCoy said homebuilders started to have steady increases in home production in 2012, but by 2022, the Federal Reserve increased rates seven consecutive times.

“That one hurt, and that visible rate shock affected how many units got delivered in the market,” McCoy said.

In 2006, Las Vegas produced 42,000 new homes, which is fewer compared with what Phoenix has been producing as late as 2024 with 44,000, McCoy said.

“Phoenix produced more homes in 2024 than Las Vegas has ever done in any given year over its entire lifetime,” McCoy said. “What’s different? We have a lot of vacant land with 90 percent of Clark County completely vacant, but 88 percent is controlled by the federal government. Ninety-four percent of all vacant land is federally controlled.”

Land is guided by the Southern Nevada Public Land Management Act of 1998, which established a disposal boundary that limited to certain parcels.

“It turns out the disposal boundary isn’t very big at all,” McCoy said. “The disposal boundary as a share of all the county’s area is 6.3 percent, which in turn has concentrated the vast majority of all developed real estate into a small contiguous area. It turns out around 96 percent of all single-family and multi-family development in the entire county of Clark exists in the Las Vegas Valley disposal area. The challenge for Nevada, indeed, is where we stand with vacant developable land.”

That comes as UNLV is projecting 380,000 people will move to Southern Nevada over the next decade. That is larger than the current population of North Las Vegas and Henderson.

“To talk about that relevance even more, we have to talk about households versus the economy,” McCoy said. “People live in homes, but commercial real estate is a bit different. The commercial real estate sector is the home and incubator of the modern economy, but (that) needs large parcels with different slope requirements and lot sizes. We can’t build high-rise industrial projects.”

If the 380,000 people dropped into Las Vegas tomorrow, McCoy said the first thing they will look at is buying a home and increasing prices unless builders are able to construct more new homes.

“They are going to be looking for a house, but they also will be looking for a job,” McCoy said. “There would be more people looking for work, but with no more economic development and job creation, wages tend to go down. When we don’t check population growth with the right amount of commercial development and the right amount of residential development, we see imbalances. We see rising prices and falling wages — what we call jobs-housing imbalance.”

Commercial real estate is needed to attract businesses, hire workers and elevate wages, which, McCoy reiterated, requires land.

“Land shortages for commercial real estate are going to (create shortages) sooner than they will for the residential sector,” McCoy said. “For builders, homebuyers are going to be looking for a home and a job. If this plays out over the next few years, there will be conversations at Clark County with businesses asking where can I put my facility, and the answer is we don’t know. This will pose challenges for every aspect of economic development when we try to get businesses here to Southern Nevada, but those workers will look at where they can rent and where can they can buy? With 380,000 people the fastest-growing segment is the workforce population. Thinking about a workforce housing option is more relevant than it ever has been in Las Vegas history.

The housing market is stronger and has signs of a correction, and the housing supply is fundamentally at risk, McCoy said. If development levels in the 1990s had continued over time, post-2008 — the valley would have 200,000-plus additional homes available for homeowners.

“While housing supply is at risk, it’s working as the cantilever to what’s happening to home prices — high interest rates and high cost of living is pulling demand down,” McCoy said. “That’s why we’re seeing prices contract. The same things pushing demand down are pushing supply down, and when supply drops, it puts upward pressure on price. The very thing that’s hurting our economic growth potential — where do we stand from demand and supply — is also acting to keep prices propped up.”

Cameron Belt, a senior economist and research director for RCG Economics, said being the only state where pre-authorized sales of federal land is allowed makes Nevada an outlier. The Bureau of Land Management, which oversees that, focuses on stewardship and retention rather than disposal. More land ends up in conservation for every acre that gets purchased by the private sector.

“We need more parcels that are vacant that we can get from the federal government to get in the private sector’s hands in order to be developed,” Belt said. “That’s the crux here. We can sit back and plan and think this would be great if this happened in this way, but we need people willing to take on uncertainty, development costs and take on risks and throw their cash behind it.”

Belt said that they can say there are 60,000 acres of vacant land, but how much of that, Belt asked, is on the side of a mountain, has utilities running to it or is irradiated because of old nuclear fallout.

“Just because we have an acre, 10 acres or 1,000 acres of vacant land doesn’t mean we can immediately put it to a use that the market wants, can sustain or is necessary,” McCoy said.

When the region has less of an ability to make different decisions, that makes it more reactive and less resilient, Belt said.

“We are less resilient if we have fewer choices. We need to be more robust, weather any storm and move as fast as we can,” Belt said. “Adding bureaucratic decisions to land processes slows that down and gives us some handcuffs. If all we are building is a bedroom community, we’re going to have a hard time growing.”

People talk about infill development, but it’s expensive and runs 20 percent to 40 percent cost premiums compared with a greenfield site.

“When we talk about infill development being able to solve the housing crisis or other growth challenges, developers can’t develop unless a project financially pencils,” Belt said. “When I look around at infill sites, the simple part of my brain is what is the barrier and what is the challenge. So much dialogue in the last eight months has been on these blanket statements that we need to grow upward or grow in by people who don’t actually do it.”

McCoy said they need to do research on what is inhibiting developers and what incentives can be given to help developers overcome them.

“We don’t want to be a boom-and-bust city much longer,” McCoy said. “We want to reap the benefits of that growth and do it in a way where we’re not panicking every five years.”