Real Estate:

Luxury-home construction may not be booming, but it is bouncing back

Workers put in a pool for a home in the Ridges, a luxury residential community in Summerlin, Thursday, June 11, 2015.

Azure, a luxury, gated community within a luxury, guard-gated community, is built along a Jack Nicklaus-designed golf course and nestled outside Red Rock Canyon, with hills and mountains practically in its backyard.

And now, it’s packed with work crews building mansions.

More than 20 custom homes are being built in Azure, which sits inside the Ridges, one of the wealthiest, most exclusive areas of Southern Nevada. A number of the new homes are said to average 7,000 square feet, and the cluster of construction makes it look like another tract subdivision — but instead of Las Vegas' usual cookie-cutter stucco homes, it's getting customized palaces.

Luxury Home Construction on Upswing

Carpenters work on a home in the Ridges Las Vegas, a luxury residential community in Summerlin, Thursday, June 11, 2015. Launch slideshow »

It’s not the only part of town getting a new crop of high-end houses.

Luxury-home construction is on the upswing throughout the valley. It's not booming, but the increase reflects rising wealth among the already-wealthy, easier lending, a dearth of bargain-priced resales and confidence that Las Vegas’ luxury-housing market won’t tank again — at least not soon. Some even want to flip their mansions.

Overall, the market is “not super-robust, but at least it looks like it’s getting better,” custom-home builder Dan Coletti said.

Developers sold 21 new homes for at least $1 million this year through May. That’s up from 34 sales all last year and just three in 2013, according to Las Vegas-based Home Builders Research. Those numbers don't include high-rise condo sales.

Luxury builder Christopher Homes didn’t even try selling houses around 2010 in its Boulder Ridge community in the Ridges because of the wrecked economy. Things started picking up a few years ago, and in the past six months, buyers have signed contracts for six homes at an average price of about $2 million, said Erika Geiser, vice president of sales and marketing.

Custom-home deals, not included in Home Builders Research’s data, also are on the rise. Coletti, owner of Sun West Custom Homes, said he built “probably two” homes in 2014 and expects to complete six this year. Raftery Homes owner Jack Raftery, who at the depths of the recession “was lucky to have at least one” project underway in the valley, now has three under construction and a few more in design.

Blaser Construction owner Scott Blaser built three or four custom homes a year at the peak of the bubble, dropped to just one or two during the recession, and now has three underway. He expects to line up two or three others by year’s end.

“I’ve got more on the books now than I’ve ever had,” Blaser said.

In a recent one-week period, buyers signed contracts for seven lots in the upscale Henderson foothills community of MacDonald Highlands, developer Rich MacDonald said. In that same time, he said, he also signed a joint venture with a builder for seven other lots.

On the other side of the valley, sales of custom-home sites slowed in Summerlin — where the Ridges is located — to five lots in the first quarter, down from eight a year earlier. But sales nearly doubled last year, with developer Howard Hughes Corp. selling 20 custom lots, up from 12 in 2013, according to securities filings.

The company is gearing up for more luxury construction. Howard Hughes formed a joint venture with Scottsdale, Ariz.-based Discovery Land Co. last year to develop a 555-acre, high-end community just south of the Ridges. Plans call for about 270 homes, with custom-lot prices starting at $1.5 million. The first sales of lots and homes are expected to close in early 2016.

Altogether, there are several reasons for the uptick. A big one is the stock market, which has shot past its pre-recession peak and keeps climbing, giving investors the cash for multimillion-dollar homes and other goodies.

The economy “might not be all that great, but these guys have a lot of money in their pockets, and they feel pretty confident,” MacDonald said.

For custom homes, residents pay the landowner for the lot and then a builder to construct the house. Most seem to be paying cash, but more than a few are getting loans to help cover the costs or to replenish their coffers after paying for everything out of pocket.

Banks — which gave loans to practically anyone during the bubble and then seemingly no one during the recession as lenders collapsed throughout the country — have been opening the spigot again, issuing more “jumbo” mortgages and other debt to luxury-home buyers.

“We’ve seen a big improvement on that,” said Blue Heron co-founder Tyler Jones, who is building five homes in Azure and getting permits for another.

Lenders issued 762 jumbo home-purchasing loans, totaling $619 million, in Nevada in 2013. That’s up from 384 loans, totaling $326 million, in 2012, according to the most recent data from the Mortgage Bankers Association.

Interest rates are historically low, meaning cheap borrowing costs for buyers. But rates are expected to climb, prompting some people to get loans while money is cheap, builders say.

At the same time, buyers don’t have as many low-priced options on the resale market as they did a few years ago. Foreclosures swept through the valley during the recession, and luxury housing was by no means spared. Bargain hunters had a big pool of big houses at relatively small prices, and resales soared.

In 2013, owners bought 341 homes that cost at least $1 million apiece, up 92 percent from 2012, according to the Greater Las Vegas Association of Realtors, which mostly tracks previously owned homes.

But such bargains are largely gone, executives say. Buyers picked up 300 homes last year for at least $1 million each, GLVAR data show. The pace of sales is up this year from 2014, with 151 million-dollar homes sold through June 9, but the rapid jumps have stopped.

“The market’s still there, but we lost that (sales increase) to new construction,” said Gene Northup, co-owner of luxury-home brokerage Synergy Sotheby’s International Realty.

Today, custom-home buyers are a mix of locals and out-of-state residents, especially Californians, building their primary residence or second or third home.

Among locals building in the Ridges, for example, a good number already live in Summerlin, which only began taking shape in 1990. But their neighborhoods have “now reached a mature age, so to speak,” and they’re building from scratch again “just so they can get a newer custom home,” builder Coletti said.

“This town happens to be nomadic — they don’t stay in homes for 30 years,” builder Raftery said. “They build and move on and move up, or move, period.”

Also, more than a few people valleywide are building just to sell their mansion for profit some time later, contractors say.

“In their minds, they’re actually making money building a house,” Raftery said.

At least one person has. Blaser said he built a house for a client a year ago who has already sold it, making $2 million on the deal.

Still, the entire market isn't roaring.

Ascaya, the long-delayed mountain-mansion project in Henderson, reopened for business last August after sitting untouched for years. But since then, buyers have picked up only three lots at the 313-lot development, and at falling prices.

The first parcel, 0.46 acre, sold in October for $925,000; the second, 0.73 acre, went in December for $915,000; and the third, 0.49 acre, sold last month for $865,000, Clark County records show. All buyers were local residents.

Last August, the project’s listing brokers said they were aiming to sell all 313 lots in phases in five to seven years and to have Ascaya fully developed in a decade or so.

Ascaya sales manager Darin Marques said this week that his group initially was “a little frustrated” by the small number of deals. But with each sale, interest from prospective buyers has picked up, he said. Also, he searched Southern Nevada sales records and found that only about 30 homes sold last year for between $3 million and $5 million each, roughly the price it would take to own a house in Ascaya. It’s a small pool of potential buyers for his community, he said, and his research “shows we are on a good pace.”

Construction of the first two homes is expected to begin by mid-July, which could also spur buyers who were nervous about being the first to break ground in the community that Hong Kong tycoon Henry Cheng blasted out of the McCullough Range, almost 1,000 feet above the valley floor.

Overall, despite the increased construction, the market remains a shadow of what it was during the frenzied boom years.

At the peak of the bubble, in 2005, builders sold 226 new homes in Southern Nevada that cost at least $1 million each, according to Home Builders Research. Resales also were hot, with 626 homes selling for at least $1 million that year through the GLVAR’s listing service.

Builders say the market isn’t overheating now, but given how badly things turned out last time, they don’t want a return to the go-go years.

“That’s what we don’t want to see happen again,” Blue Heron’s Jones said.

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