Land prices.At the bottom of any story on construction, development, and even building design in northern Nevada sit land prices Mark Krueger, Grubb & Ellis senior advisor, predicted another rise in those land prices as he spoke last week at the Builders Association of northern Nevada's Forecast 2005, an overview of construction industry trends.
The average price of land for singlefamily lots in Washoe County rose 16.5 percent in 2003, about 44.2 percent in 2004, and Krueger predicts it will jump another 28 percent this year.
Follow that price as it ripples through the design and build of a development.
Lot costs took up about 26 percent of a home price in 2003, rose to 27.5 percent last year, and Krueger sees them going up to 28.5 percent this year and capping out there.
Construction costs are up, too.
The median price of homes rose upwards of 39 percent last year and will go up almost another 24 percent this year, said Krueger.
As the ripple of rising costs hits developers, they are responding with higher density communities putting as much as possible on each patch of land,with alley-loaded units, cluster projects, and townhouse designs.Home sites are getting smaller expect to see more of them under 5,000 square feet, says Krueger.
And that the downsizing is the biggest trend in residential development, he adds.
But even with all the talk of increased density and rising costs, optimism reigns.
Several developments are in the pipeline, and more are coming, with the concentration of them in the north valleys, west of Reno, and in the south suburban areas.
Following on the eaves of those rooftops, said Tim Ruffin, senior vice president of Colliers International, are numerous retail and industrial developments.
Land prices have had an impact on this end of the real estate market, too, but have not slowed it down yet.
And will it? Land prices themselves will have to slow down, says Ruffin, because at some point you won't be able to charge rents high enough to compensate for the increased land cost.
The market will be forced to adjust.
Krueger agrees: The residential market, too, will adjust, he predicts."We expect the biggest remaining price jump in 2005, followed by a leveling off," he says.
Home prices are outpacing the local economy's salary ranges.
National builders have taken notice of the rush for building out the bowl and up into the hillsides around Reno/Sparks, and are eyeing northern Nevada.
Lennar Corporation's acquisition of Barker-Coleman, a Nevada builder, is another indication of the trend.
They'll have an impact, says Krueger, such as more cluster designs, more duplexes and other high density approaches.
But also, they'll add competition for the land.
As developers both residential and commercial scout where they are going to build next, they are running up water, sewer and transportation infrastructure challenges.
And, as developments continue to cover the sagebrush and hillsides of northern Nevada, more of those challenges await.
