As home prices bottom, builders may stir to action

A veteran observer of residential development in the Reno-Sparks area thinks prices on new homes won't fall much farther, and a stabilizing market may stir builders into action.

Mark Krueger, a principal in the commercial real estate brokerage Lee & Associates, says pricing on new homes fell by 7 to 8 percent during the first half of this year.

And Krueger, who specializes in big land transactions such as residential subdivisions, says 60 percent of new home sales in the region during the first half were priced at less than $350,000. In 2005, at the peak of the housing boom, only 28 percent of the sales were priced below $350,000.

But he says prices appear to be reaching bottom in most price categories, and that may encourage homebuilders to consider purchases of land.

"Before builders re-enter the land market with an intensity to acquire home sites, there must be stabilization in home prices and an increase in absorption," Krueger said in a mid-year report he prepared with Mike Earle of the Lee & Associates land team.

Land prices, they said, are down 30 percent from their peak in 2005. The 6,000 lots available for building in the region amount to a two-year supply. Another 14,500 sites a five-year supply are in the development pipeline.

Lee & Associates said homebuilders are very cautious about starting homes before they're sold, and the inventory of unsold new homes may drop to 300 by year-end. About a year ago, more than 1,000 unsold new homes were standing in subdivisions in the area.

New-home sales during the first half of this year totaled 1,546, Lee & Associates said, down about 160 from year-earlier figures. Spanish Springs and Sparks remained the hottest market, accounting for about 40 percent of the new home sales in the first six months of 2007.