Builders, lenders stepping lightly into spec construction

Homebuilders and their lenders in the Reno-Sparks area are cautiously — very cautiously — wading back into the speculative arena that brought them nothing but trouble during the recession.

A new study by Real Estate Marketing Inc. of Reno finds that about 75 unsold homes were under construction in subdivisions around the region at the end of the second quarter.

While that’s a far remove from the 800 speculative homes that were on the market in late 2006, it’s also a strong indication of builders’ growing optimism.

“This increase can be attributed to the general confidence that builders have in the local economy and the incentive to provide homes quickly,” says Ginette Bourdeau, the owner of Real Estate Marketing Inc.

Bourdeau bases her research on building permit data as well as personal visits to subdivision sales offices.

Sales of new homes support the builders’ optimism.

The second quarter saw sales of 360 new homes in the market. While that’s down a bit from the 400 sales in the first quarter, it’s 44 percent higher than the second-quarter sales a year earlier.

In fact, new-home sales in the market had topped 200 units in only one quarter since 2009 before breaking out sharply at the start of this year.

Builders’ confidence is reflected, too, in the premium prices they’re getting for much-in-demand lots.

Bourdeau says the premium for a corner lot has been running $30,000 to $40,000. Builders are getting a $5,000 premium for lots that abut Bureau of Land Management properties and as much as $125,000 for lots with a mountain or lake view.

Prices remained fairly stable on new houses.

The Real Estate Marketing Network study found that prices were up 1 percent to 2 percent at most developments during the second quarter. But, Bourdeau noted, that comes of the heels of sharp price increases — some as great as 15 percent — during the first quarter.

A steady flow of new supply to meet the increasing demand play a role in the price stability.

The study found that nine new subdivisions have begun sales since the start of the year, and 21 new subdivisions have come on lien in the past 12 months.

Those developments, Bourdeau found, each were averaging 2.4 sales a month during the second quarter. That pace is essentially unchanged from a year early.

A gusher of supply, however, appears to be coming down the pipeline.

Real Estate Marketing Network says 44 developments totaling 19,500 units (about 500 of them are condominiums) are in the planning stages. Three-quarters of those developments are north of Interstate 80.

The timing of those projects is unknown, Bourdeau said.