Could some of the most in-demand housing markets be cooling off?
Astoria Homes' Silverado Lane hits the jackpot with Las Vegas home buyers.
|The three-bedroom, 1374 square foot Residence 480 is the largest of five homes that Las Vegas-based Astoria Homes is building in its affordable Silverado Lakes neighborhood.
One of the more memorable scenes from the movie "Field of Dreams" struck a chord with many builders. In the face of bankruptcy filings and naysayers, the film’s protagonist, at great personal cost, builds a perfect ball field in the middle of his Iowa farm. In the end, of course, he is vindicated. And as the camera pulls back for the final time from the ballfield, it reveals a line of cars stretching down the road to the horizon. The farmer built the field on faith and the people came.
This is not unlike the situation that Tom McCormick and his colleagues at Las Vegas-based Astoria Homes found themselves in a few months ago. After two years seeking approvals to build a high-density community of detached, single family homes on a 20-acre parcel zoned for apartments, there remained considerable doubt whether there were would be enough buyers for very small homes on very small lots.
Unlike the farmer in "Field of Dreams," Astoria was never at enormous risk financially when they decided to build the Silverado Lane neighborhood. They did a good bit of market research that suggested a strong demand for affordably priced detached homes in Las Vegas. But even then, building 288 homes on 1500-square-foot lots is brand new territory for just about any stick builder. The product and concept were so new, in fact, that a certain leap of faith was required.
"We were very nervous going into this project," notes McCormick. "We knew we were pioneering,"
These doubts, however, were quickly put to rest when Astoria opened a sales trailer on the site July 1, well before models opened on October 13. From the very first day, traffic was heavy.
"To be completely honest, we were caught flat-footed," says McCormick. "Normally you will get 10 to 15 traffic units a week. What we started getting with this trailer was over 100 units per week. And by a unit I mean one family equals one unit. It just went absolutely bonkers."
In hindsight, based on price alone, the overwhelming response from the marketplace is not surprising. Astoria is offering five floor plans in a good part of town, near the highway, with good schools and shopping all within the established master-planned community of Silverado Ranch. Another important benefit: no buyer-paid, ongoing fees to support the construction of roads and schools. In California these are known as Mello-Roos fees, in Nevada they are known as LIDs, short for local improvement districts.
|Due to very tight building envelopes, designing floor plans for Silverado Lane was done with a strong focus on saving space. The result, says Astoria's president Tom McCormick, are homes with very functional interior spaces that appeal to the widest possible group of buyers.
The largest and best seller of the five plans—priced at $107,950—is a two-story, three-bedroom home with 1374 square feet of living space. The smallest—a 639-square-foot, one-bedroom single story—starts at $81,950. Compared to the rest of the Las Vegas market, these prices are unheard of.
According to figures gathered by the real estate information firm The Meyers Group, average sales prices of new homes in Las Vegas now stand at $176,100. In a more apples-to-apples comparison of similarly sized homes, Silverado Lane again stands out for its affordability. Of the 177 plans now selling in Las Vegas with less than 1300 square feet of living space, the average price is $134,594, a difference of more that $25,000.
The sales results speak for themselves. As of mid-November, Astoria had contracts to build 143 homes in Silverado Lane, an average of 35 contract signings per month. These are huge numbers, even for fast-growing Las Vegas, which suffers from a common misconception about the city’s ongoing building boom.
Yes, there are vast numbers of new jobs being created in Las Vegas each year, but that belies the competitive reality for most home builders. The city has averaged 20,000 closings per year, those closings are spread across 460 active new home communities, an average of less than 50 homes per community, per year.
So, with such a huge buyer response, was Astoria’s "nervousness" about Silverado Lane misplaced? Not really, says McCormick.
A number of important lifestyle, construction and financial questions still remain. According to McCormick, these questions can only be answered as construction issues crop up through a careful monitoring of the community for a period after buyers move in.
"Everybody in the company is very excited about Silverado Lane and I keep reminding them that people have not lived here yet," explains McCormick. "It is just hard to anticipate the way everything is going to work."
Part of the reason that McCormick makes this point is because company employees have been so busy writing contracts and overseeing construction that they have not had a chance yet to take a good inventory of its buyers. They do know that the crowd is diverse—from single out-of-towners that frequently travel to Las Vegas on business, to young families. But hard-and-fast rules of buyer behavior are being broken here. Two-story homes with bedrooms upstairs, for example, are even selling to people in their 60s and 70s. This is in part due to the company’s conscious effort to offer floor plans that do not preclude any group of buyers.
Working with footprints that are only 25 feet wide on 342421/2 foot wide lots, the design focus for each of the homes was more on space planning and less on appealing to the particular needs of families, singles or empty nesters. "It was a matter of taking a pie and slicing it in such a way that you got the space where you really needed it," says McCormick.
Likewise, a number of either/or choices were made at the outset. Front door coat closets were eliminated to make room for food pantries. There are no laundry rooms, but niches are cut out for stackable washer and dryer units. No two-car garages: all the units have one-car attached garages with a single, uncovered guest space. "These are the kind of compromises that people are clearly willing to make because it is still a functional set up," he says.
And though a number of space-saving compromises were made, Astoria is being careful to ensure that each of the homes are built with quality materials and that the homes look good from the street. The last thing they want is to build a neighborhood that diminishes in any way the company’s good reputation with other buyers they serve. This year the company expects to close on 400 homes—mostly standard sized and larger—all within the same market. For example, at the time the Silverado Lane parcel came to light as a buildable option for Astoria, the company had already been hard at work in another part of Silverado Ranch, building homes as large as 6100 square feet.
Features of note that help engender a feeling of overall quality at Silverado Lane while keeping hard costs to $43 per square foot include:
"We were really worried about preserving our company’s reputation," says McCormick. "They are obviously very small homes, but we were very careful to include little things like covered entries and shutters. We did not want to make them feel like cheap homes."
Other reasons for McCormick’s wait-and-see stance before giving a final grade to the project include the problems associated with getting labor, equipment and materials in and out of tight spaces. Specifically, in the back of each house, there is slightly less than three feet of separation between a rear fence wall and the back of the home. They quickly realized that standard three-foot-wide scaffolding would not fit behind the homes to apply exterior stucco.
"We solved that problem by changing the way we phase the project so the block walls are put in last," says McCormick. "Any time you are building homes that close together, just managing the job site is a challenge."
From a financial perspective, McCormick is cautiously pleased and certain that the company will look at building a project like Silverado Lane again. The project’s success depends to a degree on the company’s ability to minimize soft costs associated with marketing and land carrying. The faster it sells, the more profitable it will be. So far, the returns are pretty much in line with pro forma expectations for the project; but McCormick points out that they have only closed on one house so far.
An early key to making the Silverado Lane possible was an agreement that they would not have to purchase the 20-acre site until after final approvals were granted. Another was the property’s excellent location about five miles south of The Strip.
Had Astoria not moved forward with Silverado Lane, another land buyer was ready to sign to sign the deal and build apartments on the site. The way McCormick tells it, Astoria executives "chewed on the idea" of how to build a detached product with densities approaching the 18 units per acre suggested for apartments.
"Our thinking was ‘What if we just tried to lay out single family detached?" explains McCormick. "We started playing with the map and got the density up a little bit over 15. We then started running some numbers and thought, ‘This might work.’"
Community: Silverado Lane
Builder: Astoria Homes
Location: Las Vegas
Models' Grand Opening: October 13, 2000
Total Project Sales: 143
Interior Designer: Design Dimensions
Marketing Consultant: Carolyn Dahan
Land Planner: Astoria Homes
Total Homes: 288 at build out
Density: 15 units to the acre
Average Lot Size: 1500 square feet, 342421/2
Square Footages/Starting Prices: 639/$81,950; 831/$91,950; 964/,$96,950; 1151/$101,950; and 1374/$107,950
Major Products Used:
Appliances: Kenmore, Lift Master (garage door opener); Carpeting/Flooring: Mohawk Portico Royale, Congoleum Valuflor; HVAC: York; Paint: Frazee; Siding: Stucco; Windows: Philips; Plumbing Fixtures: Moen; Countertops: Formica; Insulation: Greenstone Cocoon; Door Hardware: Yale.