Building Nevada - July 2004

No Place Like Home:

Building Custom Homes in Nevada

by Carol Patton

It doesn’t matter if you want to live in Las Vegas or Reno, the answer is still the same: opportunities for building custom homes – any size, with or without views – are becoming scarcer than water.

Blame it on the estimated 9,000 people moving to Nevada each month, who have pushed the state’s population to approximately 2.3 million from 1.4 million 10 years ago, according to the Research & Analysis Bureau at the Nevada Department of Employment, Training & Rehabilitation Information Development & Processing Division. There are more than 20 homebuilders in Southern Nevada alone. During the first quarter of 2004, new-home sales jumped by 36.4 percent and existing-home sales by 55 percent when compared to the same time last year, according to Home Builders Research Inc. of Las Vegas. Land is being gobbled up by developers, homeowners and real estate tycoons faster than anyone can say, "Sold."

Perhaps the last chunk of land suitable for custom homes in Southern Nevada sits in the McCullough mountain range in Henderson. Now called Crystal Ridge, it was purchased by WL of Nevada in the early 1990s, said Bob Campbell, representative for WL, which is owned by New World Development, a Hong Kong-based real estate empire chaired by billionaire Henry Cheng. The 640-acre parcel will accommodate roughly 472 high-end homes. While Campbell estimates a six- to eight-year build-out, he says WL will start selling the lots in 18 months and cross-market them to customers of its other real estate projects in New York and London.

"We’ve don’t see anything on the market now or that will come to market that really compares," said Campbell, who anticipates a fairly early sellout. "We believe this is the last opportunity for this type of project in the Las Vegas Valley, because there are no other mountainous areas likely to be built on."

Even semi-custom homebuilders are feeling the pinch. Toll Brothers, for example, has thousands of people on waiting lists for its Las Vegas communities and around a dozen more for each of its two communities in Reno. (A third property is scheduled to open in Reno this September.) The luxury homebuilder entered the Reno market in October and is projecting sales of its semi-custom homes to climb to 360 this year between the two markets, said Gary Mayo, vice president and regional manager of Toll Brothers in Las Vegas.

The biggest differences between building semi-custom homes in Northern and Southern Nevada are price and availability, said Mayo, who added that the cost for a half-acre lot in Southern Nevada can start at $500,000. This figure may be slashed by up to 50 percent in Northern Nevada, where view lots can still be purchased. Recognizing the short supply of homes and land, customers are not being "extremely demanding," Mayo said. However, to keep pace with the area’s growth and development, the builder recently began limiting custom changes. "Because of the tremendous demand and backlog, we’re having to reduce the number of custom changes we make to a house," he said. "Everybody is overloaded. We don’t want to sell things we can’t deliver."

Red Hot Market

The pent-up demand for luxury homes has definitely exploded. Just look at the numbers. Back in 1995, only two homes in Southern Nevada sold for more than $1 million, according to Steve Bottfeld, executive vice president of Marketing Solutions, a Las Vegas-based research organization specializing in consumer behavior and real estate. Last year, he said that number climbed to 323 and is projected to reach 500 this year and exceed 800 in 2005.

What’s also changing are buyer profiles and the type of houses they’re building. Typically, custom home buyers were in their 50s or 60s, said Bottfeld, also managing director of several magazines, including Southern Nevada New Homes Guide and Luxury Las Vegas. Now, some are in their 30s or 40s. Many are also local move-ups who want bigger homes. As a result, the size of custom homes has been steadily increasing from about 4,000 square feet to as much as 12,000 square feet.

Many new custom homes in Nevada feature a contemporary design with clean, straight lines, arched roofs and smart or updated technology, such as automated drapes or blinds that are preset to open and close at certain times of the day. Other popular items include: unusual configurations for garages that also double as indoor sports courts; circular driveways with a covered entry by the front door; fewer wall boundaries; elaborate home gyms and offices; multiple levels; larger kitchens; second-floor open areas; and pocket sliding glass walls that blend indoor and outdoor living spaces.

Likewise, casitas are becoming more popular. But that may not be surprising, said Bottfeld, considering one out of every 10 homes purchased in the last three months houses three or more adults.

"We’re seeing some things we never thought we’d see in a custom home," he said. "Because of the drought, we’re seeing artificial grass and boulder rock treatments." Even custom homes on Lake Tahoe face landscaping restrictions from the Tahoe Regional Planning Agency (TRPA), added Jim Costalupes, a general contractor in Crystal Bay, who has built more than 50 custom homes in the area, ranging between 5,000 square feet to 10,000 square feet. He said view lots are still available on the eastern slopes of Lake Tahoe Basin at roughly $1.2 million per acre.

TRPA’s directives require that landscaping reflect the natural profile of the land, said Costlupes. Even outdoor terraces are taboo if they change the natural watershed. Instead, natural landscaping is used extensively, and swimming pools are built indoors due to the inclement weather. To capture unlimited views, a house’s infrastructure is framed in steel, not wood, which can support windows on all sides of the home.

Meanwhile, builders in Northern Nevada are also being challenged by the growing number of local contractors who are not licensed or qualified to build or remodel custom homes, he said. "Unqualified professionals are telling people they can build homes for half the price," he warned, adding that roughly 40 percent of his own workload focuses on repairing the damage caused by inexperienced contractors. "They’re ruining the client base."

Mixed Bag

On average, building custom homes can take anywhere between seven months and more than three years, depending upon square footage and amenities, said Stephen Jones, managing member of Merlin Contracting and Developing in Las Vegas, which builds an average of five custom homes a year, ranging in size from 3,000 square feet to 20,000 square feet.

To some extent, he said individual style and preferences can impact a home’s resale value. As an example, he pointed to a customer who may want something unusual, like a 12,000-square-foot home with just two bedrooms. "But our clients aren’t into their house for resale value," Jones said. "Reselling their homes is lower on their radar screen, less of a priority than building a home they’ll stay in for the next 20 years."

He said the process of building a custom home is very personal, emotional and time-consuming. Builders frequently start and stop because homeowners are overwhelmed with choices and often have difficulty making decisions when it comes to selecting flooring, kitchen cabinets, countertops, wall finishes and ceiling treatments, which can cause construction delays.

Homeowners are also buying better appliances, said Dan Coletti, president of SunWest Custom Homes in Las Vegas, who builds up to 10 custom homes each year in Southern Nevada that range between 4,500 square feet and 18,000 square feet. "Years ago, GE appliances were OK," he said. "But today it seems like everybody wants Viking appliances or above the standard." He points to dishwasher drawers, veggie steam units that sit flush with granite countertops and espresso coffee machines that are built into the wall. Even larger bathtubs and elaborate vanity tops are becoming the norm.

So are wine rooms. Every home Alan Richards has built within the last five years has included a dramatic wine room. Richards, a general contractor and on buying one of his custom log homes because its wine room could only store up to 1,200 wine bottles instead of the 12,000 he owned.

Since 1989, Richards has built approximately 30 custom log homes. In the early days, they were typically 2,500 square feet. Now, he said, clients are requesting homes between 8,000 square feet and 10,000 square feet. One such home, for instance, features an 850-square-foot kitchen along with a heated, 9,000-square-foot driveway and a heated roof. Another includes an outdoor stream that surrounds the house, with 40-ton boulders to support its banks.

He said most of his log homes are being used as second homes by everyone from young executives to retired professionals from California, Arizona, the Midwest, Canada and Germany. So far, the homes have more than held their value. He pointed to one customer whose $900,000 log home recently sold for $1.6 million.

"I want my clients’ homes to feel like the outdoors," Richards said. "This high-elevation mountain community attracts people who want a home that reflects this environment."

Good Things Coming to an End?

The percentage of custom homes built across the country has dropped from 40 percent several years ago to 23 percent now, said Michael Carliner, an economist with the National Association of Home Builders in Washington, D.C. Although Nevada’s population and employment is growing at a rate that requires additional housing, he said builders and homeowners are already bumping up against federal land.

In the future, Carliner said, building a custom home will be a relatively rare occurrence. "The trend is in the opposite direction, as we use the land more intensively," he stated. "Homes built in subdivisions are going to have more choices and incorporate additional features, but probably won’t be independently built."