Introduction
Summerlin is a 22,500-acre master-planned community on the west side of Las Vegas and next to Red Rock canyon National Park (Summerlin, 2016). This property is under development by The Howard Hughes Corporation in multiple phases. Summerlin North lies within the city limit of Las Vegas but Summerlin South lies in the unincorporated Clark County. Summerlin’s population has almost doubled in last 15 years. Close to 120,000 people currently leaves in Summerlin currently. Summerlin was named as “Best Places to Live in America” by Money in 2014 (Summerlin, 2016).
Figure: Summerlin: Near Read Rock Canyon and Spring Valley (Summerlin, 2016)
The land was originally bought by Howard Robard Jr. in 1952 and later it was named after the grandmother of Howard. Currently, the community has 150 neighborhoods and village parks, 150 miles of completed trail, nine golf courses including two PGA tournament level courses, dozens of houses of worship, medical facilities, business parks, private schools and shopping centers (Summerlin, 2016). Summerlin community plans to accommodate 250,000 residents when fully complete. Currently, it has completed 19 of the proposed 31 villages (residential communities) and is home to more than 120,000 residents (Summerlin, 2016). Currently, 9000 acres of land is under development for future residential and commercial projects. Summerlin offers homes at a variety of prices and styles.
Planned Development
Figure: The Cliffs by Summerlin at Summerlin South (Summerlin, 2016)
Summerlin has undertaken multiple projects for different types of home buyers. This essay will primarily focus on “The Cliffs”, a residential development project undertaken by Howard Hughes Corporation and analyze the prospect of this society with respect to the local residential property market. The Cliffs is a 450-acre residential villa located at the southern most tip of Summerlin at Hualapai Hwy (Summerlin, 2016). When complete this neighborhood will host 1700 single family and multi-family homes. The price of these homes will start from upwards of $350,000. Some homes that will have an unobstructed view of the mountain and the valley will be priced in upwards of $750,000. The Cliffs will also have amenities like long walking paths, small parks, elevated rest stops and lots of open spaces that will give a good view of the spring mountain range. The community will also have a middle and high school, Water Park, aquatic center, community center and a private college preparatory school.
Product
Figure: Capistrano Houses (Summerlin, 2016)
In “The Cliff” residential project, Howard Hughes Corporation plans to build different types of homes in the first phase which is planned to inaugurate in late 2016, Capistrano style of homes will be launched with an offer price from $400,000 to $550,000. These houses will be 3-5 bedroom and 3-5 bath houses and the area will be 2500 square feet to 3,300 square feet.
Figure: Woodhouse Homes (Summerlin, 2016)
In the first phase, Woodhouse style homes will be launched with an offer price starting from $550,000 to $750,000. These houses will be single floored with significant amount of front and backyard. These will also have 3-5 bedrooms and 3-5 baths.
Figure: Boulder Ridge Houses (Summerlin, 2016)
Finally, Howard Hughes Corporation also plans to launch 10-20 units of Boulder Ridge houses that will be priced upwards of $1.5 million and will have a minimum floor area of 4,500 square feet. These houses will be located in the best locations within “The Cliff” and will get an unobstructed view of the cliff and the Spring Mountains.
Customers
The main customer segment for both Capistrano and Woodhouse styles homes are single-family and multifamily home buyers. Families, where both the husband and wife works are the main target segment as they will be able to afford these homes and the commute from “The Cliffs” to the Las Vegas downtown, is only 30 minutes’ drive. Families with more than $200,000 income per year are also the prospective customers for Capistrano and Woodhouse homes. However, for the Boulder Ridge house, the target customers are owners of medium and large sized businesses not only in Las Vegas region but also across the country as Summerlin is ranked as one of the best places to live in the whole USA and many people are willing to invest in housing properties in this region. An increasing number of people over the age of 55, with substantial annual income and net worth, are willing to buy properties in Las Vegas. These are the main potential customers of Bolder Ridge properties.
Competition
The Cliff project will not face much direct competition from the housing projects near the strip as customers who want to stay in Las Vegas will not choose to come to Summerlin. The main competition for Summerlin Development projects such as “The Cliff” mainly comes from the satellite development projects in North Las Vegas and the City of Henderson. North Las Vegas has a lot of new housing developments. However, most of the properties in North Las Vegas area mainly caters to the customer segment who are looking for houses for the price ranges $200,000 to $500,000. Additionally, North Las Vegas do not have the natural assets like Red Rock Canyon and the Spring Mountains. The only advantage of North Las Vegas is its proximity to the airport and proximity to the main city and its amenities.
The main competition for The Cliff housing project will come from the housing projects in Henderson. Henderson is a separate city south of Las Vegas. The city is already well developed with all amenities and is not too far from Las Vegas. Henderson has a population of approximately 270,000. However, after the below par delivery of Henderson’s Galleria Mall, the housing market in Henderson is witnessing a slowdown. However, similar featured houses in Henderson costs less than Summerlin homes. With both Summerlin South and Henderson located in Clark County, The Cliff will face major competition from hundreds of new listings from Henderson that falls in the price range from $400,000 to $700,000. Henderson is well connected with Las Vegas and other close by cities through HWY 515 and HWY 215 which is not the case with “The Cliff”.
Core Market Segment and Proposed Sales
The plan for The Cliff project is to deliver 1700 residential properties in next 10 years. Only 5-8% of these properties will be Boulder Ridge. Therefore, it is expected that only 100 Boulder Ridge homes will be available in The Cliff. If we assume a linear delivery, Howard Hughes Corporation will probably deliver 10 Boulder Ridge houses every year. Additionally, it will add around 160 new houses every year to the price ranges $400,000 to $750,000. Assuming Howard Hughes Corporation plans to sell the houses within few months of the availability of those, the sales plan is as below
Data Collection
Overall, data indicates that the housing market is growing and demand for single-family homes are on the rise and on an average a new listed single family home get sold within 68 days from the listing date. Currently, the inventory of houses has come down to below 6,700 from 7200 last year (Movoto, 2016). The overall population in and around Las Vegas is also growing at a rate of 1.9 % which is healthy and one of the highest in the USA. Almost 15,000 new people entered and settled in greater Las Vegas area in 2014 (GLVAR, 2015). This also is a good indication of the growing need for housing.
As per data from GLVAR, 1734 residential properties were sold in 2014 at prices over $500,000 (GLVAR, 2015). In 2015, it is estimated that almost double the number of units were sold over $500,000 (Hanson, 2015). However, million dollar properties sold from 2012 to 2014 remained flat. On an average, 270 million dollar units were sold every year (Kasama, 2014).
Only warning signs in the housing markets are the increase in a number of distressed property which is causing the banks to offer loans at stricter terms. Additionally, the inventory level of more than 10,000 units during October-November 2015 was one of the highest in last 8 years which also indicates that the recovery from housing slump probably is not fully over (Movoto, 2016).
Analysis and Findings
The housing project needs to capture 18% of the potential customers. It is not an easy task under normal circumstances but as there is an increasing trend of customers moving away from Las Vegas proper for luxury family units, The Cliff may be able to sell all its units quickly. The naturally beautiful location and the developed family friendly luxury neighborhood can play a big role in that.
For the million dollar homes (Boulder Ridge), a similar analysis is done.
Similarly, for the million dollar housing market, the capture rate should be 19%. This is easier than the other segment as there are less number of developers for million dollar houses. One other thing that can benefit Boulder Ridge sales is that the potential customers of these houses can come from all over the USA.
Conclusion
The Cliff project in Summerlin South is one of the signature projects of Howard Hughes Corporation. The cliff will have over 1700 residential units when it is complete. Las Vegas real estate market is bouncing back from the recession. Especially the housing segment from the price range $500,000 to $1 million is witnessing a huge growth. Most of the units for The Cliff will fall within this segment. Therefore without much competition except that from North Las Vegas and Henderson housing markets, there is a high probability that The Cliff will be a successful housing development project. Million dollar units will have a larger potential customer base as many customers are willing to buy property in South Nevada region because of its natural beauty and an appreciating real estate market. This will help the Boulder Ridge units to sell even faster than the Capistrano and Woodhouse units.
References
Hanson, M. (2015). Las Vegas: Housing Market. Hanson Advisors. Retrieved on 28th April, 2015 from <http://mhanson.com/pdf-info/7-31%20HansonLas%20Vegas%20BACK%20TO%20'06%20PEAK-BUBBLE%20HOUSING%20COST%20-fslash-%20Not%20that%20different%20leftsnquote-this-rsnquote%20time%20.pdf>
Kasama, H. (2014). Las Vegas Luxury Home sales Flat. Las Vegas Review Journal. GLVAR. Retrieved on 28th April, 2015 from <http://www.reviewjournal.com/real-estate/las-vegas-luxury-home-sales-flat-year>
Movoto. (2016). Las Vegas: Real Estate Trend and Statistics. Retrieved on 28th April, 2015 from <http://www.movoto.com/las-vegas-nv/market-trends/>
GLVAR. (2015). GLVAR Report on Local Housing Market Shows Stable is the New Normal. Retrieved on 28th April, 2015 from < http://www.lasvegasrealtor.com/glvar-stats/>
Summerlin. (2016). History Timeline. Retrieved on 28th April, 2015 from <http://summerlin.com/history/>
