Labor costs also are rising as the building boom gives workers the opportunity to demand higher pay, Smith said. All of that is passed on to customers, he said.
“The higher that land prices and building costs go, the higher prices will be a year from now,” Smith said.
Single-family building permits in Nevada rose in May to the highest point since early 2008. In Arizona, permits reached a five-year peak in June, according to data from the Commerce Department.
In the rest of the U.S., banks are stepping up efforts to reclaim homes and the improving economy is trimming the number of newly delinquent loans as the housing recovery passes the halfway point of its second year. Nationally, there were 2.2 million homes for sale in June, up from 1.8 million in January, a sign the U.S. price gains may slow to a sustainable pace.
That’s not the case for the desert cities. The market in Las Vegas is booming at a speed that can’t be sustained, Smith said.
“I don’t use the word bubble because that implies it’s going to burst and never come back,” he said. “I don’t see a crash. I see a slowdown. That’s what better happen, or we’ll be seeing a bunch of tumbleweeds blowing through town.”