Back in June, when discussing April’s single family inventory of 17,161 homes, the Las Vegas pundits were declaring that inventory had "peaked."
SalesTraq President Larry Murphy said:
The market will take care of itself. We’re probably at the peak of inventory. It’s just going to take six months to run through it and get back to levels builders feel good about."
Murphy predicts that by the end of 2006, the market will see significant declines in inventory. And 2007 will bring even bigger reductions in housing availability.
He wasn’t alone in his predictions. Linda Rheinberger, president of the Greater Las Vegas Association of Realtors (GLVAR) agreed.
"I really believe this (inventory) is a short-term phenomenon. I believe we have peaked," she said. "I believe there are some short-term opportunities if you’re a buyer. All our indicators point to inventory levels going down in two to three months, even as demand doesn’t go down."
Fast forward to October- The Las Vegas Review Journal Reports:
The median sales price of a single-family home in Las Vegas was $310,000 in October, up less than 1 percent from the same month a year ago, the Greater Las Vegas Association of Realtors reported Monday. The price is unchanged from September.
The number of homes sold in October dropped 34.4 percent from a year ago to 1,689, the 13th straight month of declining year-over-year sales.
Inventory of homes for sale continues to climb at 23,474, a 53.8 percent increase from October 2005. More than 5,000 homes were added to the Multiple Listing Service during the month.
Inventory jumped 12.8% from September to October, representing the first double digit increase in inventory since January of 2006. Here’s the graph [data from GLVAR]
Several analysts in the Las Vegas market have claimed that strong growth and a strong economy will protect Las Vegas from a declining market. This is a fallacy. One of the things that makes the Las Vegas economy strong is its construction industry. Anyone watching Las Vegas knows that the local builders can and do get a projects up in record time. The continuing rise in inventory proves that it is not only possible, but an absolute given that the Las Vegas homebuilding industry can and does build homes faster than people need them.
This rising inventory will continue to put downward pressure on prices. Prices remained unchanged from September, but appear slightly higher this month year-over-year, as the median price dropped $2000 in October 2005 from September 2005. Sellers and builders are also now offering incentives that are not factored into the reported prices, masking part of the median decline. In addition, these figures are not adjusted for inflation. Were these figures adjusted for inflation, than appreciation would in fact be in negative territory.
One thing that hasn’t changed since June though, is the spin from the GLVAR’s Rheinberger.
Rheinberger said the MLS shows steady sales activity with more than 3,400 properties about to close escrow. More than half the homes on the MLS are selling within 60 days.
Let’s consider the math. With 23,474 homes on the market, for half to sell within 60 days, that would mean 11,737 in 60 days, or 5868/month. That would be a blistering rate- unprecedented in Las Vegas history.
The problem lies with the way the MLS calculates length of time on the market. Days on market (DOM) only includes the properties that actually sell- if a home has been languishing on the market for years, or if it is pulled off the market, or relisted to keep it from appearing to have been languishing on the market, it will not figure into the calculations. This method of calculating DOM is used nationally, and not just in the Las Vegas market. However, it should be apparent that for 23,474 homes to sell at a rate of 1,689/month it’s going to take nearly 14 months to sell them if no new homes come on the market- and you don’t have to drive around town much to see that’s not going to happen.
Last June Rheinberger was advising people who did not have to sell to delist their property:
Rheinberger did just that herself, delisting an investment property this spring and repositioning it as a rental property. She said she’s advised clients who don’t absolutely have to sell to wait at least three months, when she believes local inventory will begin to drop.
Potential home sellers who followed Rheinberger’s advice have seen inventory increase by about 37% since April. Sellers and buyers who are making their plans on the assumption that the market will recover quickly need to reconsider. Ignore Rheinberger- look at the data. The data does not indicate that this is a "soft landing," or that the Las Vegas market will recover soon.
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Ha! Priceless. One consequence of all the rosy predictions borne from denial that the “experts” have been providing is that we get to revisit them out just how wrong they were.
They can always come back and say things would have gotten better, except for all the negative press. (I’ve seen that excuse around) The bubble bloggers did it- they wrecked the market!
If you have not yet, check out CNN Money.com, listing Phoenix as the third worst market to buy real estate in now. Unfortunately Vegas also made the “10 worst” list. Very high profile nasty stuff for the local real estate pros.. Lucky for them many do not appear to read much, unless its secret notices of incentive co-brokerage. Why doesn’t the Phoenix paper pick-up a headline like “Phoenix 3rd worst” now that a MSM source like CNN publishes it? Maybe too soon after the recent agonizing over being listed as the “dumbest” in the US. I wonder if PV will come to mean “poorer valley” and we can soon talk about the former high home prices for stick-built, stucco shacks in “Rotsdale” the way the Dutch once joked about tulips.
Old Mike-
Publishing “Third Worst” might not jive with their weekly “How Much Has Your Home Appreciated?” section every weekend, showing how much your home appreciated BEFORE the bust.
If you have not yet, check out CNN Money.com, listing Phoenix as the third worst market to buy real estate in now.
URL, please?
NVmike (& Old Mike) -
This one’s not it, but looks interesting.
“Housing and the jobs economy: Phoenix points the way”, Posted by Paul Kaihla on November 09, 2006 at 02:10 AM, CNN Money RE blog.
I’ve got it:
http://money.cnn.com/popups/2006/biz2/newrules_wherenot/index.html
NV Mike, Sorry I wouldn’t know a URL if it bit me but the report came up as one of the five “news of the day” stories on the AOL screen today. I still operate a steam powered computer, thus the “old” tag. I did have an interesting real estate professional in north scottsdale tell me today that prices are going up there “because there is so much more land to be developed up here”. See, we must have that demand/supply stuff all confused.
NV Mike and all. It also looks like I can not count. Reviewing Twists citation (is that a URL?) Phoenix appears to be fourth worst, not third, although I would swear New Jersy wasn’t there this morning. Sorry all.
Old Mike-
I’ve talked to analysts who rate Phoenix as #1 or #2 worst. It shouldn’t make a lot of difference though- any way you look at it, we are close enough to worst to not have it make any difference.
Old Mike
I guess the papers are to busy teling the readers that Rotsdale is the 7th best place to live and that Phoenix and Rotsdale are home to 5 “5″ diamond hotels most of any city in the world? Poorer Valley is the choice of the stars and entertainers to make home after retirment from their profession>
NOW WHAT ABOUT HOME PRICES?
Yes housing takes a hit gang so what was expected happen but is it all bad no.
So in areas where 100 houses sold in a month now 68 sold hardly a depression when you consider that 1 million+ homes are selling.
In my area alone a house next door will be moved into next week 1.7 million it was listed for 1.9 but it sold. Across the street a 1.4 sign went up sold 48 days 1 million 290k. That 300 to 600k range is tough because those people are just out of range for what they make to buy.
Look this is shake out time the flippers i love that word (it is so shiek to say instead of carpetbaggers?)will disapate. Nobody in good areas will give away property make a deal yes, crazy offers no.
If you think that you deserve a home because of the nonsense last year well blame the agents, the lenders, the investors, not someone who has to move and pay those crazy prices also once they sell to you.
I say this is a great time buyers if you have the money offer, look up tax or property values like a blue book on a car offer what is fair leave the people a profit not a crazy profit of course those days are gone you might be surprized and get the dream house and a 6.3% house loan not bad try it?