Hat tip to the Judge, for sending us the link to the Review Journal article by Hubble Smith, quoting two of my favorite Las Vegas spin masters- Dennis Smith of Home Builders Research and Larry Murphy , President of SalesTraq:
Home Builders Research on Wednesday reported 1,411 new home sales in February, less than half the number sold in the same month a year ago. Nevertheless, the median price of a new home climbed 2.3 percent to $315,965.
It was the same story for existing homes. There were 2,332 recorded resales during the month, down 27.2 percent from a year ago. The median price rose 2.4 percent to $289,000.
Rather straight forward data. It’s apparent that allowing for incentives, inflation and the lack of first time buyers, home prices are in fact down in real terms.
The average price of a recorded resale was $369,005 in February, an increase of $34,193, or 10.5 percent, from last year. Smith said resales of high-rise and mid-rise condos are pushing up median and average prices and that must be taken into consideration.
Las Vegas-based SalesTraq reported dips in both new and existing home closings. New-home sales fell 49.5 percent to 1,441 and existing home sales fell 17.2 percent to 2,594.
Again, despite the sales slump, median new home prices rose 3 percent in February to $321,555 and resale median prices increased 1.4 percent to $284,000.
New home sales fell 49.5%, and that’s a DIP? I suppose you don’t say PLUNGE unless sales are down at least 50%.
These numbers differ markedly from figures from the GLVAR. The GLVAR reports that 1,407 single family homes and 277 condominiums sold during February. No explanation is given of the difference. The median price of single family homes, according to the GLVAR, rose only 0.3% in February, from $309,000 last year to $310,000 this year. Again, no explanation is given for the difference.
While median is the preferred measure of tracking home values in the real estate industry, Smith uses the mean (average) price. While no explanation for this is given, according to the National Association of Realtors:
Due to the nature of the distribution of home sales prices, the mean sales price is usually higher than the median price.
Perhaps the average price looked better. As for new sales:
Las Vegas-based SalesTraq reported dips in both new and existing home closings. New-home sales fell 49.5 percent to 1,441 and existing home sales fell 17.2 percent to 2,594.
Again, despite the sales slump, median new home prices rose 3 percent in February to $321,555 and resale median prices increased 1.4 percent to $284,000.
"This defies both the laws of gravity and economics," SalesTraq President Larry Murphy said.
Murphy is in error, there is nothing gravity defying about Las Vegas home prices. First, the absence of affordable housing for first time buyers has caused many of them to leave the market, which serves to skew the median upwards. This is a pattern we have seen time and again in other overheated markets. First sales drop, and then the median price. In addition, when you allow for builder incentives and inflation, the prices of new Las Vegas housing is down in real terms. These values do not reflect same house appreciation.
Smith continues on the new home sales:
Traffic through model homes has been stable since February, but net sales have declined 37.6 percent for the first two months of the year, Smith said. The cancellation rate has declined to 24 percent from 26 percent a year ago.
There are still homes being sold in Las Vegas, but not as many as builders would like to see at this time of year, he said.
The inventory of new homes for sale continues to decline while resale listings have escalated.
What has escalated more than the listings is the spin. In spite of some fairly ominous numbers, Murphy says "this defies both the laws of gravity and economics." What is being defied here is the law of sense and reason. Any way you look at it, it’s going to be a rough year for Las Vegas real estate.
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My favorite quote from this article:
Smith of Home Builders Research said problems with subprime lenders shouldn’t surprise anyone.
“Since early in 2004, we have all read and discussed the large number of nontypical loans being processed by some lenders,” he said. “It would only take price reductions or tightening the credit requirements by the primary mortgage market to cause problems with subprime lenders.”
Well, here we go again with the housing shills and their revisionist history. Now they’re all trying to tell us they knew this was coming. Yeah, so did we bloggers and posters, but we were saying it out loud, not keeping it quiet so that more Greater Fools would be lured into buying depreciating (or is that “correcting”) assets to line the pockets of the REIC.
Spare us the “we knew this was coming” nonsense. You weren’t saying it when would have taken money and commissions out of your pockets. Now that the sub-crime well has run dry and no one’s buying, now they’re going to ride in on their white horses to save us from ourselves. Jerks….
– The Judge
“Sell now or be priced in forever.”
-Judge
So true. I’m sure there is escape goating going on too. Messes this large are never the consiquences of just one person or group it takes a lot of “Failure”, “Greed” and ”Misconduct” and lots of people and groups. These guys are in CYA mode, “Its all the subprime sectors fault!!! We just build houses don’t blame us.”
I would also argue that Volume is More important then cost how do you think Wal-Mart or Cost Co got so big. The housing industry has been moving a lot of product and employed a lot of people over the past 5 years, what happens to all those people if you go an extended period of low volume? Suddenly you don’t need all those people. I would like to see the Price per Sq foot, I would bet you would see the the price per sq foot is getting smaller.
Roger-
The Walmart analogy is a good one. Not only is volume down, but there are a lot more “stores.”
When Walmart dramatically increases the number of it’s stores, it can’t sooth stock holders with, “Our sales are normal- they are back at previous levels.” More stores means you need to move more product.
The same is true here. A lot of homes have been added to the market in the last few years, and you can’t discount that when considering sales.
heh heh
He said Greater Fool
Love the captchas!