Sorry Doomers, what can I say? I was wrong. Unlike a certain ex-chief economist we know, though, I’m going to stand up and admit it. [OK, I'm sitting, but that's beside the point.]
This is from my November 28th post:
Lereah is correct when stating that there should be a lift to home sales in the first quarter of 2007- home sales are cyclical; there is always a lift to sales in the first quarter.
I was too optimistic in my projections for the Las Vegas market. [It must be a result of my sunny disposition.] 1381 single family homes sold in the month of April– fewer homes than any other month this year– fewer than any month for the past four years. [My available data goes back to January 2003.] Sales were down 40% over last year’s 2,266. [I got the down YOY part right anyway.] And as for that 1Q lift– sales were down 13% from the fourth quarter of 2006. Here’s the graph: [Data from GLVAR]
While sales are tanking, prices are slowly fizzling. The median price for a single family home was $305,000- down 1.6% from last year’s $310,000, and unchanged from March. This figure is not adjusted for inflation, and may be skewed by the mix of houses sold and by seller incentives:
According to the April 20 In Business Las Vegas:
Money Magazine cited a report from Fiserv Lending Solutions that analyzed the 100 largest markets in the country, and it predicted Las Vegas will have the steepest decline in home prices between April 2007 and April 2008.
The projected 8.9 percent drop for Las Vegas follows a 5 percent decline in the last 12 months, the magazine reported. The expected drop for Las Vegas eclipses an 8.8 percent decline predicted for Miami. No other city is expected to have more than a 6 percent decline.
I don’t know if I believe that Las Vegas will see the worst decline in the nation in the next year, but then I’ve always been an optimist.
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Well Twist, you can go back at least another year. The last time there were fewer resales was in Feb 2002, so it’s been over 5 years.
Of course, everything will be alright in May… according to Bottfeld.
The boom here started in May 2003 and petered out in Aug 2004, so we are almost 3 years past the boom, which I think would surprise many people. REOs are starting to pile up in the MLS so I would not be surprised to see prices beginning to drop over the next few months. Only time will tell.
FYI – here are the SFH sales by month for 2002 per GLVAR:
Jan 1340
Feb 1281
Mar 1656
Apr 1828
May 2089
Jun 2041
Jul 2160
Aug 2183
Sep 1919
Oct 2084
Nov 1865
Dec 1935
I have the other stats for 2002 in PDFs, send me an email if you’d like a copy.
-Rebel
Rebel-
Thank you! I’ll update my charts.
I’m assuming Bottfeld & Co. will be trying to spin this as “back to the more normal 2002,” but there is nothing normal about this.
Great data Twist,
I’m utterly shocked at the weakness of the “spring bounce.” Don’t get me wrong, I’m very bearish… I just wasn’t *that* bearish.
I strongly believe that the #1 reason that sales were about half of peak is the ongoing credit tightening. Well… its tighter today than a month ago. So if we were to non-dimensionalize 2007/2006 sales, the ratio should drop (from a current value ~0.5 to something lower). But now layoffs are coming. or more precisely, lack of contract work and commisions…
Got popcorn?
Neil
Ouch!
“Las Vegas Single Family Sales” graph says it all. Let’s see if the NAR will ever post that graph, you can’t put lipstick on that pig. We have 4 points plotted for this year, anyone see a trend?
The real question is what is the fewest number of homes that can sell? I know technically it is 0 but in a big city like Vegas you have hundreds of idiots. Thousands of people bought the William Hung album or the Singing Dogs Christmas album so no matter what you will always sell a few homes every year. The question is the real world equivalent of zero sales? I think it ~1000 home sales.
Neil-
It’s funny- for all we are criticized for being too “doomish” around here, I keep finding myself surprised by the downside.
Tightening lending standards is the biggest factor I think, to the lousy numbers. More than the subprime borrowers, it’s the speculators who I think that are finally being squeezed out.
There aren’t enough OO buyers to begin to make a dent in this bloated inventory.
Roger-
I’d think that this would be the low point until things “cool down” in the fall, but I’ve been overly optimistic so far.
I think it’s going to be in the hands of lenders where the trend will be. How badly are they going to want to avoid foreclosures, and what are they going to do with all the REOs?
There are calls for lower interest rates, but I don’t see how that will help. It doesn’t help a buyer have the interest rate down to zero if he can’t qualify for it.
Not that I am optimistic about a turnaround but shouldn’t April be nornmally lower than March on a seasonal basis? It was for the last three years. Overall sales YOY are obviously in the tank.
I am in the Central Florida market (Orlando) that seems to be mimicing Phoenix trends. March sales are normally up 30% over January and February. They were only up 12%. April sales are normally up 10% over March. Initiall data suggests that April is DOWN 12% over March. Summer selling season doesn’t look so good.
Tobby-
Lower than March is no big deal, as you noted from the graph. It’s the fact that it’s lower than January, and the worst month since February 2002 [Thank's Rebel] that is so surprising.
The tightening lending standards are affecting what was already set to be a poor summer.
Yes, I agree Twist. It seems that the March fizzle has set a new level from which future sales will be based upon. If this is true then we would expect May-June sales to be similar to March’s already pathetic showing.
It will be interesting to see what happens over the next month as the summer selling season starts. If the above holds then the end of the year, based upon seasonality, will be horrid.
I strongly believe that the #1 reason that sales were about half of peak is the ongoing credit tightening.
Definitely.
And as a consequence, using incentives to mask falling prices will grind to a halt and those $400K homes that are really $300K homes with $100K in “free upgrades” will start selling for $300K.
Watch for median prices to tumble. Quickly.
Let’s look at the Talking head predictions.
Where Saying: Subprime is only a small percentage of the housing market and will have a marginal if any effect on the housing market at all.
Are Saying: Q1 was adversely affected by the sour Subprime market.
Where Saying: Houses NEVER go down in value at absolute worst it will just stay flat.
Are Saying: It’s just a little bit down, it will not fall any further.
Where Saying: It is entirely a subprime problem, there are NO cotangents and this will only affect low end buyers and low end home sales. Prime buyers, Prime loans and high end homes will not be affected.
Are Saying: We are tightening standards on all loans, Wall Street is not buying Alt-A loans at pervious prices, Home sales of High end homes are on the decline due mostly to the carnage in the Subprime markets.
Where Saying: We have hit bottom.
Are Saying: We are close to bottom.
Where Saying: We just need to eat through this 7 month supply then we will be on track for gains.
Are Saying: We just need to eat through this 9 month supply then we will be on track for gains.
Where Saying: Spring will be a housing boom, the buyers will return to the market and the prices will start rising again.
Are Saying: Spring housing was a bust.
Where Saying: GM’s Subprime division will have a slightly negative affect its Q1 profits.
Are Saying: GM’s Subprime division all but wiped out its Q1 profits.
Now they are saying: “The National Association of Realtors expects that home sales will start climbing again in the second half of the year.”
http://news.enquirer.com/apps/pbcs.dll/article?AID=/AB/20070429/BIZ01/704290355/&ref=patrick.net
We know Freddie will enact its higher standards in August-September. We know most of today’s foreclosures of which we have record amounts will hit the market in August-September. We know the largest ARM reset will take place in August-September. We know August-September are months in the second half of the year. Do they just pull this stuff out of their @ss or do they actually have something to backup their claim.
Try this for size: THE HOUSES ARE TOO EXPENSIVE. PERIOD.
While I can see that it has been harder to get money; the real “meat and potatoes” of this market is the actual PRICE for these homes out in B.F.E. A home builder could throw in another house with the purchase of one and it would still be to expensive.
The stupid people already own a home they can’t afford. I believe what you are seeing is a distinct lack of morons ready and willing to become F.B’s.
Roger-
If sales aren’t going up in the first half the year, I can’t imagine what possible stimulus would make them go up in the second half.
The NAR is infamous for conclusions without data, I wouldn’t hold my breath until they pull some out now. Besides, if they did, it would probably only be a weather forecast.
Dustdevil-
Those overpriced homes are a lot less appealing when the appreciation is gone, aren’t they? Without appreciation, if the price doesn’t resemble rent, they look a lot more like “black holes” than “investment vehicles.”
Twist -
Heck yeah… Houses never looked appealing to me other than a place where I could accumulate more “stuff” and lower my taxable income. The more I read and learn about mortgages and creating wealth, the more I want to rent. Its really simple when you can visualize the entire industry with your minds eye.
I’m not hell bent on making a ton of money either. I’m more concerned about my sleep factor. I find that the older I get the less important it is to have the super fancy car and hot date, so to speak. I want nothing more than, good food, good wine, good sleep and productive days doing things I enjoy.
I’m actually a very positive person that gets along with people that most can’t stand. I’m always smiling and have the lines to prove it… haha. I wonder if bearish people are generally happier than their bull counterparts?
It seems like; Bulls tend to worry about making a buck while taking great risk, while the bears sit back and postulate with minimal risk… thus good sleep. While a title like housingdoom would imply a great deal of negativity, I generally sense a great deal of positivity here. At least we’re positive that the housing market is doomed, anyway…
BTW – I’m in my 20′s so I’m not “that” old.
Dustdevil-
When we were brainstorming for a domain name, we quickly decided there was too many variations of “housing bubble,” to be distinctive, so my son said, “What terms are there for people who think the housing bubble will burst?” I said, “Well ‘Gloom and Doomers’ for one.”
He liked “doom” better than “gloom,” and checked to see if it was available. I thought the name seemed kind of gloomy, but he said a good dot.com name is hard to come by. He’s right, if you do a Google search of “Housingdoom,” we basically own the term.
I think everyone who contributes to Doom are very positive people- whatever problems we see with the economy and housing, we figure writing about it will make a difference and help make things better. I’m hoping that readers associate Doom with honesty and accuracy- not the end of the world as we know it!
Well, sales “normally” increase this time of year as we all know. Given that they did NOT then it seems to me we can look for prices to start taking a hit…or should I say “hammering” in the next few months as the listings increase from the start of the annual relocation cycle.
I am starting to see improvised garage sale type signs put up by desperate sellers at intersections in the Summerlin area. Saw three or four on Charleston Blvd. today.
My wife and I are from Vegas currently living in South Carolina.
We just spent the last two weeks trying to buy a home th the LV market for our return in the very entry level price range of 175K.
Of the 7 homes we tried to buy ALL had multiple offers or instant cash offers.
We were and still are avoiding the ghetto properties so the few that came up in our price range in a decent part of town need cosmetic work but we found the sub 200K non-ghetto market to be very competitive; in fact so competitive that we gave up and have rented a home in the extreem NW for way less than the payment on that home would be. In fact this is a supposed 300K home that we rented for $1150 per month.
I think we will wait a couple of years until the wife is done with nursing school.
Vegasdirtplay-
While there are lots of delusional sellers in Las Vegas, there aren’t a lot of smart ones. There are still homes being sold in Las Vegas, and I wouldn’t be surprised if the good deals in your price range are being snapped up quickly. It’s not that no one wants to buy a home- no one wants to buy one and pay too much.
Either sellers are going to have to get real though, or the lenders are when properties turn into REOs. Either way, I think you’ll find more opportunities in the range your looking for as time goes on.