There are two big trends in the Las Vegas housing market this month. One is that while sales are declining, they are not declining as quickly has they have been. The same cannot be said for prices, however. Prices continue to decline in the double digits.
The Greater Las Vegas Association of Realtors released their report for March 2008. With sales at 1,478, home sales were down 7.9%, which was the smallest year to year drop since December 2005, and the greatest number of homes closing since May 2007. It appears that the sales declines have slowed. However, with March typically one of the busiest sales months for Las Vegas, it also appears that 2008 will remain a lackluster year.
22,763 homes were on the market in March. Listings had dropped off somewhat in the fall, [typical] but have been rising slowly since December. The March increase in sales, however, has reduced the months supply to 15.4 months. That’s a dismal number compared to years past, but the best the market has seen since May 2007.
While sales seem to be shifting from "plummeting" to "stagnating", prices continue to see significant declines. The median price of homes sold in March was $243,169, down 20.3% from last year’s $305,000. The median price of a home in Las Vegas hasn’t been this low since March 2004.
The disparity between listings and sales, lack of buyer confidence, and tight lending will continue to take its toll on prices. Look for the pundits to get excited about the "not as bad as it could have been" sales numbers. I suppose you can’t blame them. In a market like this, the industry celebrates any relief it gets.
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Last summer my wife and I camped around several ghost towns(Bust in 1900′s not 2000′s). She was dismayed at the lack of “good stuff” and curious of the piles of rusted junk. We talked about the silver bust that killed that particular town. She said she now understands how people could just “walk away” and where the door knobs went. I think watching Vegas is interesting because the difference between it and Goldfield, NV is that it mines people’s wallets. My ma is a realtor in AZ. She says in 10 yrs, when boomers start keeling over, there will be more houses for sale than we’ve ever dreamt about. Thinking of the retirement communities around LV…that’s quite a tailings pile if this stretches to then.
Someone with more knowledge may be able to correct or add to my thought. My understanding and position has been that many sales are made outside of MLS so I question the market as a whole in terms of averages.
I understand we need to take reports, on some level, for face value. But could they be somewhat inflated if a number of homes are transacted outside of MLS? Or am I not understanding something?
The above reports tell a story, is it the whole story? Input is appreciated. Thank you.
I think its a good thing – quick depreciation means the market will reach its level sooner. The banks finally got wise that they couldn’t hold on to the houses for the cost of the mortgage. One example – a 2500 sf house, 3 car garage on a nice size lot – at the peak of the market sold for 480. Most sold for 400. A repo just sold for 265. The repo was trashed, drywall busted, dirty ceilings, dog and cat urine everywhere. It needed new cabinets, countertops, doors, carpets, several windows, and a/c unit. Easily 60-70k in repairs. which puts the value at about 325 – which is what one sold for about a year ago. But the repo had been on the market for 6-8 months – at 325.
There are now smallish single family homes that are selling for a price that would put the payment equivalent to rent in LV (160-180k for a 950-1100 monthly payment).
But it is all about the neighborhood. Some neighborhoods do well. I am in an established 15 year old neighborhod, convenient to new shopping, the airport, strip, and the major highways. There are 3 houses for sale in our 100 plus home neighborhood. Other neighborhoods are ghost towns. I was in a neighborhood in North Las Vegas, with big houses on smaller lots, which was pretty new (3-4 year old), but every 4th house was for sale and vacant.
I don’t think I want cheap housing (for other reasons related to sprawl), but more affordable housing is nice.
ingvdesu-
“Cheap” housing is all relative. Anything under 450 is considered cheap here. If you could get a 3 bedroom condo in OC for that, you’d pretty much have a screamin’ deal. A decent home (even after depreciating 25-30 percent is still in the 800 to 1.1M range.
I’m all for cheap housing.
Chuck Ponzi
I believe the hundred’s of homes sold at auction are not listed on the MLS, which would imply that home sales here are much more brisk than the MLS numbers show.
I also notice that in the first chart, this is the first time in the series that the January sales are higher than the previous December sales. Also the improvement in sales from January to February 2008 is the best since 2004, and the March increase isn’t shabby either.
Also, pending sales are rising each week. In the first quarter they more than doubled from 2004 on 12/31/07 to 4180 as of 3/31/08, per the data listed at http://timkuptz.wordpress.com/category/weekly-market-snapshots/. This would suggest strong sales in the upcoming months.
At $100/sq ft, the homes I have looked at in my neighborhood (Summerlin) would cost no more than renting. I believe that was one of the conditions to wait for that was posted on this blog a long time ago. Also, these homes all have multiple offers within a day of going on the market and I have yet to go to one where there wasn’t multiple agents showing the property. And these are not trashed homes. They are REO’s in good condition, needing only carpet, paint touchup and some landscape repair. The last time Summerlin homes could be purchased at this price per square foot was 2002! With the amount of competition at this price point, I can’t see prices going much lower. The “average” home price may drop further as more homes get to this price per square foot.
With huge strip properties coming on line within a year that will need 10′s of thousands of employees and almost no new housing being built and still over 5,000 people moving in every month, it seems our inventory levels are bound to decrease over time.
If we are going into an extended period of high inflation, then it would seem wise to buy a house in Vegas at these relatively low prices, lock in a low fixed rate mortgage and let inflation raise the value of homes in nominal terms over the next decade while paying the loan off in ever more devalued dollars. Also, mortgages seem fairly easy to come by. It is still possible to put zero down and get financing on stated income type loans at decent rates.
Cheap is relative.
I like it when rents correspond to housing prices. In a perfect world, renting should beat buying over 1-3 years, and buying beat renting over 4-5 plus.
I want to keep housing price appreciation roughly equivalent to inflation.
Why? I don’t want to create an economic underclass, permanently ghettoized because they didn’t get on the property ladder early enough.
I don’t really have a problem if a 1 bedroom apt/condo would sell at a purchase price that gave a monthly payment of 2000-3000 a month in an area, if the rental price is about the same. The market will regulate salaries, and thus demand for housing based upon this expense (don’t like the bay area, the factory moves to texas). What I don’t like is an 800k house renting for 1000 a month. My cousins and friends in California all report the same thing. Investors buy rental properties early, and rent at a loss. Positive cash flow is rare unless you have held the property for 10 years. It is all about the appreciation. I don’t like that.
Believe it or not, there are some condo sellers in my area (SW) that are still asking top of the bubble prices for their units. I remember seeing a similar disconnect from reality during the Boston condo crash in the early 1990s. It takes many years for amateurs to get the message.
OutofVegas:
Most data sets have accuracy problems. The MLS doesn’t show cancellations (averaging 40 percent plus in many developments), for one thing.
But it’s a long data series with reasonably similar data over a fairly long period. Sure, it might underestimate sales not in the MLS. It might be offset by the high cancellation rates in new homes.
The other problem is relying on ‘the median’ as if it was the only measurement of central tendency. Averages with bin ranges are extremely helpful, but hardly anyone produces them.
Unless you are doing some micro econ issues, it’s probably ok to rely on the MLS data for trend purposes. But, field work is likely more important at this point than backward looking statistics.
Can you say, ‘modern ghost towns?’ That’s what one of the Federal Reserve governors said about Western US developments last year.
Did you miss last week’s piece in the NYTimes about Maricopa, Arizona? There’s another new ghost town for you.
The lesson about MLS data? It’s bad. It’s trending to getting worse. If mere recent history is your guide, we still have years of home price declines ahead of us.
The problem is not declining home prices per se, but the economic damage done to the US. That is, we’re about to discover that relying on ‘flipping houses’ as an economic growth strategy is never coming back. And people and banks counting on that are filling bankruptcy courts.
“and tight lending will continue to take its toll on prices.”
(my perspective as an RE agent & investor who is currently buying in LV)
Yes…prices have already declined greatly in Las Vegas. Foreclosures are controlling the price levels. Also, banks are tightening the screws more & more for lending. They are getting away from stated income and requiring more documentation. As this shift occurs less people will qualify. Another wave of mortgages will be resetting creating more foreclosures. How low will prices go? Anybody’s guess. However, my belief is that there will be a larger supply of homes priced at the lower levels than what is currently available. The saying “Cash is King” may be heard a bit more often in the near future.
Las Vegas has a 15.4 months supply of homes on the market and we are in April now, the selling season. It will take some time to get out of this situation. If you buy in LV anytime soon…proceed w/ caution. A friend of mine recently said “Amateur night is over.”
I agree.
OutofVegas
Someone with more knowledge may be able to correct or add to my thought. My understanding and position has been that many sales are made outside of MLS so I question the market as a whole in terms of averages.
This is a very good question that you raise. With a 15.4 months supply of homes on the market there will be relatively few For Sale By Owners getting their homes sold at this time. Also, I am seeing foreclosed homes that are sold at auction being reported in the sold status of the MLS. These are homes that had previously been listed w/ an agent that did not sell and then went to auction. The MLS numbers and averages reported in a high (months supply of homes) such as now is likely more accuarate than when there is a low (months supply of homes.) FSBOs stand a better chance of selling when there is a lower inventory of homes available for sale. In a nutshell…there will always be some residential resales sold outside the MLS. However…right now…it’s a high, high percentage that is sold thru the MLS.
OutofVegas-
Daddymunster is right about FSBOs in the current market. I think that nationally, about 10% of the homes sold are not sold on the MLS. That number goes up in good markets [Who needs an agent when a bidding war starts when you put a sign in the front yard?]and down in bad ones.
I have two sets of sales numbers that I track in Phoenix- one is the MLS, the other are the numbers of the ASU Realty Center, [Jay Butler] who says his numbers come from the Recorder’s Office. Interestingly, some months the MLS number is higher.
While any one month their might be a big disparity, over time the trends follow each other rather closely. The MLS isn’t a perfect metric, but in general, it does a pretty good job of tracking the trends.
I wouldn’t tend to assume this about FSBOs, and Daddymunster, as a Realtor, is never going to suggest that people do this under any circumstances. (Think he was advising people to go FSBO when the market was hot because they could sell anyway and make money without him getting his cut?)
Consider this – if the tens of thousands of dollars you have to pay a Realtor force you above the comps, and going FSBO would allow you to undercut them instead, then an FSBO might get you sold where a Realtor will fail – it’s entirely possible to do your own marketing, and make a sale, at a tiny fraction of the cost a Realtor will charge you. For some people, especially those for which a Realtor’s cut changes the nature of the transaction (e.g., from profit or break-even to a loss), this may very well be the right way to go.
I think it is amazibg that we are all able to mass communicate our ideas. I think, in accordance with several news stories, we have never been here before. Usually there is some industrial down turn that leads to a slump in the market. Silver, oil, grains, telcom, energy, etc. The financials generally follow. This is a ride with the financials leading the way. There is also the “triple tsunami” of energy crush, inflation, credit freeze. Our markets are locked globally in a “dollar diplomacy” via technology never had before(story of point/click bank runs). Ecology is a wild card. National debt is a wild card. Everyone has tossed in good strategies for unwinding problems. A rental populace is more mobile. With modern transportation of goods to market, a business isn’t as dedicated to coasts or transit hubs. The down payment I think is key. As a litmus tester I would keep an eye on savings rates of consumers. Yes, prices have to go down but people must start saving money beyond costs of retirement. I know nobody wants to look at Joe Six-pack’s checkbook but working his finances is were medians are headed. If he needs more beer, he will cut 401k contributions. If he wants steak, he will poach game or go to a food bank. If he has to work two jobs we have latch-key kids and crime goes up. Without a signifacant crash, there is a danger of becoming third world. If I were a developer I would(gasp) start making trailer parks. If Joe’s hand has to be cold and dead for you to take his gun, the same for Ely Elite and his paper. The ultimate wild card then is who’s going to lose the draw? Trailer trash, the gated community, the retiree, the factory worker or the child still in grade school?
JimAtLaw-
I don’t think Daddymunster was advising against FSBOs, just pointing out there tend to be fewer of them in a down market.
Thinking that many sales occur outside of MLS is incorrect. Only a handful of homes sell in that manner. Most homes offered for sale in the auctions are also found in MLS. Further, they are not true auctions. You may be the high bidder on a home but that doesn’t mean you get the home. After the auction, the bids are presented to the sellers for their approval or rejection. That MLS rationale holds true only for builder sales, most of which occur in a sales office at each new home development and not through MLS. Dontcha love these Las Vegas people? Their town/neighorhood is different from anywhere else. The fact is that many people in LV work on tips and can’t prove their incomes. Now the Stated Income loans that drove the market crazy are gone. If you think prices are low now, wait another 12 months. You will be astounded.
Thank you Yossarian, Daddymunster, Twist and everyone.
I had more-or-less the right idea. Thank you for clarifying this, I appreciate the input.
Thanks again!
Great Balls of Fire! Pending sales blast past the 5500 mark in this week’s Las Vegas Real Estate Market Snapshot. That’s an increase of more than 250 units in 7 days. This is more than a 100% increase since January. The market is well past the bottom in terms of transactions. Prices are still coming down. They will for a few months more. I submit the transactions are far more important to the overall economy than the price of any one home. The value of a single home is critical most when one needs to sell. For those who do not need to sell, an income to afford their home is paramount. Therefore, it is transactions in the marketplace that make a bigger impact on the overall local economy. More home sales mean more appraisals, more loans, more home inspections, sales commissions, more escrows, handyman needs, and with all these bank repos a little money going to the home improvement stores. Don’t forget transfer taxes and recording fees for local governments. Sure prices are still soft but the real recovery, the one that reaches way beyond just you and me, is well on its way.