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Two key factors should have severely damaged May housing statistics for Las Vegas.
— First, Nevada had the highest unemployment in the nation.
— Second was the withdrawal of Federal funding for first time buyers at the end of April.
Surprisingly, the negative impact was much gentler than expected.
And concentrating only on those two statistics would make us overlook another factor – perhaps a more important factor: Las Vegas may have entered the second phase of its foreclosure crisis … and thus far it appears less damaging than it might have been.
Based on the first two factors, virtually all of the pundits suggested that prices would drop significantly in May. They were only partially correct. Virtually all of the market watchers predicted that inventory would expand exponentially in May. They were wrong.
And almost everyone predicted sales would drop like a rock in May. They were wrong again. And, nearly all of the naysayers were wrong about the level of foreclosures for May as well.
That’s not to say that May was a good month. We’re merely pointing out that it could have been far worse, particularly in view of what we have dubbed “the second phase of the foreclosure crisis.”
Here are the details:
SALES: Both new homes and existing home sales remained strong.
New home sales chugged along at a 515 per month clip – about 2.26 sales per subdivision. While 515 may not be a number to sing about, the sales rate per subdivision is like having the Beatles over for dinner. It’s the second highest rate in two years. And, it could be a strong indication that new home builders have discovered a formula that works – smaller homes at smaller prices.
The average sized home sold in the month was 1,852 square feet.
While the 4,186 existing home closings total was not as strong as last month (4,323), the numbers continue to exceed 4,000 – the third consecutive month in which that total has been exceeded. Perhaps more importantly, existing home sales are 12% above last year for the first five months.
INVENTORY: While new home inventory and the number of foreclosures declined, the number of available listings on the MLS increased for the first time in six months. New home permits dropped to 410 (from 474 last month).
MLS inventory increased to 10,176 from 9,400 last month. Still, at current sales rates that represents less than a 2.7 month supply … and the definition of a “hot market” is one in which there is less than a 90 day supply.
The number of new home subdivisions slipped to 228, tied for the lowest number in this century.
A total of 1,688 foreclosures impacted the market in May. That’s almost 500 less than April. For the first five months of the year, the foreclosure total is more than 20% below last year’s numbers. And, this may herald an important change in the market.
PRICES: Both new home and resale prices slipped in May.
New home prices fell 11% from last month to $193,278 – the lowest price since June 2003. However, price per square foot actually rose to $104.33, second highest this year. One conclusion to be drawn from those two statistics is – as we previously pointed out – builders are building smaller homes.
Resale prices slipped slightly to $122,847. Resale prices have been bumping along between $116,000 and $126,000 for more than 14 months.
How did prices “break out?”
SHORT SALES 941 $120,000
AUCTION SALES 437 $102,000
REO SALES 1500 $122,000
NON-DISTRESSED 1308 $131,000
Note that REO sales are priced higher than short sales (for the second consecutive month). While two months does not make a trend, we believe this probably means that we are now in the second phase of the foreclosure problem.
The first phase was created by those “investors” who well overpaid for housing product and by cheap mortgages lacking SEC oversight.
These new figures indicate that we may be taking a first look at people who can’t pay their mortgages because they’ve lost their jobs or had medical problems. June figures will be more revealing.
In any event, we appear to be ooking at higher priced homes going into foreclosure. Ultimately, this will lead to higher prices in Las Vegas. And, that’s not as good as it sounds.
It’s not pleasant, but May was not as bad as we thought it might be. And, we still have the rest of the year to anticipate.
Respectfully submitted,
Larry Murphy / Steve Bottfeld
Crystal Ball Seminars SalesTraq Marketing Solutions
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