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MarketWatch Reports and End of Year Analysis

January 19, 2011

Market Watch Report
End of Year 2010

Las Vegas, Nevada

Happy New Year! Well…..another year of living the Las Vegas real estate dream has come to a close. And, we’re all still here. At a minimum, let’s raise our glasses to that fact. That alone speaks volumes. So………..Cheers!

2010 was a year without a lot of surprises. Things stayed pretty constant throughout. Those who projected the beginning of a turnaround (was there anyone who took that side?) were left to grasp a few glimmers of hope that came to pass and those who warned of another year of further crashes throughout the market – the Gloom and Doomers – were also off the mark.

The home buyer tax credit, which many worried was artificially propping up an otherwise much worse market, came to an end. And while we agree that we did see a slowdown in closed units in the months that followed, certainly, those numbers did not dip to the lows that were being presented at that time.

Hopefully, the 2011 Las Vegas real estate market will begin to show signs of a turnaround. However, I believe that we will probably see another year very similar to 2010. Of course, massive job creation or a spike in interest rates could move the pendulum in either direction, and quickly.

Here’s what I noticed as I reviewed the end of year statistics as well as each month’s numbers throughout the year:

1. Inventory is climbing. December was the first time that available inventory had declined since April, but it is up 50% from the same time in 2009. REO and Short Sale inventory climbed 58% and 68% respectively over that same period. The available inventory is showing signs of stabilization. From August through December, the available inventory has remained between 14,119 on the low end to 15,353 at the upper end.

2. Contingent and Pending properties are down. Since April, this number has been trending downward, from 16,193 in April to 10,849 in December—a 33% decrease. For the year, the number of contingent and pending properties is down 17%.

3. They’re baaaaacck. The next wave of REOs may be upon us. In December, there were 1,880 REO closings—the highest number since March 2010. We shall see.

4. Final Short Sale numbers proved us wrong. Earlier in the year, I predicted that Short Sales would pass REOs as the largest portion of closed units in a given month. They got close, but did not quite make it. In June, REO closings were 38% of the closed units for the month and Short Sales were over 34%. However, the spread started moving back the other way in July, and at the end of the year, REOs were back to 50% of the closed units and Short Sales had declined to 26%.

5. There is one other thing to note about Short Sales in 2010. While the general perception is that Short Sale successes are on the rise, a closer look at the numbers shows this is just not the case. Overall, Short Sales are successful between 8 – 12 % of the time, or 1 out of every 8 – 12 Short Sales actually closes. This statistic has remained pretty consistent over more than just these past 12 months. Many theories abound. I will save that for another discussion.

6. Finally, distressed sales (REO and Short Sale) continue to dominate the market. They comprised 77% of the closed units in December 2010. This number has been as high or higher for some time. With the number of homeowners underwater at around 80% and Las Vegas having the highest percentage of distressed assets in the United States, look for things to remain the same for awhile. The turnaround everyone is looking for may still be a few years away.

Thanks for your continued support and readership. I really enjoy sharing every month. And again, Happy New Year!

David

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November FAST FACTS

December 21, 2010

Each month, we scrutinize the housing data in FAST FACTS looking for a number that has changed significantly. If we find one, our task is to figure out why it changed and what it means. This year, we have seen significant numerical changes on only three occasions:

1. In June 2010 we saw 983 new home closings – - about double the 515 in May and the 408 in July. The reason: The expiration of the $8,000 home buyers tax credit was June 30th.

2. This month we saw Short Sales listings in the local MLS break the 50% mark for the first time. The reason: Banks are showing a preference for the Short Sale over the Foreclosure Sale.

3. This month we see 951 Bank Foreclosures, less the half of the 2,195 we saw in October, in fact, less than half of the 1,900 we’ve averaged for the first ten months of this year. The reason: the much ballyhooed but short lived foreclosure moratorium highlighted by the “robo-signing” scandal which broke in September and October.

Does that mean that we can expect bank foreclosures to snap back to their normal level of about 1,900 next month? Probably not, because of three factors:

1. It’s the Christmas season, and apparently even the Scrooge Banks have some heart . . . December 2009’s 1,325 foreclosures were the fewest for any month that year.

2. Some lingering, left-over robo-signing effect from previous months.

3. But the main reason: banks are finally realizing that they are better off pursuing short sales than they are pursuing foreclosures.

According to Fitch Ratings, “Loss severities are expected to increase between 5% and 10% on residential mortgage-backed securities in 2011 as loss mitigation costs and foreclosure expenses go up.” This is a national trend, and we believe it is part of the solution to our current housing crisis.

Just look at November’s numbers regarding types of sales in the existing homes market:

SHORT SALES 824 $125,000

AUCTION SALES 308 $91,000

REO SALES 1,597 $111,000

NON-DISTRESS 1,187 $119,900

Notice this; not only did Short Sales fetch more money than REO sales, they also sold for more than the Non-Distress (Normal) sale! When we look at a YTD comparison, we see Short Sales at a median price of $123,000 and Normal Sales at $125,000.

Here’s what’s happening, in our opinion; The fact that the majority (70%) of all sales are in the Distress Sale category dictates the pricing for ALL categories. This is unfortunate for the non-distress homeowner who is trying to sell his home, but the “inconvenient truth” here is that there are many homes for sale today in Las Vegas (78% of them vacant) and the buyer doesn’t care who owns it, or why they are selling it. All the buyer knows is that he can buy the typical home in Las Vegas today for $115,000 (the median price of all types of resale homes last month.)

Because we see another year or two of distress properties coming on the market (Remember 16% of homeowners are more than 60 days delinquent on their mortgage payment and 75% are underwater) prices are likely to remain suppressed for the foreseeable future.

However, we predicted at last January’s Crystal Ball Seminar that we “Would NOT see a tsunami of foreclosures” in 2010, and that has proved to be the case. We noted that the banks at that time appeared RELUCTANT to foreclose on homes expeditiously, and that many people where still living in their homes many months even a year or more after they stopped making their payments. Why? Because banks sensed the very precarious nature of the housing crisis. They realized that aggressively proceeding with foreclosing as their first remedy would be self-defeating, driving prices down both lower and faster. That’s the reasoning underlying the short sale. Leave the homeowner in the home, let him maintain the home, and help him out of his underwater condition.

All of leads us to this question, “If the banks today are willing to adopt a Short Sale philosophy (as opposed to a Foreclosure mentality) so that a buyer can purchase the home for less money than is owed against it, why are the unwilling to do (in effect) the same thing for the homeowner himself via an outright principle reduction?”

For the answer to this and other mysteries of the Las Vegas housing market, come to the Jan 20, 2011 Crystal Ball Seminar for only $29. Coffee bar and registration from 7:30 – 8:15 am, presentations from 8:15 – 10:00 am at View 215.

We wish you and yours a happy holiday season and a better New Year!

Respectfully Submitted,

Larry Murphy and Steve Bottfeld

SalesTraq™ and Marketing Solutions

©SalesTraq 2010

By admin | Posted in Big Picture, Las Vegas Real Estate News | Tagged homes for sale las vegas, las vegas home sales, las vegas homes for sale, Las Vegas MLS, Las Vegas MLS listings, Las Vegas Real Estate, las vegas real estate listings, Las Vegas Real Estate Market, Las Vegas Real Estate mls, vegas mls | Comment (1)

Las Vegas October FAST FACTS

November 23, 2010

October housing statistics proved to be as scary as the holiday associated with that month. For those hoping to see some indication that the worst is behind us and recovery is just around the corner, October data will come as a disappointment. It looks like Las Vegas could be in for another two years of rough sledding in the housing market.

Yet, there is good news. Las Vegas visitation and room rates both increased in October. Airport traffic is up. Unemployment has eased considerably (down .9% over last month). And, a recent Harris Poll found Las Vegas to be the third ranked city that people prefer for relocation. But, October data shows the real estate market is still very far behind what appears to be the changing economic fabric in Las Vegas.

In October, median existing home prices slid to just $113,000, the lowest since 1994. That’s sixteen years ago! Seven out of ten (70%) existing home sales are classified as distressed (Auction, REO, or Short Sale). Almost four out of five (78%) of the homes sold through the MLS system were vacant, and 44% sold for cash. (Add those sold for cash at auction, which are not included in the MLS stats, and approximately 59% were sold for cash).

If we agree that the distressed sales are responsible for driving prices down, then when do we expect to see distressed sales abate? Not for some time, given the steady stream of bank repossessions which continue, month after month, year after year. For example:

2008 25,000

2009 24,000

2010 19,000 (YTD)

Add to that the estimate that 16% of all borrowers are now late on their house payments and there could be an additional 50,000 future foreclosures entering the pipeline. Prices cannot recover until distressed sales are a thing of the past. New home construction cannot recover until 78% of homes sold through the MLS being vacant are a thing of the past.

It should come as no surprise that October new home closings slid to their second lowest total this year. The 325 total was 31.6% below last year and 27.5% below September. And, 25 of those sales were Hi-rise or mid-rise product. Year over year existing home sales totals slid 21.5% to 4,053. That number is 5.9% below September and the third lowest total this year.

What else happened to sales in October? The expiration of the $8,000 homebuyer tax credit on June 30th imposed a negative impact on the second half of the Las Vegas real estate year. Simply stated, that program appears to have stolen buyers from the future. Indeed, June was the zenith for both new and existing home sales for this year. October, November and December will all feel the impact of that program’s demise.

Not surprisingly, both New and Existing home inventory increased in October.

There were just 277 new home permits drawn in October, the second lowest total of the year. Builders appear to be playing 2011 very close to the vest. The number of available listings on the MLS rose 4.9% to 15,789. That number is 49% larger than October of last year. And, at current sales rates, there is at least a 4.6 month supply.

As we said earlier, the number of foreclosures has a major impact on the market. In October, foreclosures increased 10.1% over September to 2,196, but were 5% below last October.

What will change this situation? How do we deal with a future that promises great difficulty? Those questions will be addressed at the next Crystal Ball on January 20. To register now, go to www.crystalballseminars.com

In order for the housing market in Las Vegas to recover, first the Las Vegas economy must recover. We are seeing signs that this is, in fact, happening. Along with economic recovery comes job creation, and with job creation comes something we’ve been missing since 2008: POPULATION GROWTH! Clark County has actually lost population in the past two years. Combined with a larger average household size (people sharing living quarters), this has resulted in fewer household formations. All this has translated to lower demand for housing at a time when we already have excess inventory.

It will take knowledge and inspiration to face the new year. In spite of today’s situation, there are still things for which we can all be thankful.

We wish you and yours a Happy Thanksgiving.

Respectfully submitted,

Larry Murphy and Steve Bottfeld

SalesTraq™ and Marketing Solutions