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
©SalesTraq 2010
(used with permission)
