AN UNHAPPY HOLIDAY; A HAPPY NEW YEAR

Implications:     The housing Grinch appears to be packing his bags this holiday season and getting ready to leave Las Vegas.  November’s housing statistics suggest that Las Vegas may be the first major market in the United States to begin recovery.  It was reported that the Grinch, who has a degree in economics, learned that inventory dropped sharply.  Knowing that inventory is a leading indicator and sales/pricing is a lagging indicator, the Grinch knew that the Christmas bells were tolling for him.

Analysis:      Still, Santa’s delivery of November’s housing statistics will bring little joy to the holiday season, even for good little builders and Realtors.  But, there are a few gifts among the lumps of coal.   
    As expected, annual comparisons of sales and pricing slipped in nearly every category.  But Santa gave an ailing real estate industry a well-packaged gift of significantly less inventory.   
    The one tiny present in the sales and pricing stocking stuffer was new home closings. They climbed 16.7% over October’s results to reach 1,472.   But, that’s 47.5% below November 2006 totals.    
    The impact of significantly lower prices may be helping builders move product.  The median price of a (traditional) new home slid 17.7% (year over year) to $272,405 – a level not seen since September, 2004.    And, for the first time since we began separating vertical and traditional product statistics in 2005, the median price for ALL new homes slipped under the $300,000 barrier to $271,228 – 20.2% below last November.  While that result may seem surprising, there were only 57 “vertical” closings in November, the lowest monthly total of the year.   
    The existing home sales total of 1,523 was a 5.9% dip from October, but   42.2% below November 2006.  The median price of an existing home eased down 1.2% from October to $257,000.  That’s 10.5% below November 2006, and the lowest level since June, 2005.   
    Santa and his elves gave the industry three helpful gifts and two lumps of coal for November. 
    The nicely wrapped gifts included:   
        HOME PERMITS: There were only 343 new home permits in November, the lowest monthly total in this century.  Housing permits have been coming down steadily since the first quarter of last year. 
        EXISTING HOME INVENTORY: Existing home inventory dropped 4.3% from October to 25,981, the lowest total since June.  November marks the second consecutive month of existing home inventory decline.  Before taking this toy out to play, remember that existing home inventory normally declines in the fourth quarter.  But, the fact that inventory is finally following normal seasonal patterns is of great value in assessing the future. 
        NUMBER OF ACTIVE SUBDIVISIONS: For the fifth consecutive month, the number of active new home subdivisions in the Las Vegas Valley declined.  November’s total of to 544 is a 6% decline from the peak of 579 in June.   
    The two lumps of coal in the inventory picture were:   
        SUPPLY:  At current sales rates, it would take 22 months to exhaust current existing home inventory.  We believe that’s the highest it’s been in the last two decades.   Last month, the inventory figure represented only 19 months of supply. 
        FORECLOSURES: November’s foreclosures jumped over the numeric hurdle of 1,000 for the first time.  The total of 1,327 was 400 more than October’s results.   
    Maybe Santa did not have Rudolph guide his sleigh this year.  Or his brother Fred Claus made the deliveries.  Or one of the Elves got the orders wrong.   
    Or maybe Santa gave Las Vegas a gift in these statistics that is not apparent … like a bottom to the market correction!  As the Grinch points out, inventory is a leading indicator.  And, even with seasonality factored in, the decline in Las Vegas shelter inventory is gaining momentum.