LAS VEGAS CONTINUES TO MOVE FORWARD (AT LEAST UNTIL DATA CATCHES UP)

Implications:   As the US is battered by an economic system undergoing a frightening metamorphosis, people look for signs that something good may be happening.   Unfortunately, they won't find it in the Las Vegas August housing data.  Of great concern to economic and market analysts is that Las Vegas housing prices continue to slide.  The caveat is that August data was developed prior to recent economic news regarding such major financial entities as Fannie Mae, Freddie Mac, Merrill Lynch Lehman Brothers, and AIG.   And, September’s housing data will suffer the same shortcoming.

Analysis:

 

Nevertheless, the August  median price of a new home dipped $2,338 (0.89%) from July to $259,847, perhaps signaling that it is reaching a bottom.  However, the median price of an existing home fell $10,000 or 4.8% from July to August, settling at $200,000. Given that speculators –not investors -- are back in the market, the August median may not be the bottom for the existing home market.

 

Why is pricing so important?  Price is the last piece of the recovery puzzle.  Until prices turn around, the Las Vegas financial landscape -- and the country's -- will remain "broken.”  Price impacts not just the housing industry, but every facet of the financial industry – from Wall Street to Main Street.

 

Lower prices have resulted in greater sales in the existing home arena.  Indeed, August was the 8th consecutive month in which existing home sales increased.  And, there is just 7.3 months of existing home supply in the market.  Remember that normal markets are often defined as having six or less months of existing home supply.

 

That's the positive.  The negative is that three out of five homes sold last month (60%) were bank owned homes with a median closing price of $189,000.  The other 40% of existing home closings were non-bank owned homes with a median closing price of $220,000.

 

Last month, Las Vegas experienced an all-time high in foreclosures (2,839).  While July data suggested sales might be minimizing the impact of foreclosures on the market, August data indicates there is still some time left before sales will eclipse foreclosures. In other words, current sales replaced only two out of three foreclosures (68%).

 

One bright spot in the August data was inventory.  Just 485 permits were pulled for 428 new home communities.  The total of 428 new home communities was the lowest since May, 2005.  Existing home inventory remained relatively unchanged from July at 20,623.  However, the number of days on market for a listing has dropped to just over two months (62 days) from 93 days just eight months ago.

 

In sum, August data suggests that the Las Vegas market is moving toward normalcy – at a pace that is somewhat slower than hoped for.