LAS VEGAS ENTERS A "GOLDILOCKS" RECOVERY

Implications: June's housing statistics suggest that the Las Vegas real estate market has entered a rolling "Goldilocks" recovery.  A rolling "Goldilocks" recovery is not hot.  It is not cold.  And, it may not be "just right" for everyone.    Rather, as the existing home market recovers, it will roll the new home market segment into recovery.   Those two market segments then "roll" the vertical market component into recovery. 

Analysis:

EXISTING HOMES:

----->    The Las Vegas resale market is already in recovery. It boasts three consecutive months of sales increases and eight consecutive months of diminishing inventory.  The downward pricing spiral is slowing. 

The 2,979 existing home sales in June were not just the highest total of the year, but the highest monthly total in 20 months.  Almost three out of five existing home sales in June were bank-owned homes.  The median selling price of homes not owned by financial institutions was $225,000 or virtually the same level as last month.  However, because of the number of bank-owned homes sold (median price $203,000), the overall median price of an existing home dipped to $215,000.

Inventory slid for the 10th consecutive month to 20,554 - or at current sales rates, just about nine months of supply.  In other words, existing homes are in a very nearly "normal" market state.  And, the total of monthly foreclosures slid for the first time since November to 2,149, about 300 less than May.

NEW HOMES:

----->    The new home market still has some distance to go before recovery can begin.  It may be approaching the "bottom."

As my previous articles here have noted, a bottom sits on a 3-legged stool.  The three legs are sales, inventory and pricing.  Two of the three legs are slowly straightening -- pricing and inventory.

New home absorption continues to be dismal.  June was the 5th month in this year to total less than 1,000 new home sales.  The bad news is that the 922 total for June brings the first half of the year to a close with just 53% of the sales experienced over the same period last year.  The good news is that sales have not fallen further and have remained relatively consistent on a monthly basis.

Better news is that median prices are fluctuating within a narrow range and may be near a plateau.  The median price of new homes and condominiums was $255,341 in June, just $4,000 under the previous month.

Inventory in the new home arena continues to diminish rapidly.  The number of active new home subdivisions fell for the 11th consecutive month to 460 - and about thirty of those have 25 units or less left to sell.  New home permits totaled 750 this month.  It is important to note that the total number of permits for the year so far is more than 2,500 less than the total number of sales for the year.

VERTICAL

----->    The sub-prime crisis and the rising price of oil have both had a severely negative impact on the industry's vertical housing component.

Only 115 vertical sales closed in June.  Given that several Hi-Rise projects are in the process of closing units, this number is a less than hopeful sign.  And, because those several projects are in a state of flux, it is very nearly impossible to pinpoint the true level of inventory.

The Vertical Component of the market reflects national conditions much more than the other market segments.

What will the impact of high gasoline prices and expected Federal Reserve actions have on the overall housing market?  The answer is that Las Vegas escaped in June, but may not escape over the summer, especially since this is an Olympic Year.

And, during the Olympics, virtually everyone in Las Vegas has their eyes glued to a TV set.  Look for a summer slowdown followed by an impressive Fall.