The Beginning of The Beginning: Las Vegas turning the Corner

Implications: To paraphrase Winston Churchill, April’s housing data for Las Vegas could be the “beginning of the beginning.”  undefined·      -----Prices of ALL new homes have reached a yearly high of $291,080 – just 9.3% below last April.  The price differential between 2008 and 2007 has narrowed in each successive month of this year. undefined·         undefined--Sales of existing homes (2.225) boasted the first year-over-year increase since September 2005. undefined·         undefined--At 21,338, existing home inventory is at the lowest point since February 2007.  At current sales rates, that represents just under 13 months of supply. Normal markets are defined as seven to ten months of supply. undefined·         undefined undefined·         undefined

Analysis:    -----<!--[endif]-->Although they reached the highest point for the year, new home permits continued to be counted in three digits (541).  At this rate, 2008 will see about 40% of all the home permits “pulled” last year.
-----Not unexpectedly, sales of vertical housing product reached their highest point this year as well in April.
-----The number of active subdivisions dipped under 500 (485) for the first time in two years.  After reaching a peak of 577 active subdivisions in July of last year, this figure has steadily dropped.  We are now 16% under the peak of the market.

The progress is laudable.  But, if you look underneath the data, there are still significant problems mixed in with the better results.

<!--[if !supportLists]-->(1)   <!--[endif]-->1.  More than two out of five existing home sales (42%) were properties repossessed (foreclosed upon) by financial institutions AND THEN RESOLD.  It’s important to distinguish between a foreclosure and a sale of a foreclosed property.  When we say “sale,” it means just that.  Our sales figures DO NOT include those homes repossessed by a financial institution.  Indeed, that amounts to nothing more than a transfer of title. (We count those as foreclosures).  A sale is a sale, not a transfer of title.

<!--[if !supportLists]-->(2)   <!--[endif]-->2.  While not unexpected, the number of actual foreclosures in the market reached its yearly peak in April.   The April figure of 2,183 was the highest number thus far in 2008.  But, it was well below estimates from analysts outside the Las Vegas market.  While this number may not end up being the highest for the year, it is an indication that the foreclosure problem may be in a much more manageable proportion than previously thought.

<!--[if !supportLists]-->(3)   <!--[endif]-->3.  The “slide” of existing home prices has slowed markedly.  And, while we can call the $228,000 median price relatively stable in comparison to previous months, it is important to remember that two out of five such sales consisted of foreclosed homes sold by financial institutions to consumers.  Indeed, when foreclosure sales are excluded from the data, the median price jumps nearly 15%.

<!--[if !supportLists]-->(4)   <!--[endif]-->4.  New single family and condominium home prices (exclusive of vertical product) are still declining. In fact, you would need to go back to 2004 to find a price that rivaled April’s $255,000 median price.  In part, this is because new home sales have still not recovered (April’s 938 sales were less than March).

However, it appears to us that lower new home prices – and they will remain lower at least for this quarter – will be a stimulus for new home sales.  It is entirely possible that we will return to “normal” sales rates in the third quarter.

 We’ve mentioned in earlier analyses that a “bottom” is a three-legged stool consisting of declining inventory, stable prices and increasing sales. 

April may not be the bottom of the housing market, but it could be -- and I think it is --the beginning of normalcy for the Las Vegas market.