Las Vegas Market Watch Report - July 2016
Greetings. Hope you are having/had a great summer! Wow, summer is over already. School zone flashing lights are “on” again.
July’s numbers are in and here are a few of my insights.
Total inventory is down from last year at this time by 5 percent (9,238 in July 2015 versus 8,792 in July 2016). Closed units are also down year over year (7%). Probably caused by supply shortages as much as a seeming slowdown in the market due to higher prices. Though, both factors may be contributing.
However, pending units are up year over year, yet lower than June 2016 by a bit.
The makeup of the inventory achieved a new mark in July. Traditional inventory product now officially makes up 90%+ of the total inventory. It had been hovering just below this mark for the past few months. Fewer than 10% of all homes for sale are bank owned or short sales. Some have suggested that this has created an environment whereby it must be about time for a “shift.” Will write about that more below.
Inventory has slowly climbed over the past few months. Bigger increases exist in the move-up and luxury markets. While the $150,000 to $250,000 market is still very much in short supply, the luxury market has seen significant increases in inventory over the past few months. That data is not reflected in this report’s numbers. If you are interested in this submarket, I can send you that data. Just email me at [email protected].
The Ninth Circuit Court of Appeals also recently made news. The NV Supreme Court decision which extinguished the first trust deed because of a Home Owners Association foreclosure was overturned on a 2-1 decision. The Ninth Circuit ruled that the Nevada Revised Statute in question was on its face, unconstitutional and the bank did not receive proper notice and realization of its rights under the 14th Amendment. What does this mean? Well, the case was remanded. This could lead to a subtle increase in foreclosures as these properties that have been hanging in limbo may be taken through foreclosure and be brought to the market as added inventory. However, the impact may be not really noticeable.
Gary Keller, founder of Keller Williams Realty recently spoke at a national KW event in Austin and he prepared the attendees for a coming “shift” in the market. That affordability had declined for each of the past 6 months. And, things were about to turn to a potential buyer’s market. Though, my research suggests that Las Vegas may be better off than many of the other cities/markets across the country. Though, I said that same thing in 2006……and, I was wrong. Remember all those billions of dollars of “Strip” projects that were going to save Las Vegas from any downturn. Well, they dried up then….so, what about now?
It is worth noting that Keller, who resides in Austin, TX and whose company, Keller Williams is headquartered there, may be influenced by the state of the market in Austin as partial basis for his comments. Austin is one of the top markets in the United States where experts feel that prices may have grown to unsustainable levels.
In Las Vegas, it seems the new homes market and its median new homes’ price may be moving toward a state of “unaffordability.” But, the resale market looks much better today than it did in 2006/2007. And, compared to the other Case-Shiller “Top 20” cities, Las Vegas is positioned much better from a price-index perspective.
And, other signs suggest that Las Vegas may not be “bubblish.” Conditions are significantly different than they were in 2005 and early 2006. First, house flipping is not prevalent. Those who are buying homes are planning to occupy them or they are investors buying with “cash” or significant down payments. Second, price to income ratios are very sensible. And, “exotic” loans are rare if not non-existent. Credit is not too loose today as it was in the mid-2000s. Another sign is that inventory is still very low…. except for the luxury home submarket as I mentioned above.
In short, Las Vegas’ median home price is well below the 2006/2007 pricing levels. The recent pricing improvements, while bold in recent years, are more of a repair of a market that overcorrected when Las Vegas home prices dipped dramatically in the Great Recession. We appear to be in the “safe zone” still.
That’s all for this month. Too much already…