Nevada Real Estate Market Conditions Nevada market research real estate Las Vegas real estate,new homes,second home,retirement homes

REVISED: July 10, 2008

Las Vegas Resale Analysis: January 1 – June 30, 2008

Data is downloaded from the Greater Las Vegas Association of Realtors MLS website into a 1-2-3 spreadsheet for analysis & graphing. During the course of the analysis errors are corrected that are disovered during the course of our analysis, e.g. A list price of $198,000 with a sales price of $1,980,000 or a Seller’s Contribution of $600,000 on a sale price of $298,000. However, Residential Resources, Inc. cannot guarantee the accuracy of the data. We do believe that given the ‘scrubbing’ we do and cross checking with Clark County assessor data that the errors (including errors of omission) do not substantially affect the statistics presented.

Please see the end of this report for a comprehensive overview of the services Residential Resources provides.

We have completed a detailed and comprehensive analysis of the first 6 months of MLS sales data. We provide herewith some selected excepts from that analysis looking at:

1. All of the MLS reported sales for closings from January through June 2008

2. June 2008 single family residential 1-story versus multi-story closings

3. June 2008 single family residential bank owned closings versus non-bank owned

Conclusions and interpretations are solely those of Residential Resources, Inc.

General Overview of the Multiple Listing Service data:

The number of actively listed properties peaked around September 2007 (for single family that was about 23,622) at just under 30,000 for-sale units. That number declined until the beginning of this year and has since started to increase to the present level of 23,054 single family (20,516 single family if you remove the Pending transactions) units or roughly 2.4% (-13.15% w/out Pending) under the September peak.

In September of 2007 there was a roughly 3 year supply of active properties based upon the monthly absorption rate (closed escrows). As the supply dwindled so did the months of supply and after the first of the year bounced around the 16-18 months of supply range. Until 2 weeks ago when it dropped under 13 months and last week edged back up to 13.7 months of inventory.

These numbers can be quite volatile and change remarkably and quickly so they only serve us as a guideline of trends in the market rather than an explicit predictor of where the market is heading.

Bank Owned Properties (REO for brevity) are currently setting the pace in sales as well as helping establish the bottom in prices. At the beginning of the year most REOs were priced according to typical backward looking market analyses and if offers were made the institutions holding the properties often rejected ‘low-ball’ offers or countered at close to list price. As a result, few properties were sold. However, as the amount of REO and Short Sale inventory

started to increase (dramatically; roughly tripling in both categories from January to April) the institutions and/or their real estate companies have become markedly aggressive in pricing properties to sell.

In many cases properties are priced below even recent comparable closed sales resulting in a multiple-offer situation and, depending upon how the institution/listing office handles the situation, a silent auction situation ensues. This has resulted in properties selling for more than list price; sometimes much more than list price.

While frustrating to buyers and their representatives, it appears to be a smart strategy for the sellers of these properties and is resulting in the ‘market’ finding the bottom – at least in terms of pricing and at least for this point in time. A deeper-than-expected or a prolonged recession could alter the attitudes of buyers and thus the dynamic of the market.

Of the 1,363 REO MLS closings in June the sales price/listing price ratio ranged from a low of 43% to a high of 130% with an average of 99.8% and a median of 100%! For year to date those figures have ranged from 42% to 162% with an average of 97% and a median of 98%. Pretty remarkable I think. Bear in mind that these figures do not take into account seller incentives and contributions.

For the month of June there were 2,087 reported closings through GLVAR and 1,363 of those were reported to be bank-owned properties or 65% of those closed.

For the month of May there were 2,161 reported closings through GLVAR and 1,320 of those were reported to be bank-owned properties or 61% of those closed.

For the month of April there were 1,857 reported closings through GLVAR and 1,022 of those were reported to be bank-owned properties or 55% of those closed.

The MLS changed some of the fields (as they do continuously) in the listing information so properties that were considered ‘repo’ prior to April did not have to be reported as such; that is, there was not a specific mandatory field as there is now to report whether a property is in foreclosure, is a short sale or is bank owned. While these fields are currently mandatory, there is no accounting for input errors. RRI believes that the input error is relatively small based upon other areas of input error we can discover but there is really no way of knowing.

Another result of the increased REO sales is the number of multi-story homes now outnumber the sale of single level homes 57% to 43%. This was not the case in March where single level homes had reverted to the ‘normal’ market of outselling multi-level properties.

The price range of the June REO closings was from $57,000 to $812,900 for properties that ranged in size from 685 to 6,087 square feet. The average/median sales price was $233,506/$210,000 for an average/median size of 2,094/1,872 square feet resulting in an average/median price per square foot of $111.50/$112.18 for REO closings.

The price range of the June non-REO closings was from $84,900 to $3,710,000 for properties that ranged in size from 650 to 9,291 square feet. The average/median sales price was $331,766/$256,000 for an average/median size of 2,174/1,977 square feet resulting in an average/median price per square foot of $152.59/$129.49 for non-REO closings.

Seller incentives for REO closings ranged as high as $27,303 with a median incentive per transaction of $6,438. An incentive was provided in 58% of the June transactions.

Seller incentives for non-REO closings ranged as high as $21,000 with a median incentive of $7,470. An incentive was provided in just over 46% of non-REO transactions in June.

Sales prices adjusted for incentives averaged $226,393 with a median adjusted price of $203,563 for REO transactions while non-REO closings averaged $323,473 with a median adjusted price of $248,530.

While the median list price/sales price ratio for REO closings was 100.5% it was 98.3% after adjusting for incentives and was as high as 129% in the top transaction, none of the non-REO transactions exceeded 100.0% with the median of 96.4% (95.1% adjusted for incentives) - another indicator that ‘the market’ is doing its work and buyers are finding perceived value (only time will tell whether the perception reflected reality) in bank-owned properties.

The foregoing are just some of the interesting results from the analysis of six months of resale data as the Las Vegas metro market undergoes some dramatic and gut-wrenching (depending upon your perspective) adjustments.

I think it too early to say the market has reached a bottom but the dynamics have clearly changed during the Second Quarter and depending upon what happens in the national economy, lending guidlines and lending institutions we are no doubt in for a wild ride before we can see the market reaching a ‘normal’ equilibrium. That is, an equiblibrium not ruled by REO transactions.

It would be easy to see a nice ‘bump’ upwards in prices as the majority of REOs are eliminated from the market whenever that elusive target occurs.

Residential Resources provides custom market research and analysis primarily to our builder/developer clients as part of our turn-key sales & marketing services. We also utilize this analysis to best represent the interests of our individual buyer & seller clients. We generally do not charge extra for this service but provide it as part of our commission compensation structure.

However, we also privide custom analysis to interested individuals, residential & commercial builder/developers, residential & commercial real estate practitioners, financial institutions and asset managers on a fee-based project-specific basis. The preceding tables, graphs and narrative are for general informational purposes and should not be relied upon for a specific project or purpose.

Residential Resources, Inc. provides SUPERIOR services to residential AND commercial real estate developers and builders in the Mountain Southwest!

Why 'Residential' if you provide commercial 'Resources' also? Good question! Commercial success follows rooftops. You can't have a commercial success without understanding the residentail market!