Frank Nason

September Single Family Sales - Las Vegas - Henderson - North Las Vegas - Clark County

General Overview of the September 2009 Multiple Listing Service data for Las Vegas Metro:

SFR – September sales were a virtual repeat of Augusts’ activity with 3,181 single family closings representing a 16.6% year-over-year increase and, notably, a 4.2% increase in the median sales price. I continue to see the market stabilizing and returning to a post-boom seasonal pattern of sales, however, I expect November to be out of character as everyone who is eligible tries to close before the end of the month in order to take advantage of the $8,000 1^st time homebuyer subsidy. Even if the subsidy is extended those trying to take advantage exhibited purchasing activity in September and October – so we could also see a bump in closings into December for those whose timing wasn’t quite right on.

Have we seen the bottom in prices as some of the pundits have recently predicted? No one knows since none of us who follow the market have crystal balls. Is the so-called ‘shadow inventory’ of foreclosed properties going to flood the market or will the financial institutions be able to manage a measured release of properties to prop up prices?

For what it is worth, on the former question I think we are more likely to follow a Japan-style deflationary cycle that would suggest that the bottom is not in. I don’t find conspiracy theories plausible most of the time so I don’t believe there will be a measured release of foreclosed properties. That being said, I find no evidence that there truly exists a ‘shadow inventory’ of any magnitude ‘out there’.

Of the hard data that is available on foreclosed inventory the only reliable figures I can obtain are from the assessor’s office:

I believe that lot/land sales are the best bellwether of residential pricing. Until residential lot/land sales start to pick up and home sites can be predictably valued, I see no support in the pricing of new or resale homes.

The cost of producing a finished lot is currently greater than the value one could obtain upon its sale! Land in master planned communities arguably has a negative value due to carrying & development costs. I think the Hughes heirs will have to wait quite a while for that last payout.

The market surely seems to be exhibiting a mania again if the days a property stays on the market is any indicator. The median days on market of a home that closed escrow in September was 20 days.

Even short sales that are priced ‘right’ are receiving multiple offers as the listings of REOs diminishes. Nearly 1/3 of Non-REO sales had an accepted contract in 15 days or less and a remarkable 47% or REO properties were under contract in that same amount of time.

Unless the number of properties acquired through foreclosure continues to decline we believe we will see an increase in median sales prices as more higher priced homes enter the market and the price compression occurs at a greater level – dragging the median sales price upwards. Based upon the median/average listing prices for SFR properties not in escrow I believe that is occurring.

There are a lot of moving parts to this market though so it remains prudent to be cautiously optimistic and watch the various indicators closely.

The good news for the month is:

!    strong year-over-year purchase agreement activity

!    increase in median sales prices

The breakdown in transactions for the month is identical to August:

!    2,200 REO (69.2%)

!    404 short sales (12.7%)

!    577 arm’s length (18.1%).

I personally have seen a quicker response, not always positive, from lenders regarding short sales and in a number of recent CE classes I have heard similar anecdotes. So this would seem to be positive as short sales are being processed at a greater rate, thus reducing the number of properties entering foreclosure.

This Month’s Graphs

The graphs and table above probably tell most of the ‘story’ however, I find the Value Ratio (price per square foot) revealing also. The median price per foot declined slightly but has obviously flattened and the ranges as a percent have remained fairly constant for the last few months.

Terms Sold: Another trend I have been watching is how the properties are being sold each month. Cash transactions, not surprisingly, represent close to 40% of all successful REO transactions and slightly more than ¼  of non-REO properties and the percentage breakdown among VA, FA and Conventional financing for non-REO transactions is returning to pre-bubble ratios.

Tidbits: Asking price versus selling price: Minimum 10.5%, maximum 264.7%, median 100.1%; in non-REO, non-short sales transactions the median AP/SP was 97%

!    Occupied (by owner or tenant): Arms length – 27% which is uncharacteristically low; Short sale – 65.8%

!    Swimming pools – overall 19%; arms length 33%; short sale 15%

!    Seller points – REO 46.5% of all transactions; arms length 33%; short sale 63%

Methodology: Data is downloaded from the Greater Las Vegas Association of Realtors MLS website for analysis & graphing. During the course of the analysis errors are corrected that are discovered, e.g. we remove lease-option ‘sales’, correct lack of square footage, correct Seller Concession dollar amounts, etc. There are errors every month but often not great enough to affect the medians or averages except in the Seller Concessions category where there are always substantial errors. The MLS has a new statistical function that all subscribers can partake; however, since it doesn’t correct input errors any analysis created with the new capability is suspect in my opinion. So be cautious when examining data from other sources, including the Greater Las Vegas Association of Realtors.

While we do our best to cross-check information with Clark County assessor records and use a variety of statistical checks to discover errors Residential Resources, Inc. cannot guarantee the accuracy of the data. We do believe that given the meticulous ‘scrubbing’ we do that any undetected errors (including errors of omission) do not substantially affect the statistics presented.

There is usually a discrepancy between our total closing figures compared to other sources, such as GLVAR, since we eliminate closings that are actually condominium/townhouse properties that end up in the single family residential category as well as sales reported as lease-options. Additionally, since MLS data is self-reported, it may take an agent/office a couple of weeks to accurately report a closing date for the previous month – they are subject to fines so the margin for error is not great. Since we generally download our data on the 5^th of the following month (depending upon the day of the week) there may be properties that show up after our download.

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

For further information on this or Northern Nevada (Reno/Sparks) or for a quote on custom analysis please contact: FrankNason@ResidentialResources.com

702-597-2855 Frank Nason, President