Frank Nason

October Single Family Sales - Las Vegas, North Las Vegas, Henderson, Clark County - Nevada

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

SFR – October sales saw quite a boost in activity over August and September’s with 3,477 single family closings representing a 33.5% year-over-year increase and a 9.4% increase over September sales. And, while the median price of REO closings delined slightly the overall median price of all single family closings increased 1.4% over September – the 2^nd consecutive monthly increase in the last 2 years. 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. I would postulate that same dynamic is what powered September closings also.

Whether December gets some residual effect from the subsidy remains to be seen, however, December could turn out to be quite ugly as purchasing decisions were postponed due to the uncertainty surrounding the subsidy, coupled with the normal seasonal decline.

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 and as the MLS indicates that 2,193 closings in October the county records only 1,620 for the month:

As stated last month, 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. On that note I have been getting calls from small builder/developers who are looking at some of the outlying (e.g. Mesquite) and smaller southern California (Temecula) markets. Bank of America, who took back Matthews Homes 3 subdivisions on the north side of I-15 in Mesquite recently completed a bulk finished lot sale for slightly more than $19,000 per lot.

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 October was 22 days. Nearly 2/3 of REO houses are under contract within 30 days; normal and short sale properties show close to ½ under contract in that same amount of time.

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:

Ø      strong year-over-year purchase agreement activity

Ø      2^nd consecutive month increase in median sales price of closed single family homes

!    Days on market remarkably low

The breakdown in transactions for the month is starting to diverge from the last 18 months pattern:

Ø      2,193 REO ( dropping to 66%)

Ø      557 short sales (a pretty large move to 16%)

Ø      727 arm’s length (healthy increase in nominal sales and an improvement to 21%)

Obtaining short sale approval continues to be a mixed bag of results. For owner occupied, the response time and approval percentage seems to be improving – depending upon the lender (Chase being the worst). For investor units, the response time varies widely and multiple units owned by a single investor entity usually receives multiple loss mitigators that make the approval process overly complicated.

That being said, our approval percentage for investor owned units is picking up – and that is for full forgiveness of the debt with the lender issuing a 1099 to the seller.

This Month’s Graphs

The graphs and table above 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: Cash sales used to account for fewer than 10% of transactions pre-bubble but now account for almost 40% of REO transactions and range close to 25% for non-REO transactions. Meanwhile, FHA transactions for REO properties has remained in a range from the middle to high-30% but for non-REO has increased from ¼ of monthly transactions at the beginning of the year to over 1/3 of all closed escrows in October.

Tidbits:

Ø      Asking price versus selling price overall: minimum 35.3%, maximum 273.4%; for REO transactions - median 103%; in normal transactions – median 98%; and short sales transactions the median AP/SP was 100%. So, in general, REO properties are selling for a premium over their listed prices while normal properties are selling at a discount to list price.

Ø      Occupied (by owner or tenant): Arms length – 22% which is uncharacteristically low; Short sale – 52% that is a huge percentage drop from September

Ø      Seller concession – REO 46% of all transactions (same as September) and a median dollar amount of $4,625; arms length 29% for $4,650; and short sale 48% for a median of $4,260

Subscribers can obtain this report with additional graphs (bedroom, price per square foot, garage preference, etc.) that are located at the end of the report.

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

Residential Resources provides custom market research, new home sales & marketing and product recommendations for residential and commercial builders and developers.

We also offer individual buyer and seller representation from our offices in Las Vegas and Sparks, Nevada.