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HOME BUILDERS RESEARCH, INC. A publication of HOME BUILDERS RESEARCH, INC. VOLUME 233 Not much has changed since our last monthly newsletter. Much of the Las Vegas housing market is still "slugging it out" for cautious consumers who are looking for "steals/deals". The new home inventory continues to decline, while the number of active resale listings adjusted to the seasonal changes, and again escalated. There are still homes being sold in Las Vegas, just not as many as builders would like to see during this time of the year. And now we have to deal with more negative news stories about problems with some of the sub-prime lenders. It certainly shouldn’t be a surprise to anyone that this was bound to happen as the national housing slump extended into 2007. Since early in 2004 we have all read and discussed the large number of "non-typical" loans being processed by some lenders. It would only take price reductions or tightening the credit requirements by the primary mortgage market to cause problems with the sub-prime lenders. More about this later in our newsletter. Traffic through model homes has been stable since February. We were hoping it would improve steadily during the spring before the summer temperatures set in. The next graph illustrates the traffic per subdivision per week data taken from our Weekly Traffic/Sales Watch report. The data is from January 1, 2006 through March 11, 2007. The report has been averaging about 400 subdivisions reporting each week. As you can see, since February the weekly traffic has been averaging about 26 per week per subdivision. One year ago the traffic was averaging 33 – 35 per week. Weekly Traffic per Subdivision and Net Sales per Subdivision - 2006/20070510152025303540Jan 1 200623-Jul3-DecJan 7,200711-Martraffic per subdivisiontraffic/sub. During the first two months of 2007, the year to year data from this report displays the net sales (gross, less cancellations) have declined by 37.6 percent. The reported consumer traffic is off by 26.5 percent.----------------------------------------------------------------------------------------------------- "THE LAS VEGAS HOUSING MARKET LETTER" - March 18, 2007 A monthly publication of HOME BUILDERS RESEARCH, INC., call 645-4200 1 for subscription details. E-mail at hbr1@cox.net web site – homebuildersresearch.com DO NOT REPRODUCE THIS PUBLICATION WITHOUT PERMISSION HOME BUILDERS RESEARCH, INC.
The above charts display data summarized from our Weekly Traffic/Sales Watch reports from February. We included the chart from February 2006, to compare the figures. When we INCLUDE THE JANUARY DATA CHARTS, the consumer traffic has decreased year to year by 26.5 percent. The new (gross) sales have decreased year to year by 39 percent. The cancellation rate has declined to an average of 24 percent in February. THE FEBRUARY HARD NUMBERS – NEW HOME RECORDED SALES - There was a significant drop in new home recorded sales (escrow closings) in February. We counted 1,411, which brings our 2007 tally to 3,405. This represents a year to year decrease of 2,309 transactions or 40.4 percent. We expected the February new recorded sales to be somewhat higher. The median price of all the new home transactions was $315,965. This represents a year to year increase of $7,212 or 2.3 percent. There were 186 apartment conversions that closed escrow in February. This brings the January/February total to 413, which is a year to year decrease of 1,087 closings. Wow. In 2004 we warned our clients that the conversion segment could be volatile, because it was very susceptible to a large number of investors.There were 83 escrow closings of high/mid rise and condotel units in February. Their median price was $439,258, and the average price was $525,491.----------------------------------------------------------------------------------------------------- "THE LAS VEGAS HOUSING MARKET LETTER" - March 18, 2007 A monthly publication of HOME BUILDERS RESEARCH, INC., call 645-4200 2 for subscription details. E-mail at hbr1@cox.net web site – homebuildersresearch.com DO NOT REPRODUCE THIS PUBLICATION WITHOUT PERMISSION HOME BUILDERS RESEARCH, INC. When we omit the apartment conversions, high/mid rises, and condotels, the median price of the remaining "traditional" built home segement (single family detached and condominium/townhomes) the median price becomes $330,070. This is a year to year decrease of $15,195 or 4.4 percent. If we just look at the single family detached transactions, the median price in February was $340,290. PERMITS - The number of units permitted in February from the City of Las Vegas, Clark County, Henderson, and North Las Vegas was 1,279. It brings our 2007 permit sum to 2,437, which is a year to year decrease of 2,314 permitted units or 48.7 percent. The next graph illustrates the monthly trend of new home permits since January, 2004. We see the permit trend of the last 6 months continuing for most of 2007. The inventory of new homes has declined to a 1 – 2 month level, assuming an average absorption rate of traditional product of roughly 1,600 closings per month during 2007. MONTHLY NEW HOME PERMITS - JAN 2004 - FEB 20071279208986020251379450130220500100015002000250030003500400045005000Jan-04MarMayJulSepNovJan-05MarMayJulSepNovJan-06MarMayJulSepNovJan-07SOURCE - HOME BUILDERS RESEARCH, INC. The competition for buyers is once again very fierce. Remember the 90’s? They were challenging for many, but sales rates were acceptable for most. In 2000 the average number of recorded sales per month per subdivision was 6.1. In 2002 the average number of recorded sales per month per subdivision was 7.3 In 2004 the average number of recorded sales per month per subdivision was 10.2 In 2006 the average number of recorded sales per month per subdivision was 7.8 We expect that in 2007 the average number of recorded new home sales per subdivision for most homebuilders will be in the range of 6 – 6.75 per month. RECORDED RESALES – Just when we think we have reported the lowest number of recorded resale transactions (escrow closings) we get another poor showing. In February we counted 2,332 resale closings. It brought our January/February total to 4,755. It is a year to year decrease of 1,705 or 26 percent. We still believe (hope) the 2007 recorded resales will top the 2006 sum of 41,892. But, we better start seeing better monthly data from the resale segment, or we might be forced to change our projection. ----------------------------------------------------------------------------------------------------- "THE LAS VEGAS HOUSING MARKET LETTER" - March 18, 2007 A monthly publication of HOME BUILDERS RESEARCH, INC., call 645-4200 3 for subscription details. E-mail at hbr1@cox.net web site – homebuildersresearch.com DO NOT REPRODUCE THIS PUBLICATION WITHOUT PERMISSION HOME BUILDERS RESEARCH, INC. Interestingly, the median price of the recorded resales in February was $289,000, a year to year increase of $7,000 or 2.4 percent. The average price of the February recorded resales was $369,005, an annual increase of $34,193 or 10.2 percent. We believe the resales of high and mid rises are now pushing up the reported resale median and average prices. Therefore, we caution our readers to take this into consideration.During November and December 2006, we suggested the number of resale listings would increase again during the 1st quarter of 2007. It has continued In February, according to the data released by the Greater Las Vegas Association of Realtors. The number of active listings increased to 25,163. This was a one month increase of the single family detached product of 4.6 percent, and an 8 percent rise in the number of condos/townhome resale listings. The median price of the NEW single family listings decreased from a year ago by 3.8 percent, and the median price of new condo/townhome listings was unchanged from last February. The number of new February sales of single family detached homes through the GLVAR decreased by 21.3 percent when compared to February 2006. The number of condos/townhomes sold by the GLVAR in February decreased by 42.8 percent during the same period of time. Homebuilders have "attacked" the inventory of standing (unsold) new homes. The selling incentives they have offered have been working. That is the difference with the resale segment; homeowners are not prepared to slash the "bottom line" to whatever it takes to sell their home. That is why it will take so much longer to bring the inventory of active listings down to a more normal market level. All of the housing markets in the Las Vegas area, including Pahrump, Mesquite, St. George, Bullhead City, and Kingman have all experienced an increase (in some cases, an alarming rise) of resale listings during the past 6 – 12 months. Those that didn’t get caught with an excess number of new homes being built when the market turned will see demand improve quicker. ********** A great deal is being written about the number of foreclosures. According to the Review Journal, Nevada replaced Colorado as number one in new foreclosure filings in January. The RJ quoted RealtyTrac (an online source of foreclosure information) to report a one month increase of new foreclosure filings of 8 percent. "Nevada reported 2,397 new foreclosure filings in January, a rate of one new foreclosure filing for every 362 households, or 2.4 times the national average". According to the Mortgage Bankers Association, Nevada’s delinquency rate for sub prime loans was 10.48 percent at the end of 2006, up 1.9 percentage points from the previous quarter. One national news broadcast said there would be approximately 1.1 million homes nationally that go through foreclosure during the next 7 years. We were also told by a Las Vegas realtor that one out of every four homes that are listed with the GLVBR are in a stage of "pre-foreclosure." (We haven’t been able to verify this.) We believe that investor demand for owning property in Las Vegas and pent-up local consumer demand will absorb the homes going through foreclosure in a relatively short period of time. Consumers will buy foreclosed homes if they perceive a "steal/deal". Investing in housing in Las Vegas still is a great long term investment. There is a limited supply of land available for development in southern Nevada. Unless more land is released by the Bureau of Land Management, and the area’s entities improve their forward planning for housing, our housing numbers will continue at or below the current pace. Prices will go higher even in the face of a soft housing market. The doomsday forecasters can’t deny the job growth figures in Las Vegas. People are leaving Michigan in record numbers due to its high unemployment rate, 6.9 percent, the highest in the nation. Michigan lost almost 67,000 jobs (primarily in manufacturing) in 2006. Las Vegas gained about 50,000 jobs during 2006. Many from Michigan are re-locating to Las Vegas for jobs. It’s that simple, as long as we can show job growth, people from other parts will seek those jobs, and require housing. So keep the faith, our housing market has a much better outlook than most others around the country. ----------------------------------------------------------------------------------------------------- "THE LAS VEGAS HOUSING MARKET LETTER" - March 18, 2007 A monthly publication of HOME BUILDERS RESEARCH, INC., call 645-4200 4Dennis Smith for subscription details. E-mail at hbr1@cox.net web site – homebuildersresearch.com DO NOT REPRODUCE THIS PUBLICATION WITHOUT PERMISSION   | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||