The real estate agent seems to be the eternal optimist. In the middle of the credit crunch, foreclosure crisis and general market malaise, he or she will be smiling broadly and proclaiming that this is a great time to buy. You could almost picture the agent showing a property that had been devastated by an earthquake, flooded by a hurricane and whisked away by a tornado and saying “It’s a steal, a little paint and new carpet and it’ll be good as new!” Lately I’ve been hearing real estate professionals here in Las Vegas saying that they are busier than they’ve been in a long time, just more puffing?
Houses being snapped up in a matter of days, multiple offers, bidding more than the listing price, – sounds like the real estate market circa 2005. However, that’s what I’m being told is happening today. This is the world of bank-owned homes, or REOs, in Las Vegas at the moment. This isn’t some pundit spouting numbers, or an economist manipulating data to support a pre-formed conclusion (see last weeks article), these are reports from the front lines. New homes still aren’t selling and typical resale listings are languishing on the market for extended periods of time, but the banks have slashed prices on their REO listings enough to spark an interest again.
The Raw Numbers
While I don’t have an axe to grind in this situation, I was sure that what I was being told was an aberration. With all of the negative news we keep hearing, how could the situation possibly be anything but bleak? I decided to look at a few key numbers that are readily available for the Las Vegas market. I would only look at single family homes since that is the bulk of the market here. I was interested in comparing the total number of homes on the market, number of homes under contract, and median price. I would also look at the days of supply, which is simply the number of homes listed divided by the average number of closings per day. I wanted to compare today’s figures to those from 2007.
May 2007 19,411
May 2008 16,556
(Peak supply was 21,772, we are down 24% from that)
May 2007 2,684
May 2008 5,735
Days of Supply:
What Does It All Mean?
You could add a lot of different statistics to all of this and spin it any way you want. We are not through this mess by a long shot. We have a lot of foreclosures to work through in this market. There seems to be a consensus building that says there is a crisis looming in the Alt-A credit market that could dwarf the present situation, time will tell. But what I see in these numbers is very simply, activity. I’m sure you’ve heard many times that you can make money in any market. That is mostly true when the market is going up, down or sideways. However it is almost impossible to make any money in a market that is stagnant. Without buyers there is no market. Even a buy-and-hold investor will sell eventually, and that takes a buyer. While many people will see many different things in these numbers, what I see is hope.
Opportunity is missed by most people because it is dressed in overalls and looks like work. –Thomas A. Edison