Vito Pal's Blog

New Home Sales

Vito Pal (Prudential, Americana Group, REALTORS) — Thu, 28 Sep 2006 23:49:06 -0700

From National Association of Home Builders (NAHB)

September 27, 2006 - Sales of new single-family homes rose 4.1 percent in August to a seasonally adjusted annual rate of 1.050 million units, following substantial downward revisions to the sales rate for the previous three months, according to figures released by the U.S. Commerce Department reported today. The preliminary sales pace was down 17.4 percent from a year ago.

“The sales increase for August reported by the government was somewhat surprising,” said National Association of Home Builders (NAHB) President David Pressly, a home builder from Statesville, N.C. “However, mortgage rates have been coming down from mid-year levels and many builders are offering substantial incentives to bolster sales, making this a good time to buy.”

“The bounce-back in new home sales certainly is a welcome development, although the reported increase was from a downward-revised July level that was the lowest reading since March 2003,” said NAHB Chief Economist David Seiders. “Many builders still have large inventories of unsold homes, and we expect to see aggressive use of sales incentives over the balance of the year.”

“The near-term prospects for monetary policy and mortgage interest rates also will be supportive of housing demand going forward,” Seiders added.

Three of four regions across the country posted increases in pace of new homes sales in August. Sales were up in the Northeast by 21.7 percent, in the Midwest by 12.2 percent and in the South by 11.1 percent. The sales rate in the West was down by 17.7% for the month. All four regions reported substantially lower sales on a year-to-date basis.

The inventory of new homes for sale decreased slightly to 568,000 units at the end of August, a 6.6 months’ supply at the current sales pace. Completed homes for sale were 26 percent of the inventory. Units still under construction represented 55 percent of the inventory, and units for-sale that were permitted but not yet started represented nearly 19 percent of the inventory level.

The median length of time that completed homes for sale were on the market was 3.6 months, the same as the two previous months and down from 3.7 months a year earlier.

Las Vegas Housing Market

Vito Pal (Prudential, Americana Group, REALTORS) — Fri, 22 Sep 2006 08:29:02 -0700

I just came across this article, thought it was interesting.

PRICES REMAIN ABOVE LAST YEAR

       August prices are down slightly.
       The median price of a new home slipped $7,500 from July's record high to $329,897. That's still 12.9% ahead of August 2005. The median price of an existing home also slipped $2,500 from July's record high to $286,500. But, that figure was 2.3% above August 2005.
       This was achieved in a period in which:
       1. Inventory is at all-time high; and
       2. Demand appears to be cooling.
       Under ordinary circumstances, rising prices in the face of those two factors would not make economic sense. But, this is Las Vegas and there is always more than meets the eye.
       Critics argue, for example, that "incentives" inflate new home prices. That's not true. Incentives detract from a builder's bottom line. But, no matter what the builder gives the buyer -- cash back, options, upgrades -- the price of the home is still the price of the home!

THE DEMAND FACTOR

       Sales of new homes in August slid 13.1% compared to last year. Yet, at the end of eight grueling months, we are about even with where we were at the end of August, last year (+0.2%).
       Sales of existing homes have slipped 19.7% for the year and were off 36.3% from last August.
       This sounds terrible until you consider this one fact: Vertical is siphoning off investor/second home buyers.
       Remember that investors and second home buyers purchased 20-25% of all homes in this market through the second quarter of 2004. Last year, they only accounted for 4% of the sales. This year, they are up to 8%. In other words, approximately 12-15% of the market that would have purchased new and resale homes are now purchasing Vertical product instead.
       What does this mean? Vertical has siphoned off about 15,000 sales from the traditional markets.


WHAT THIS DOES TO "TRADITIONAL HOUSING" INVENTORY

       As noted in our last edition, Vertical impacts inventory in two ways:
       1. Those who buy Vertical product as an investment want to resell it. Inventory goes up.
       2. Those who buy Vertical product as a residence have a home to sell. Inventory goes up again.
       At the end of August inventory was at record levels in both the new and resale markets.
       The resale market was at a record 21,155 homes. That's about 8,000 homes above last August.
       The number of new home subdivisions reached a record 521. Let us put that in perspective. That's the highest number of subdivisions per capita of any city in the United States. That's about one quarter of the number of active subdivisions in Southern California -- an area that boasts a population 20 times larger than Las Vegas.


WHY WILL PRICES BE STABLE IN THIS MARKET?

       The answer lies in New Home Permits.
       For the fourth consecutive month, new home permits were off more than 30% from corresponding months in 2005. For the year, housing permits are down 17.1%.
       New lots in final map were off 19.8% in August and have declined for two consecutive months.
       Builders are rapidly reducing the number of new homes entering the market.
       This is beginning of market stabilization.
       The key word in that sentence is "beginning." This process will take at least nine months.
       There is no question in our minds that economic conditions are not favorable for a rapid turn-around. Nor do we think we will see the bursting bubble in this market that so many "national analysts" have predicted.
       But, we will give them one bone to gnaw on. The median price of a vertical residence (hi-rise/mid-rise) did decline significantly in August ... because lower priced mid-rises were closing units.
       It will rise again in September.
       A final thought: We're not telling you that prices won't dip nor are we suggesting that inventory will be significantly reduced anytime soon.
       We are saying that there are sound reasons why prices will be stable, if not rising, over the next few months.
       The argument that current prices are the result of a psychological euphoria similar to the one preceding the stock market crash of 2000 is balderdash as well.
       The plain, simple truth is that prices are the result of market action. It's the law of supply and demand. The problem with "national analysts" is that they are so focused on inventory that they can't see the demand.


Respectfully Submitted,
Larry Murphy Steve Bottfeld

Your Privacy

Vito Pal (Prudential, Americana Group, REALTORS) — Tue, 19 Sep 2006 15:07:35 -0700

Beginning May '06, a new database was made available to the general public free of charge that displays your personal information (names, addresses, phone numbers, birth dates). (Soc. Sec. is available for a price.) The database is found at http://www.zabasearch.com Type in your name and check...you'll be SHOCKED as I was!