[SportyandMisty]

Originally Posted by olecapt

... Vegas appears to be rapidly recovering except (big except) in construction and related. I wonder if we can actually recover while leaving construction pretty much dead on the sidewalk. Sure looks like the way it is going.

Wow. I sure hope you are right.

[SportyandMisty]

Originally Posted by olecapt

... Your beief that appreciation will not occur over the next few years is very improbable. Homes simply do not sell below replacement costs for a long period of time in a healthy economy.
...

Hmmm... wouldn't it be more correct to say that replacement costs tend to adjust themselves to be below home re-sales prices over time?

It seems to me that the various residential construction subs (concrete, framing, electrical, plumbing, sheetrock, roofing, etc) have dropped their prices (at least for labor) 30-40%. Land seems to be down 40% for high end lots in nice areas, and even more elsewhere. Material suppliers have dropped their prices in some of areas by 30%. Vendors of plumbing fixtures & appliances are down 15%. Counter tops? I've been told Granite now costs quite a bit less than CaesarStone (who would have thought that?). Painting? prices have come down substantially.

In the long run,

• populations increase, so the demand for housing increases. That tends to drive prices up.
• as populations increase, demand for leisure activities increases... and that has Las Vegas written all over it.
• Governments tend to issue more building permits to increase supply. That tends to drive prices down.
• We seem to have a fair bit of land (at least relative to places like the San Francisco Bay Area, where there is little land left to build new homes).
• We seem to have a fixed amount of water. Governments tend to ignore that when they are making the decision for short term development (have you ever heard of a developer asking for permits to build and being told "No. We don't have enough water") at the same time the wring their hands about the long term. Will water ever be the resources in short supply that causes a city to declare "no more residential construction"? It is probably already too late.

How does it all play out over 15-30 years? Beats me.

[SportyandMisty]

Originally Posted by Slim10

Based on raw numbers (source in brackets).

Total number of homes in clark county: 796,355 (1)
Homes with foreclosure filings in clark county: 61,327 (2)
Actual home sales in 2009: 46,879 (3)
Estimated REO % of home sales: 65%

Max shadow inventory = 61,327 / 46,879 * 65% = ~2 years.

That conservatively assumes that all foreclosure home will be repo, filings are not duplicate, filings does not include repos.

(1) Numbers as at July 1, 2009
http://www.accessclarkcounty.com/dep...usingUnits.xls
http://www.accessclarkcounty.com/dep...UnitCounts.xls

(2) Realty Trac numbers extracted from accessclarkcounty database
Clark County Foreclosure Statistics, Trends and Heat Map | RealtyTrac

(3) GLVAR MLS listings
http://www.lasvegasrealtor.com/stats/Statindex.htm

My comments:

Taking realtytrac is conservative. Homes in default will definitely have a foreclosure filing (ie default though not necessarily repo-ed). A significant % of the 61k are repos already so that reduces the actual numbers. Taking 65% is also conservative as a proportion of the 35% remaining include short sales which increases the rate of repo sales.

Actual home sales are on track to hit 38-42k this year, slightly lower than 47k in 2009 but that is offset with declining foreclosure filings so the max 2 years est should still apply.

The only way foreclosure rates can be maintained at current levels is if the new buyers default which is less likely due to more stringent loan criteria and cash sales. Prices cannot retain at this level in the medium to long term once foreclosures dry up. If the economy picks up, people who have lost their homes and renting will re-enter the market. Its a matter of time.

Thanks for posting this real data. As a famous economist once said, "you're entitled to your own opinion, but not to your own facts."

I agree with your analysis -- but -- the big unknown is the potential effect of an exogenous shift -- e.g., construction starts to pick up elsewhere in the country and large numbers of Las Vegas-based construction workers pick up & move to different locations. Yeah, that might bring local unemployement rates down (maybe cut them in half), but then that of course would cut demand for housing as well.

A true story: Max Planck, the famous Nobel-prize winning physicist & father of Quantum Theory, started out his education intending to be an economist. "I wanted to go into economics, but I found it far too confusing & difficult, so I switched to physics," he once said.

[Fastrudy]

Planck probably didn't say that. From Wikipedia:

Planck was gifted when it came to music. He took singing lessons and played piano, organ and cello, and composed songs and operas. However, instead of music he chose to study physics.

[SportyandMisty]

Originally Posted by Fastrudy

Planck probably didn't say that. From Wikipedia:

Planck was gifted when it came to music. He took singing lessons and played piano, organ and cello, and composed songs and operas. However, instead of music he chose to study physics.

You know, I looked it up on wikipedia, too, before posting.

My recollection is that quote I attributed to him is in an introductory econ textbook I used in the late 1970s... so my memory may be wrong. I was hoping there was something about it in wikipedia. My memory tells me the author of the textbook was at Rutgers. At first I thought the author was Leftwich, but his bio indicates he was never at Rutgers.

Oh well, even if I do remember it correctly from the econ textbook, you're right -- it kinda looks like he never would have said that.

But then again, maybe he did: http://www.econ.mpg.de/english/ is the Max Planck Institute of Economics.

[Slim10]

Originally Posted by SportyandMisty

It seems to me that the various residential construction subs (concrete, framing, electrical, plumbing, sheetrock, roofing, etc) have dropped their prices (at least for labor) 30-40%. Land seems to be down 40% for high end lots in nice areas, and even more elsewhere. Material suppliers have dropped their prices in some of areas by 30%. Vendors of plumbing fixtures & appliances are down 15%. Counter tops? I've been told Granite now costs quite a bit less than CaesarStone (who would have thought that?). Painting? prices have come down substantially.

Construction costs have come down but still a big differential to housing prices.

Connico who does construction sector consulting has been tracking construction costs for a few years now.

http://www.connico.com/press/2010%20Q2%20QCR%20(2).pdf

Its $90-240 psf for SFR residential housing construction cost as at 2nd qtr 2010 (equivalent to mid 2007 costs and only started coming down from Apr 09).

Median/Average psf will show how badly prices have dropped. Don't expect new construction to recover anytime before the housing market does.

[Slim10]

Originally Posted by olecapt

Not official yet but close. Single Family sales at 2880. That is down a little from April and a good bit from last year. Median is about $142,000. That is same as last month and up 2K yoy. Average is down 1.5% from last month and yoy. REOs are now 38.8% of the mix and still dropping. Note though that REO inventory is up sharply.

Just bouncing along with little change. Got to see what is going on with that REO inventory. REO sales keep dropping but inventory rises. Price is slowly rising as well. Wonder if we are getting a richer mix or just the lenders are pushing the price up.

SFR sales numbers confirmed at 2884 (2951 previous month). Condo median prices are at 15 month highs (still way under-valued at $72k but up 10.9% yoy).

Interesting to note comments stating that this is supposed to represent march contracts. That means sales numbers should drop further in July.

[tony soprano]

Originally Posted by Slim10

Interesting to note comments stating that this is supposed to represent march contracts. That means sales numbers should drop further in July.

Nationally, mortgage applications are down by 35% in the four weeks since the tax credit expiration at the end of April. Locally, monthly SFR YoY sales volume were down for both April and May. It will be interesting to see what the summer sales numbers do post-tax credit.

[Slim10]

Originally Posted by tony soprano

Nationally, mortgage applications are down by 35% in the four weeks since the tax credit expiration at the end of April. Locally, monthly SFR YoY sales volume were down for both April and May. It will be interesting to see what the summer sales numbers do post-tax credit.

That is significant when read with the drop in cash sales. That suggests SFR sales would drop to ~1,800 pm post july and overall sales ~2,400 pm (~28,800 for nxt yr which is ~08 numbers).

[umbilicus]

Originally Posted by olecapt

Not official yet but close. Single Family sales at 2880. That is down a little from April and a good bit from last year. Median is about $142,000. That is same as last month and up 2K yoy. Average is down 1.5% from last month and yoy. REOs are now 38.8% of the mix and still dropping. Note though that REO inventory is up sharply.

Just bouncing along with little change. Got to see what is going on with that REO inventory. REO sales keep dropping but inventory rises. Price is slowly rising as well. Wonder if we are getting a richer mix or just the lenders are pushing the price up.

What's the latest update?