Forrest’s Blog

Reminder: Daylight Savings Time - March 9th! We have seen a considerable increase in buyer activity this past two months.  Daylight savings time couldn’t come at a better time.  This is a real opportunity to conduct extended open houses and connect with those buyers.  Also, consider Friday afternoon open houses that go until dark.  I am convinced that this is the time each week that your brochures disappear from your brochure boxes!

There is mixed news in the numbers this month . . . but let’s first download and take a look at: February 2008 Resale Market Snapshot.

Listing prices dropped a mere 1.4 percent during February compared to 9.3 percent since September. The good news is that closed sales prices remained flat in February but has dropped 13 percent since September. Inventory dipped while the absorbtion rate rose to 6.3% . . . these best one month rate in months. The average Cumulative Days on Market still hangs around 180 days while listing remain woefully overpriced.

The Cost of Overpriced Listings:  Bob Thompson is the author the monthly Market Condition Report for Equity Title.  His studies clearly show that half of all homes listed in the Las Vegas market are priced outside the “Selling Zone”!  Those homes are not receiving offers . . . they’re not even being shown in many cases!  The result is that we are now only closing 40 homes per day on average in the Greater Las Vegas area.  This compares to 88 closing per day in 2006 and 125 closings per day in 2004.  What is this costing you?  More importantly, what it is costing your seller?

What Can We Do? First, the traditional CMA approach to market pricing does NOT work in this market.  It may be an indicator of what it might appraise for, but that may a totally different number than what it will sell for.  Bob’s research and my own observations support the notion that Las Vegas is a very efficient market.  That simply means that each area or subdivision will experience market valuation changes on their own schedule or in their own time.  One area may be performing poorly today . . . but will prosper later when other areas are under-performing.  The bargains and opportunities in the Las Vegas market is a constantly moving target.

From a practical standpoint this means that just developing a CMA in the subdivision of the prospective listing is not adequate . . . and may be financially fatal to you and your seller.  Let’s discuss two very intuitive examples.  If a buyer is interested in Anthem Country Club . . . is it possible that they would also check out Red Rock Country Club?  Of course, so your market analysis must determine if there are opportunities in the competing subdivision that could cost your seller showing and offer opportunities.  How about the age qualified buyer?  How many neighborhood choices do they have?  Well let’s see:  Sun City Summerlin, Sun City Anthem, Solera, Sienna, Sun City Aliente, and quite a few others.  If you are preparing a CMA for a Sun City Summerlin property . . . can you afford to ignore the vast competition in all other areas of Las Vegas, North Las Vegas and Henderson? 

Let’s Continue to Get Those Critical Price Reductions!  If there was ever a time for brutal honesty on listing prices . . . it is now!  I would urge each of you to review your listings in the context of this blog and make appointments with your sellers to take a look at their current listing prices with this perspective.  Don’t nibble away with insignificant price changes. Boldly price the property to sell!

Did you caucus last month? If not . . . you missed one of the most interesting days in recent Nevada history!  The utter lack of organization was actually refreshing as groups of neighbors came together to exercise one of their more profound voting rights.  It was truly memorable . . . and I’m certain that the next round of caucuses in Nevada will go much more smoothly!

There is some really good news in the numbers this month . . . but let’s first download and take a look at: January  2008 Resale Market Snapshot.

Listing prices dropped another 2.5 percent during January and nearly 8 percent since September.  On the otherhand, closed sales prices dropped 4.3% in January and nearly 13 percent since September.  Inventory held steady while the absorbtion rate nudged upward yet again. The average Cumulative Days on Market jumped to 180 days, but this is very good as we saw a lot of older inventory

Areas 303, 404, 504, & 606 had much better than average absorbtion rates in January despite the continued over-pricing in nearly all areas of Las Vegas. 

Again, I  would be remiss if I did not mention that we are once again seeing a large number of multiple offers being submitted on properties around and below $250,000! This is especially true for well priced REO listings right now . . . and something that every buyer should know before making an offer in and around this price point.  However, we are also seeing multiple offers on short sales . . . this was not happening previously.

Let’s Continue to Get Those Necessary Price Reductions!

 The race to the final December 2007 closings certainly lacked the enthusiasm generated by Kinky Friedman’s run for Governor of Texas in 2006.  Both ended up about the same way . . . failing to excite anyone with results.  But Kinky at least, had the distinction of being the first independent in 154 years to even make it on the ballot! 

Yet, there is some really good news in those numbers . . . so let’s first download and take a look at:  December 2007 Resale Market Snapshot. 

Listing prices dropped 2 percent during December and 5.4 percent since September.  On the otherhand, closed sales prices dropped 4.5% in December and 8.7 percent since September.  Meanwhile available inventory dropped nicely while the absorbtion rate nudged upward.  Some areas even saw a reduction in the amount of over-pricing compared to previous months. 

Areas 103 and 504 seem to have benefitted nicely from the November and December auctions.  Homes in area 103 sold much better than in previous months while the average listing price and average sales price are becoming more balanced.  Area 404 did not see much of a drop in average list price, but experienced a nice increase in average sales price that boosted the absorbtion rate and modestly closed the over-pricing gap from October and November.

I would be remiss if I did not mention that we are once again seeing a large number of multiple offers being submitted on properties around and below $250,000!  This is especially true for well priced REO listings right now . . . and something that every buyer should know before making an offer in and around this price point.

Have a Great and Prosperous 2008!

Let’s begin with some good news!  However, that will have to wait until we congratulate Lee Barrett on becoming a certified CRS instructor on his first attempt during the NAR Convention last month.  Congrats Lee!! 

Now for the good news! First, the single family residential (SFR) resale closing numbers for November are pretty much on par with October . . . and that’s good why?  Well, we did not have the “normal” November dip from October numbers . . . and that might just be the first sign of life and hope in resale sales since it bucked the traditional end of year trend.  So let’s see what we can learn from the November SFR stats about the current underlying condition of the Las Vegas market.

First, download and take a look at: November 2007 Resale Market Snapshot

This table is a snapshot of the SFR listings that were available in the Greater Las Vegas market as of December 1, 2007.  The listings are broken down by MLS areas; you may also want to download a map to the Greater Las Vegas MLS Area Codes.

More good news!  The overall available inventory has dropped slightly since the last snapshot a month ago.  More importantly, the average price of available SFR listings has also dropped approximately 1.6% for each of the last two months or a total of 3.2% for the two months combined.  Also, the average sale price inched its way up as did the absorbtion rate.  On the whole, the Greater Las Vegas resale market remains 14% over priced, but some areas are adjusting well.  For example, take a look at area codes 201, 202, 403, and 502.  These areas are coming closer to striking a balance between average list price and average sale price.

There is one anomaly in the chart . . . and that is area 601! The small number of closings skewed that data slightly as there were three high end properties that closed out of the fourteen total closings.  One of these was a closing with a sale price of exactly $1,000,000 that had an original list price of $1,399,000; that property sold with a 29% reduction to the original list price.  Area 601 seemed to have good activity for the number of listings and a higher than average absorbtion rate, but the -12% does represent a small amount of skewing.

The one number in the report that could still use improvement is the average Cumulative Days on Market (CDOM).  It has slowly increased to an overall market average of 169 days.  One (actually several) events may change this next month!  The December auctions!!  Early indications are that the Hudson and Marshall auction held on Sunday, December 2, 2007 yielded great deals and excellent results for the properties that were included in the auction.  There are several more auctions to be conducted this month, so I am really looking forward to see what impact they will have on next month’s snapshot!

 Until then . . . Keep Getting Price Reductions . . . and close more sales!!!

Anyone who has been following the Las Vegas real estate market knows that September 2007 closings were the lowest in a decade.  Meanwhile, the resale inventory remains close to 30,000 homes.  So, what can we learn from the September stats about the underlying condition of the Las Vegas market. 

 First, download and take a look at:  September 2007 Closings vs Available Listings

 This table is a snapshot of the single family residential listings that were available in the Las Vegas market on October 5th.  The listings are broken down by MLS areas; you may also want to download a map to the Greater Las Vegas MLS Area Codes.

The table details the number of homes available is each MLS area as well as the average current list price for homes in that area.  The columns to the right of these compare what actually sold in those same areas, including the number that sold, what percent of the available inventory that sold in September, as well as the average closed sales price for homes in each MLS area.  The column on the far right of the chart is titled “% Gap/LP-SP”.  This calculation is the percent difference between average list price and average closing prices by area.  In short, it really depicts just how overpriced that the current inventory of available homes remains.

For example, Area 102 has an average listing price of $416,865 but an average sales price of $327,229.  Listing in MLS area 102 remain approximately 22 percent overpriced compared to the 4.4% of available inventory that actually closed in September.  That 4.4% is also considered the absortion rate for Area 102.  Overall Las Vegas has an absorbtion rate of 4.8% and is 13% overpriced on the average.

Be careful not to confuse the averages with what is happening with any specific property. In fact, let’s talk about the new competition in the Las Vegas real estate market!  Many homes purchased in the second half of 2003 and later probably got caught in the extraordinary market price run that saw home increase nearly 50% in 2004 alone.  It may be difficult for many of those homes to be priced competitively, especially if they were financed with little or no equity  . . .  or refinanced with most or all equity removed from the home.  However, consider the owners that purchased their home in 2002 or earlier!  They may be sitting on a great deal of equity . . . assuming that they resisted the temptation to pull the majority of equity out of their home.  This seller . . . with good equity . . . and perhaps a small mortgage (or no mortgage at all) can list their home today at an extremely competitive price that will allow them to net a very healthy return on their investment for the years that they have owned the property.  That is why you might see a $700,000 home sell for $475,000 in this market.

In 2004 homes were selling for more than they were valued at due to the heavy demand for homes in Las Vegas.  Today, homes are worth what they are worth, but they very well may sell for less than they are worth.  Simply, supply and demand is alive and well in up and down markets.  It’s just imperative to establish list prices carefully in the current Las Vegas market if one is serious about selling in the short term.