Forrest’s Blog

Anyone who has kept up with my monthly Las Vegas Market updates realize that we remain in a maket with seriously over-priced residential resale homes.  Most sellers still do NOT understand that they must be willing to compete with bank-owned REO listing in their own neighborhood as well as comparable homes in subdivisions all over the Greater Las Vegas area.

So take this test on one of you own listings . . . just in its own subdivision.  Create a search on all listings in the subdivision  . . . one story, two story, the whole nine yards.  Then add the listing price per square foot field (LP/SqFt) to your results grid. [You'll find the column manager at the top left of the screen; just click on the 12 dots next to the name of the grid.]  Now sort on the LP/SqFt column in asceding order.  Where is your listing?  Remember only six (6) out of 100 listings are selling each month.  Therefore, if there are 100 listings in the subdivision . . . your’s better be in the top 6 to really be in the selling zone.

Now let’s say that you have a listing that is out of the selling zone . . . and remarkably it receives an offer . . . albeit a low one.  The first “knee jerk” reaction of many sellers will be to reject the offer because they are offended with the offering price.  Why?  Because they are still focused on exaggerated prices from the past.  But perhaps we can offer the seller another perspective on pricing! 

Maybe it is time to educate some of these sellers by looking at their original purchase and sale in a manner similar to what an investor would do . . . but much simpler.  Yes, we are going back to the time value of money and a good financial calculator . . . but much simpler.  I realize that most of us do not really enjoy doing those calculations anyway . . . with all those extra buttons! 

I ran the numbers on an offer that was recently rejected by a seller and the results were astounding.  The seller just rejected an eleven percent (11%) annual return because they were fixated on a price they were never going to get.  But tell me . . . where can anyone realize an 11% annual return on an investment with pretty minimal risk . . . at least compared to the stock market.  We all know that a 4-6% annual return on real estate over a long period of time is good.  This is just one good way to re-focus a seller back into the selling zone.

I’ve put together a very simplistic spreadsheet that will help you will this analysis.  It contains two Investment Calculators [Download this excel file and save on your computer].  The first let’s you put in the original purchase date, purchase price, expected sale date . . . and then calculated an anticipated sale price base on a 6% annual return.  The second one asks for original purchase date, anticipated sale date, original purchase price, and expected sale price.  In turn it calculates the actual annual return as if this property had been an investment.

Try it out!  You may find some of the results very interesting.

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!!!