Single family residential (SFR) closings for April 2013 are up 3% last month, but YTD closings gained enough that total closed units only lag last year by 18%. SFR median closing prices rose 3.7% this month with the median closing prices of an SFR now at $167,000. Both the SFR median and average closed sales prices have risen 31% in the past twelve months.
Las Vegas Market Closings and Momentum
REOs continue to drift sideways, while short sales continue to plummet in earnest. Short sales make up only 32% of the current closings, but look for that to be in the 15% range by the end of the year. This has many concerned over the future of short sales, stagnating inventory and the longer term effect of hedge funds on our market.
We would certainly welcome REO inventory that results in 10%-12% of the monthly closings as this seems to have no adverse affects on market values overall. However, a combination of price increases and rental rate adjustments that would cause cap rates to fall much below 5% should signal a slowdown in hedge fund and investor interest in the Las Vegas market. This could be the case by the end of this year in certain areas of our market.
However, it is unlikely that these conditions would cause a dramatic drop in closed units, but rather the drop in units being offset by higher prices. It will begin to be more important to take listings at market values as those who make a practice of taking over priced listings will certainly have some stagnant inventory going into to 2014. The key to the future of the Greater Las Vegas market rests with the resiliency of our economy and ability to create jobs while diversifying the local economy. In turn – as the local market becomes a healthy and primarily non-distressed market – look for better lending opportunity for buyers. Non-conforming loans by local banks and credit unions could certainly help the recovery over the next couple of years.
Las Vegas Closings by Property Type
This chart illustrates just how much short sales continue to struggle despite all the streamlining and efficiencies the banks have attempted to implement. That’s due – in part – to the fact that many of those loans are now being serviced by banks that have little previous experience in short sales and are only now training staff to be able to process them. Meanwhile, traditional listings that are properly priced are selling very quickly and efficiently. Yes, some may be flips, but not nearly as many as in the past. Just one year ago closing below $100,000 made up 42% of all closings, but today they only make up 22% of all closings.