Las Vegas, Sacramento Housing Show Big Yearly Gains

Data is starting to trickle in for August housing sales on the two housing markets I have been keeping an eye on. Las Vegas and Sacramento both showed a slight decrease from July 2008 numbers but significant increases from August 2007. I follow these two markets because I am quite familiar with both and both are poster children for the excesses of the run up and subsequent crash. I believe these two markets are leading indicators for at least the regional (CA, AZ, NV) housing market.

The Las Vegas market came in with a 93% year-over-year sales increase in August. Sales were off 2% from July, ending 7 straight months of increases. Available inventory continues to fall, 7% lower than 2007 and showing a 9 months supply at the current sales pace. The median sales price continues to fall with bank owned properties accounting for 2/3 of sales. The median price fell 4.5% from July to August and 30% from the previous year. All of these numbers apply to single family homes. The condo market showed sales up 7.5% from July and 35% higher than August 2007, but prices are falling faster in the condo market. The median condo price was 9% lower than in July and 35% lower than a year ago. Source: Las Vegas Sun

The TRENDGRAFIX report for the Sacramento real estate market shows regional home sales down 11% from July but 65% higher than August 2007. Pending sales increased by 13% in August from July. Available inventory is down over 30% from the peak which occurred in August 2007. These quotes from the report define the market and pricing:

Banks continue to drop prices to dump their Real Estate inventories in all price ranges.  Inventories for bank owned are running between 2-3 months, compared to 6-20 months for non-bank owned homes for sale….85% of under-$200,000 home sales are bank owned.  Bank owned home sales shoot up 14 times in just one year….

An extremely positive fact in the report is the flat month-over-month change in the average price per square foot. Sacramento county came in with a 1% increase in price per square foot and neighboring counties ranged from minus 3% to a positive 8% change. This first month of non-negative pricing is a trend I would like to see continue.

Bank owned inventory still remains the majority of sales in both of these markets, putting downward pressure on prices. The question remains about the future absorption of foreclosed homes and will the sales pace exceed the foreclosure rate to the point these sales are in the minority and a “normal” real estate market ensues. Falling mortgage rates may be the catalyst that reverses the falling price trends.

I have postulated in the past that once the public perceives that prices are no longer falling a new “gold rush” will hit the market and prices could increase significantly. Bankers now in such a rush to dump their real estate owned will be holding out for higher prices, shutting off the bargain basement end of the market. We have all seen how rapidly the different markets can change direction these days and real estate may be no exception.

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