Junk Rates Fall Below 8%

In an article symbolic of the media’s attempts to keep finding the dark side of any news, an article heralding the fall of junk bonds below the symbolically important 8% rate gets the ominous title: “Is Debt Thaw on Borrowed Time?”. Read the article, though and you find:

Meanwhile, the additional interest that most junk bonds pay over Treasury bonds has fallen by nearly two percentage points since mid-March to around 6.8 percentage points, according to Merrill Lynch data.

And a handful of firms, including power company AES Corp. this week, recently issued junk bonds with interest rates below the key threshold of 8%, the first time that happened in many months.

and:

There are some encouraging signs regarding the leveraged-buyout overhang. The pipeline of unsold leveraged loans and bonds has shrunk to roughly $100 billion from more than $300 billion last summer, alleviating some strains on the market.

Read the full article here.

CityCenter Hiring Start Only 8 Months Away

Buried in an article about the topping out of Vdara is an update on MGM’s hiring plans:

Baldwin said the next big step will be taken after the first of the year, when MGM Mirage starts to hire some 12,000 employees.

Read the article here.

LVRJ: Nevada Immigration Continues Strongly

Even in a year (2007) with no big new casinos, Nevada continued to grow substantially in population.

A migration study from United Van Lines found that Nevada ranked No. 2 in the nation for its share of inbound moves in 2007. The moving company said 59.4 percent of the Nevada-related trips it made in 2007 were for clients moving to the state. Only North Carolina, with 61.6 percent inbound, fared better.

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…though Clark County has fallen from its record levels of population expansion three years ago, it continues to collect a substantial set of new citizens, Gordon said. Three years ago, the Department of Motor Vehicles posted more than 90,000 drivers’ license turn-ins in the county annually. Today, 70,000 to 75,000 residents hand in out-of-state licenses, still a major chunk of population.

Read the full article here.

Perspective: Most Most Mortgages Current and Up To Date

Irwin Stelzer, Director of economic policy studies at the Hudson Institute, writes in The Weekly Standard that some perspective is needed on delinquent mortgages:

 

There are 80 million houses in America. Twenty-five million are owned mortgage-free. Of the 55 million homeowners with mortgages, about 50 million are up-to-date on their payments. So some 75 million of the 80 million homeowners either have no mortgages to add to their worries or are meeting their mortgage payments on time.

He goes on to write:

Less prominently displayed is the fact that exports are up, the unemployment rate remains low, job losses are diminishing, non-financial corporations are once again issuing bonds to fund investment, and earnings of non-financial companies were up more than 10 percent in the first quarter.

Read the article here.

Aguero: Las Vegas Population to Grow By 1 million people in next 12 years

Jeremy Aguero, a principal at Applied Analysis, was quoted in the paper discussing the need for a new school building bond.

“Aguero expects Southern Nevada’s population by 2020 will grow to 3 million, from 2 million”.

Think about that for a minute. That means that there will have to be a roughly 50% increase in housing. Imagine rebuilding every single house or condominium South of Sahara. That’s the magnitude of the construction demand that Las Vegas will face.

Read the full article here.

LVRJ: Clark County PreForeclosures Down Dramatically

The Las Vegas Review-Journal reports that Pre-foreclosure filings in April dipped from 6,152 to 4,426. That’s a 28% reduction in one month.

See the article here.

GLVAR Data Wildly Underestimates Strength of Recovery

Rarely has a more misleading set of data been published than the GLVAR statistics that were distributed recently for the month of April.

According to the GLVAR, “Available” SFR is steady. In fact, the LVRJ helpfully publishes a graph showing inventory rising slowly from January to April.

Nothing could be farther from the truth.

The flaw in the GLVAR data is that they include in their count of “Available” units all Contingent Sales and all Pending Sales.

Think about that for a moment. That means that no matter how much growth sales activity there was in the last 90 days, almost none of that transactional volume will show up as a reduction in available SFR.

The GLVAR’s policy assumes an astonishingly pessimistic conclusion: that none of those units will close.

Although this pessimistic assumption has long been a part of the GLVAR data protocol, it is only recently that it has lead to particularly inaccurate conclusions.

That’s because there has been a surge in transactional activity that has not yet closed.

This simple comparison shows with numbers how inaccurate the GLVAR’s analysis is:

Date	Number of SFR truly available (ER, EA)	Number of SFR, including Contingent (C) and Pending (P)
4/11/2008	18,101	22,514
5/6/2008	17,424	22,736

In a 25 day period ending yesterday, the number of SFR units that a buyer had to choose from in Las Vegas declined a tremendously strong 3.7%. If you annualize that rate, you get a 54% reduction in inventory over a one year period.

Want to see an independent corroboration of these much more positive numbers? Check this out, from the Wall Street Journal.

What became of those 676 units that were removed from ER/EA status in that window?

Some were withdrawn. Some expired.

But most were sold. You can tell that because of the surge in Contingent and Pending status units during the same timeframe. Contingent and Pending units jumped from 4,413, to 5,312.

I am not known for frothing at the mouth and using crazed adjectives. But that jump is amazing! It’s astonishing! It’s stupendous!

Sweet Jesus! That’s a 20.4% increase in just 25 days! Annualize those puppies, and you find that sales are rising at a nearly 300% per year rate.

Are some of those contingent sales doomed to failure? Sure. Some of them will fail because buyers can’t sell their house and some will fail because bankers won’t approve a short sale.

But even if that number was cut in half, it would still represent a tremendous surge in buying activity.

But wait, there’s more!

Guess how many units changed to SOLD status in that same 25 day period?

1531. That means that out of the 4,413 Pending and Contingent units that existed as of 4/11/2008, more than a third of them closed in the next 25 days. So that makes the current count of 5,312 Pending and Contingent even more impressive. If you include all of the Pending and Contingent Units that either Closed in the last 25 days or are still Pending and Contingent, you have to add the 1,531 and the 5,312 together and you get nearly 7,000 transactions!

Inventory, REAL inventory has been declining since last September.

Specifically, on 9/26/2007, there were 22585 SFR’s in EA or ER status. Compare that to today’s count: 17,400. That means that there are 5000 fewer houses on the market than just 6 months ago.

There isn’t another place in the entire country that is showing anything remotely similar to the dropping inventory rate of Las Vegas.

$750 Million Expansion and Rennovation at Hard Rock Hotel

Here at FrothingDeveloper, we love hotel investment because it has such a positive impact on job growth in Las Vegas, which in turn leads to population growth, which leads to people who buy the homes we build.

 

Some hotel projects, like CityCenter, are high-profile, while some, like this Hard Rock Hotel expansion, don’t get a lot of attention.

 

The Hard Rock’s new owners are investing $750 million dollars into expansion and renovation:

  

 

 

 

 

 

 

 

WSJ: Las Vegas Housing Inventories Falling

This Wall Street Journal published data last week that supports Frothing Developer’s argument that Las Vegas inventory is falling, and directly contradicts the misleading information published by the GLVAR:

 

According to ZipRealty, Las Vegas has the fastest falling inventory levels in the country. The 3.5% monthly decline reported here annualizes to a 42%  annual decline rate, which would put Las Vegas back at 2004 levels on inventory.

 

Note that most of the rest of the country is still heading in the wrong direction. Miami and Orlando, which are often mentioned in the same breath as Las Vegas, are not improving their inventory position at all.

 

Recession Deemed Unlikely

First Trust Advisors published a new, and optimistic report on the predicted recession:

 

 

Monetary policy is not tight. In fact, the Fed is holding interest rates below inflation. Tax rates are still relatively low and have not been hiked, yet. And

productivity is still growing strongly. When these three things have been true, the US has never fallen into recession. When these three things are true, a financial

market collapse is highly unlikely.

 

So far, the data have corroborated this historical and fundamental view. Real GDP growth remained positive in the first quarter of 2008.