Futures Still Going Up. Chortle

Long-time readers (heh) will recall that Frothing Developer has put its money where its mouth is and bet big on Las Vegas in the housing futures market.

I’m pleased to report that the bid on November 2012 contracts has risen to 132 from the 130 where I was able to buy my last contracts and – get this- the ask is up to 155. Lord knows if anyone at this point is going to be dumb enough to sell contracts at these low prices. I’m going to keep buying them, though. You can follow the action at http://housingrdc.cme.com/

Economist: "Supply creates its own demand"

The Economist looks at the gambling industry in Las Vegas and generally concludes that while profitability will be strained by recessionary factors and by increased supply, the gaming industry is pretty good at stimulating demand:

The casino Titans are adept at dealing with shifts in demand, however. Led by Harrah’s, whose boss, Gary Loveman, is a former economics professor, they have become experts in collecting information about their customers and using it to tailor promotions. Gambling firms also have a knack for carving out new markets. And they are ramping up marketing efforts abroad. The attractions of a weak dollar are clear, even to the unluckiest of European gamblers. “It’s great. Every dollar I lose is only 50 pence,” says Neil Gregory, a British property developer struggling to contain his deficit on the Luxor’s roulette tables. Transatlantic business has also been boosted by boxing extravaganzas featuring European fighters.

Optimists reckon a weak economy and currency could boost domestic demand, too. If past downturns are a guide, a substantial number of Americans will head to Vegas rather than taking expensive holidays abroad, says David Schwartz of the Centre for Gaming Research. And the “whales”, as high-rollers are known, really are immune to economic fluctuations. Some high-end casinos are doing even better this year than last, says Brian Gordon of Applied Analysis.

This leaves some convinced that Vegas will once again defy the sceptics, just as it confounded those who argued that it would be hurt by competition from Californian gambling dens, or that the wave of mega-hotel openings in the 1990s would create crippling overcapacity. History suggests that, in America’s gambling capital at least, supply creates its own demand.

We’re Still Not In a Recession, Day 455

The government upped its estimate of growth for the first quarter by 10%. There’s no question that economic activity is weak, but I’ll take 1% growth over recession anyday.

Full Story Here

Internet Gaming Ban Upheld

It’s good for casinos when Internet gambling is restrained.

Full story here.

Las Vegas New Home Sales Up Over 2006 and 2007

New home sales spiked dramatically and were up week-over-week against both 2007 and 2006 in the most recent week, as reported by the Ryness Report, which compiles sales statistics from new home developments across the Las Vegas Valley.

This is the first since 2005 that weekly sales have topped the prior two years, and it is only the second time since 2005 that new home sales numbers topped the previous year’s sales.

Weekly traffic to sale ratios, a strong indicator of buyer demand, went from 30:1 in 2007 down to a much healthier 16:1 in the past week. While one week doesn’t make a trend, taken in context of the overall upward trend for 2008 this is a very positive development.

-Frothing Mark

Chart courtesy of The Ryness Company

GHFA on the Latest Vegas Numbers

Glass Half-Full Analysis on the latest Economic Indicators

New Resident Count: Down to 4,612, but it’s still pretty powerful to have nearly 5000 new residents showing up each month.

Total employment: Down less than 5000 from a year ago. In a city with one million jobs, the fact that despite all of the downturn in construction, lending, title, and mortgage, employment is only down 5000 jobs is quite a testament to the underlying growth power of the Las Vegas Region.

New home permits: Down 57%. Remember: this is a good thing. Fewer home permits mean we work through the inventory overhang faster.

Existing Home Sales: Up slightly from last year. There is hardly any other place in the country that sold more homes in May 2008 than they sold in May 2007. Vegas pulled it off because we’re going through a recovery.

National Inventory of Existing Home Drops

Good results for May, well-outperforming “analyst expectations”.

The inventory of existing homes dropped, nationwide from 11.2 months of inventory to 10.8 months of inventory from April to May, a 3.3% reduction.

On absolute terms, the national inventory dropped from 4,553,000 to 4,490,000, a reduction of 63,000 homes.

Existing home sales rotes 2% to a 5m per year pace.

Full results here.

Case-Shiller Overstates Decline, Says Noted Bear

Amidst the usual journalistic hyperbole of “plunges” and “steep falls” in the SF Chronicle were some very interesting statemnents on the nature of the Case-Shiller index.

“Prices are dropping [...],” said Patrick Newport, U.S. economist with Waltham, Mass., research firm Global Insight. That said, he and others believe the index may be overstating the extent to which average homes already have declined in value.

.

.

Case-Shiller is a repeat sales index, meaning it tracks only the actual price gains or declines for homes that have traded hands at least twice. In the current market, the homes that have done so recently increasingly tend to be foreclosed properties, said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley.

“It’s biasing the numbers in a way that makes it look a lot worse than it really is for the typical homeowner,” Rosen said. “I’m a bear, so I’d go with it if it were true.”

The Futures Market Turns Up in Las Vegas

I’ve written previously about my plan to make easy money buying November 2012 housing contracts by taking advantage of the morbid negativity of those markets.

I started buying at 161, and have had to pony up for margin calls as the price fell. Yesterday, I bought 3 more contracts at 130, and today, the bid is at 130.4. Another turning point, I suspect. I intend to buy more as the market slowly heads back up.

Notice also that Las Vegas is the only contract that is up today. I’ll be the first to admit that 40 cents is not much delta, but if there’s any one motto that underlies Frothing Developer, it’s that today’s trends are much more important than yesterday’s results.

Case Shiller: The Tide Starts to Turn

The monthly Case Shiller numbers came out today, and from the shrill tone of the media’s reporting, you’d think the 4 Horsemen of the Apocalypse were riding again.

AP writes:

U.S. home prices tumbled in April at the fastest rate since a widely followed index was begun in 2000 with all 20 metropolitan areas surveyed posting annual declines for the first time

The problem with this analysis is that its based on year over year comparisons:

The Standard & Poor’s/Case-Shiller home price index of 20 cities fell by 15.3 percent in April versus a year ago, according to Tuesday’s report. Prices nationwide are at levels not seen since August 2004.

We already know that prices are down from April 2007. The only news worth looking at here is, how are prices trending now?

Case Shiller was down less, month over month, across the country, than any month since September 2007.

Very similar data in Las Vegas:

I’ve predicted that when next month’s numbers come out, we’ll be at 0% decrease, month over month, for Las Vegas. We shall see.