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 analysis of the 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 way the data is collected assumes an astonishingly pessimistic conclusion: that none of those units will close.
Although this pessimistic assumption has long been a part of the 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 analysis is:
|Date||Number of SFR truly available (ER, EA)||Number of SFR, including Contingent (C) and Pending (P)|
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Some were withdrawn.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.