Positive Trends in Vegas

The LVRJ published the UNLV composite Index of Leading Indicators today:

There’s plenty not to like here, such as the big drop in passengers through McCarran, but I’m cheered by the 100% increase in home sales. Another interesting point is that total employment is up over a year ago. Not by much. A year ago there were 923k jobs and now there are 924k jobs. It’s important to realize that although the unemployment rate has jumped, that’s more a testament to the fact that people keep moving to Vegas than a statement on meaningful job losses. The 5,714 new residents is also pretty impressive. That’s really not much less than we were getting in 2006.

The Dow Loves Positive Housing News

It’s no secret that all eyes are on the state of the housing market as the search for the answers to America’s financial crisis continues. This was evident in an article posted recently by the New York Times explaining that the Dow reacted positively to an encouraging report on housing sales.

 

 

The report showed an increase of 2.7 percent in new homes sales in September. 

 

 

 As we know, construction of new homes has all but halted, so we are now working toward eating away at the new home inventory, and the current price reductions are prompting that. As Frothing Developer mentioned earlier, if only it were easier to get a mortgage! Reducing the overall home inventory, both new and existing, would happen a lot quicker. We can already see the light at the end of the tunnel – existing home sales are way up with the West, and perhaps Las Vegas itself, leading the way. Let’s hope now that encouraging news on the mortgage front keeps us moving, and that what’s happening in Vegas, happens in the rest of the country.

 

– Frothing Sherri

 

Existing Home Sales Up. WAY up

Another month, another surge in sales. 5.5 percent, month over month. That’s the best showing in 5 years. Inventories down. Supply drops below 10 months, nationwide.

And the West has the biggest impact:

By region of the country, sales soared by 16.8 percent in the West and rose a more moderate 4.4 percent in the Midwest and 2.2 percent in the South. The only region of the country which saw a decline was the Northeast, where sales fell by 1.1 percent.

This is no surprise to anyone who has been tracking the steady monthly increases in resales in Las Vegas.

Imagine how many more houses would be selling right now if it was easier to get a mortgage!

Full article here.

Housing Starts Rate Goes Down. This is a GOOD thing

 

As usual, a decline in housing starts was reported last week as “further evidence of weakness” and a “bleak thing. As we’ve pointed out before, however, supply and demand laws make it clear that when you have an oversupply, as America does now, one of the best things you can do is stop building. From that point of view, I’m disappointed the number of starts isn’t dropping faster. We could really benefit from a few quarters where nothing was started at all!

Here’s an article that makes some good points on this issue.

Increasing Agreement That Buying Now Is A Smart Investment

Today’s WSJ both have interesting things to say about buying in today’s market.

In “California Home Sales Revive…” it points out something that’s not particularly new information:

Investors and first-time home buyers are snapping up foreclosed houses here, with the number of local sales up almost fivefold from this time last year. …. Across hard-hit California, sales volumes rose 65% in September compared with a year ago, said MDA DataQuick, a San Diego-based real-estate information service.

Deeper in the article, there’s a discussion about the safety of positive-cash flow real estate investments:

Where many see ruin, some sense opportunity. Michael Arpaia, an officer with the California Highway Patrol, just bought a foreclosed four-bedroom house — valued at $400,000 two years ago — for $160,000. He spent $25,000 to replace linoleum floors, carpeting and landscaping. He’s renting the house to a local couple who lost their home in foreclosure.

With stocks falling, Mr. Arpaia is counting on the property’s cash flow and appreciation to supplement his retirement nest egg. “My financial adviser says residential real estate is the safest investment right now,” he says.

I was struck by the use of the word “safe”. It resonates with me because I have been making similar arguments in regard to sales at our Manhattan Condominiums project. When you compare the rent that those units can fetch to the price you can buy them at, you can now buy units there at positive cash flow. This is true for many other pieces of real estate in Las Vegas, as well.

There isn’t much downside risk if you’re generating positive cash flow. Only if rents collapsed or you got a tenant-from-hell (think Michael Keaton in “Pacific Heights”) would you risk a problem, because even if housing prices continue to fall, you just hold on and collect your money each month.

Gas Prices Down To Where They Were A Year Ago

AP reports in the LVRJ that gas prices are at "year-ago levels". If you think back, no one was worrying about airlines cutting routes a year ago.

Consumers got another break at the gasoline pump Monday, as prices dropped further below $3 a gallon and approached year-ago levels even as the near-certainty of an OPEC production cut pushed oil prices marginally higher.

Gasoline has fallen more than a dime a gallon since Friday, hitting a national average of $2.92 on Monday, according to auto club AAA, the Oil Price Information Service and Wright Express.

The going rate for a gallon of fuel in Las Vegas was $3.13 Monday, down from $3.16 on Sunday and $3.56 a year ago. The local average hit a record of $4.27 a gallon on June 21.

Pump prices have fallen 29 percent from their July record high of $4.11 a gallon and are only 10 cents higher than a year ago. That difference could be bridged this week if gasoline keeps falling at the current rate.

The pullback at the pump comes amid a dramatic turnaround in crude oil prices.

Low gas doesn’t mean that tourists will pour back into town, but we’re only down 4.2% in tourist count, even with all of the dour economic news.

We may have the best of both worlds. On the one hand the oil shocks have changed a lot of American behavior. People are switching to more efficient cars, changing the way they operate their businesses. Now that gas is getting cheap again, people aren’t necessary going to change back to their old ways of doing business.

6 Straight Days of Improved Credit Conditions

AP reports that:

Credit conditions among banks improved for a sixth consecutive trading day on Monday, particularly in the U.S., as confidence in the financial sector appeared to be improving after the rescue measures announced in recent weeks by central banks and governments.

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Instead of worrying about other banks collapsing, credit markets are back to being where they were at the start of the year, with banks holding on to cash in case one of their own funds goes under, Dixon said.

When banks are comfortable that they can borrow in the short-term from other banks, they can lend to businesses and to individual mortgage-seekers.

October Sales on Record Pace

Although some pessimists have highlighted the recent ending of “downpayer assistance” as a harbinger of reduced sales, Las Vegas sales continue to increase. In the first half of September, which was a record-breaking month, 1230 resales were reported. In the first half of October, 1304 resales were reported. Units are moving.

9 Homes Sold for Every 1 Home Built

The LVRJ summarizes September numbers, and one encouraging thing to focus on is the difference between units sold and units built. To begin with, total sales not only included the 3125 resales we’ve commented on before, but also 976 new home sales, for a total of 4,101.

The article also mentions that 461 permits were pulled for new houses that month. That means that for every house that was started, 9 houses were sold.

That’s an encouraging ratio. As months go by, that’s eating into the backlog of vacant homes for sale.

Oil Analysts Keep Lowering Predictions

Some of the prominent Oil bulls have been continuing to lower their predictions on price.

Just a month ago, Goldman’s commodity analysts predicted crude oil would average $148 a barrel next year. On Sept. 16, they trimmed that forecast to $123. On Monday, they slashed it to $86 a barrel.

Crude-oil futures have declined 44% from their record high in July as demand slumps and the financial crisis suggests it will fall further. Light, sweet crude for November delivery settled $3.49, or 4.5%, higher at $81.19 a barrel on the New York Mercantile Exchange on Monday on the back of a large bounce in the Dow Jones Industrial Average after last week’s rout.

….Separately, a closely watched Goldman stock analyst who covers the oil industry, Arjun Murti, cut his 2009 price forecast to $75 a barrel. This is $35 lower than his previous outlook and $65 less than what he said at the start of September.

Lower oil prices may be related to economic problems, but they lower the cost of flying and make it easier for airlines to get to Vegas and, just as importantly, drivers to get to Vegas.