Double-Counting of Foreclosures

September 12, 2008

The monthly report from RealtyTrac has become a major media event, and the press duly reports the foreclosure numbers RealtyTrac produces. One came out this morning. We apparently have It’s worth perhaps pointing out that there’s an unknown but real amount of double-counting and possibly triple-counting going on. Here’s an example:


These two listings are the same unit. In addition to the same price, they have the same owner, and since I built this condominium and sold it to the owner, I know that he only purchased one.

You can’t fault RealtyTrac too much for this. It’s a very unscientific error-prone process to cull through all those County records.

But keep it in mind when you hear about big foreclosure numbers.


Inventory Drops Below 7 Months! Boo Yah!

August 22, 2008

It’s not really new news, ’cause I pointed it out on Wednesday, but it’s worth featuring in its own special Frothing Developer Instagraphic:


How do you get this number? Take the 3,173 units sold in July and divide into the 22,091 units. The result is 6.96. That may not be much less than 7, but hell, we’re optimists.

Las Vegas Drops to 7 Months of Inventory

August 7, 2008

Well, almost 7. In July, 3036 units were sold, and inventory ended the month at 22,178. That’s 7.3 months of inventory!

We are getting very close to what has historically been called a “normal market”. Note the improvement since the beginning of the year:

Contingent Sales, Part 2

July 23, 2008

A reader posed a very good question recently regarding the impact of contingent sales and what happens to inventory numbers when a contingent buyer is unable to sell their current home.

If a sale is contingent and the buyer’s current residence doesn’t sell then theoretically the house they had in a contingent contract should come back into inventory as an active listing.  If this were happening a lot you’d expect to see the number of contingent units dropping over time and active inventory rising over time.  While we’ve only been collecting pending and contingent data for the past few months, we’re seeing exactly the opposite so far.

Contingent sales are going up steadily, while inventory is dropping significantly.  At this point in the cycle, sellers (and their Realtors) are getting smarter.  If a buyer makes a contingent offer the sellers are going to make sure the buyer is being realistic about the price of the home they have to sell first.

Are there contingent sales out there that won’t go through?  Sure.  But the days when buyers were making contingent offers based on unrealistic expecations of the value of their homes are long over.

-Frothing Mark

Debunking the Myths About Las Vegas Pending and Contingent Sales

July 23, 2008

There are a few myths that keep bouncing around the Las Vegas real estate community that are worth a closer look:

Myth #1. Inventory is higher than the what the data shows because unsold Palms Place and Trump units are listed as pending, but will actually go into active inventory if they don’t close.

Fact: Leaving aside for now the argument that these are high-end, very specialized Strip/near Strip projects that have very little, if anything, to do with the vast majority of Las Vegas real estate, let’s look at Palms Place:

Of 599 units at Palms Place there are a grand total of five units that are pending.  There are another 12 showing as contingent.  Not exactly earthshaking numbers.  By the way, in its first six weeks, Palms Place closed more than 45% of its units.

Things at Trump are a little slower, with 20% of their units reportedly closed in three months.  But out of the 1200+ Trump units in the project, there are zero showing as pending or contingent.

We’re not saying these units couldn’t eventually end up in active inventory if they don’t close, but the fact is that they are not impacting either pending or contingent numbers on the MLS as of today. Also, most developers don’t put that many units into inventory on the MLS. They put a few sample units on to draw prospects to the sales center, but sell most of their new units “off-MLS”.

Myth #2: Measuring inventory by looking only at active homes on the MLS is inaccurate because pending sales may be inflated by short sale offers that will not be accepted by the banks that own the mortgages on these homes.

Fact: Measuring inventory by active units is the ONLY way to accurately gauge inventory.  If and when homes put in pending status fall out of short sale status and come back into active inventory then the FrothingDeveloper numbers will reflect that.  But in the meantime, the trends simply don’t back up that assertion.  The fact remains that if you want to go out and buy a house today there are 25% fewer of them to chose from than there were at the peak.

Counting all of your Pendings and Short Sales as inventory is like counting all your A’s as F’s, or counting all of your wounded soldiers as Killed in Action, because some of them won’t recover. It’s just not accurate.

-Frothing Mark

National Inventory of Existing Home Drops

June 26, 2008

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.

More Positive News for New Homes

June 24, 2008

Positive news on the new home front from HanleyWood’s weekly wrap up. Sales and prices are up, while inventories are down:

New home sales posted a rare 3.3% increase in April to a seasonally-adjusted 526,000 homes, up from a revised March figure of 509,000. This is the first time since October 2007 in which seasonally-adjusted annualized sales have posted a monthly increase.

The number of new homes for sale continued to decline as builders continue to scale back production. New home inventory declined to 454,000 which is the lowest it has been since May 2005. In April, median new home prices rebounded from its lowest levels since September 2006 in March to $246,100 in April. It was also the first time since November that median new home prices recorded a year-over-year gain.

-Frothing Mark