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Las Vegas Housing Demand Has Crashed While Supply Surging

Tyler Durden's picture




 

The last time the housing bubble popped, the "frontier" marginal market of Las Vegas was the first harbinger of what was about to come. It is that again, and as real estate expert Mark Hanson explains, "Las Vegas housing demand has crashed." This is hardly an auspicious sign for the rest of the epically reflated housing market which as we have been tirelelessly pointing out for the past two years, has not recovered, but has merely had its 4th dead cat bounce on the back of i) the implicit bank subsidy of foreclosure stuffing, ii) money laundering by "all cash" foreign buyers using the NAR's anti-money laundering exemption loophole, and iii) private equity zero cost of credit REO-to-Rent programs which are now in their last days.

From Mark Hanson: Lost Vegas

Las Vegas housing demand has crashed.  "Crash"...there is no other word to use.  This is not hyperbole.  "Crashed" is absolutely the appropriate word to use here given sales are suddenly the weakest levels since Armageddon 2009.  I mean come on...sales at the same pace as when the stock market was in the midst of one of the greatest plunges in history speaks loudly...at least to me.  Volume precedes price.

Supply is surging in Vegas with "months-supply" back to nearly 7 months (over 7 for condos), and at 2010/11 levels.  There certainly is NO LACK OF SUPPLY in this market.  And ponder about this for a minute...and apply it to all these other "investor-centric" regions around the nation.  That is, in Vegas there are 10s of thousands of single-family houses being readied for rent by new-era "investors".  This flood of freshly rehabbed "for rent" supply will competes at some level with resale and builder "for sale" supply.  Even if it competes at a factor of .4, then Las Vegas "normalized" month's supply could right now be back to a year.

Lastly, houses are as expensive on a monthly payment basis -- and relative to the income needed to qualify for a loan -- then they were at the peak of the bubble in 2006.  But, this is a fact masked over for the past year by the plethora of all-cash buyers who are not governed by employment, income and safe & sound mortgage lending requirements.  Like Sacramento, Phoenix, regions in the Inland Empire, and a dozen other "hot" real estate markets around the nation -- that, "not"-coincidentally are the regions in which private and new-era "investors" swarmed with cash regularly paying 10% to 20% over appraised value / list price using flawed cap rate models as a guide -- when the stimulus go-go juice ran out this market hit a literal "brick wall" the size of 2007.

With house as expensive on a monthly payment basis than they were in 2007, when this market turns back towards "organic" being the incremental demand driver (people that can only buy as much house as their job, earnings, and mortgage qualifications dictate) serious double-digit percent points of house price downside will occur.  That's in the process of happening now.

The next year in Vegas could easily bring a 50% retracement of the past two years historic annualized gains, which to all the investor models predicting 10% appreciation in perpetuity, will feel like a crash.

So, question is, what businesses are levered to the past couple of years of resale house volume momentum and energy?  Those are the stocks that will shock the most amount of people in 2014.  Companies levered to Existing Sales typically feel trend changes two to three quarters afterward meaning Q1/Q2 will usher in a hard downshift -- especially relative to Q1/Q2 2013 when volume was going parabolic -- since 2008 and the period following the expiration of the Homebuyer Tax Credit.

November Existing Sales/Supply Stats

Demand plunging

Sales...

  • down 17% MoM
  • down 20% YoY
  • down 32% from peak summer
  • down 33% from Nov 2011, down 24% from Nov 2010, and down 45% from Nov 2009
  • lowest sales volume since Jan 2009

Supply Soaring

  • Highest "months supply" metric since 2011
  • SFR at 6.5 months, up 11% YoY
  • Condo at 7.4 months, up 23% YoY

Item 1)  Las Vegas November House Sales down 20% YoY and at their lowest levels since Jan 2009

Item 2)  Broken out, Condo are performing slightly better but sales are still at 2009 lows.

Item 3)  Month's supply surging...back to 2010/11 levels

Item 4)  It costs the same per month and requires the same monthly income today to buy the Nov median priced house as in 2006 at the bubble peak.

If that was a bubble then...

h/t Doug Kass

 

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Wed, 12/11/2013 - 08:55 | 4235525 overmedicatedun...
overmedicatedundersexed's picture

according to BLS, this is poppy cock. if you run the sales of homes on market back to 1900, why vegas is booming.

Wed, 12/11/2013 - 09:01 | 4235539 GetZeeGold
GetZeeGold's picture

 

 

They didn't have to buy super expensive healthcare by law in 1900.....just sayin.

 

Sin has now become a luxury. I'm just thankful if grandpa gets pregnant now.....he's covered.

Wed, 12/11/2013 - 09:18 | 4235591 Headbanger
Headbanger's picture

A deflation  implosion is a real bitch. And then ya die from no health care.

Wed, 12/11/2013 - 10:06 | 4235756 ElvisDog
ElvisDog's picture

Not if you take care of yourself you don't. It's symptomatic of our collective brainwashing that so many feel our current healthcare system is absolutely necessary. There wasn't a massive die-off in the 1970's under the old system.

Wed, 12/11/2013 - 11:13 | 4235991 NoDebt
NoDebt's picture

If only I had a good health care plan, I would be healthy.

Right?  OK, maybe not.

Wed, 12/11/2013 - 12:34 | 4236316 Colonel Klink
Colonel Klink's picture

The "health care system" is just another construct of the 1984 paradigm.  It does nothing to care for our health, but it does care for our sickness.  So it really should be called our "sick care" system.  Healthy people don't need care.  The only exception to this may be vaccinations and pre-screenings.

It's been pointed out quite clearly by some, that the entire system is "protected" from anti competitive laws.  When you removed the protections, costs would drop by 50-90%.

Thwart that whole scam too by eating healthy and taking care of yourself.  Stop eating the prepackaged poison they're feeding you.

Wed, 12/11/2013 - 09:21 | 4235605 Tabarnaque
Tabarnaque's picture

Bets are opened on the Taper Table!

Wed, 12/11/2013 - 10:05 | 4235747 Four chan
Four chan's picture

on the upside, its good news for scorpions.

Wed, 12/11/2013 - 10:23 | 4235811 HardlyZero
HardlyZero's picture

Can't wait for "Self-Surgery for Dummies"...with CD showing useful examples.

Wed, 12/11/2013 - 11:30 | 4236070 Freddie
Freddie's picture

I wonder if the ObamaCare crushing TAX on the middle class will hurt Vegas.  I had to go there once not that long ago.  What a hell hole.  Filled with retards.  My guess were a lot were from Calliefornia on EBT cards.  The place is an expensive toilet filled with lowlifes.

Wed, 12/11/2013 - 11:14 | 4235998 daxtonbrown
daxtonbrown's picture

I am a realtor in Las Vegas. Fortunately, I live in my mother's basement so these kinds of reports don't bother me.

Wed, 12/11/2013 - 11:36 | 4236094 Zero Debt
Zero Debt's picture

And how much does your mom make there?

Wed, 12/11/2013 - 12:38 | 4236349 Zadok
Zadok's picture

Zero, I think he was being sarcastic...

Wed, 12/11/2013 - 08:57 | 4235532 SaulRosenberg
SaulRosenberg's picture

It's not a bubble quite yet....when I see an MTV or Discovery Channel reality show about real estate investing in Las Vegas, THEN I know it's a bubble.

Wed, 12/11/2013 - 09:02 | 4235541 EscapeKey
EscapeKey's picture

What you describe is when it's frothing at the top.

Tue, 12/31/2013 - 10:10 | 4288018 slotmouth
slotmouth's picture

I used to live in Phoenix, and when I went back to visit at the beginning of the year I heard a radio commercial advertising seminars on how to flip real estate.  You don't even need to have any money, just enough to pay for the seminar!

Wed, 12/11/2013 - 10:51 | 4235900 Blano
Blano's picture

You might want to tune in to A&E.

Wed, 12/11/2013 - 11:33 | 4236083 nope-1004
nope-1004's picture

Polite way of saying he's got his head up his ass.

 

when I see an MTV or Discovery Channel reality show about real estate investing in Las Vegas, THEN I know it's a bubble

Google "Scott Yancey, Vegas Flipping"


Wed, 12/11/2013 - 11:37 | 4236092 Max Cynical
Max Cynical's picture

"Flipping Vegas" doesn't count?

Wed, 12/11/2013 - 08:57 | 4235534 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

Anyone active in 'RE in Vegas care to expand?

Wed, 12/11/2013 - 09:31 | 4235634 ken4aub
ken4aub's picture

Not in RE per/se.......bought a house in Vegas Feb 2012.......according to Zillow in November 2013, my home value is up 56%. I know this......there are 4 houses on my block that were 4-SALE more than 6mo on market. They just RENTED 3 of them out, the other has been boarded up to prevent vandelism. I knew this market was not real, but I had to have a place to live. I got in at the beginning of the latest ramp up. I see increasingly more 4-SALE/RENT units every week.

Wed, 12/11/2013 - 11:38 | 4236101 daxtonbrown
daxtonbrown's picture

I am a Las Vegas realtor, though not that active. I saw this coming and fortunately I have other business interests.

Six months ago there were 5,500 listings, this morning there are 9,500.

I have been working on an expert real estate database valuation system. I hope to use it to help investors sort out whether they can make money, and which properties to sell.

Wed, 12/11/2013 - 12:30 | 4236311 Freddie
Freddie's picture

Let us know because I want to get back into scalping doing condo flips and fixer uppers.

Wed, 12/11/2013 - 14:46 | 4236952 Larry Dallas
Larry Dallas's picture

There is a Realtor office that opened next door to my office in Las Vegas in May. They have at least 10,000 square feet, many brokers, and lots of bling. They have artwork and fully decorated office. The tenant improvements had to be close to $1,000,000, if not more.

The white BMW 6 series that the scantily clad broker drives has the license plate that says "FEARLSS". (The other guy drives a 280SLK with AMG written across the windshield but its not AMG.) - typical Realtor Rich BS.

Title company says that once a deal closes, the Realtor's Claws come out wanting their check immediately if not sooner.

3 years ago these folks were hairdressers and parking cars. They will be out probably before September 2014.

Thu, 12/12/2013 - 04:27 | 4238944 Non Passaran
Non Passaran's picture

That's is hilarious! Thanks man.

Wed, 12/11/2013 - 11:42 | 4236110 Max Cynical
Max Cynical's picture

I'm here as well...

Lot's of lingering "for sale" and "for rent" signs. Rental across the street (3/2.5, 1,200/month) has been vacant since June. New homes still being thrown up around the corner.

Wed, 12/11/2013 - 08:58 | 4235536 orangegeek
orangegeek's picture

more bullish news

 

buy MOAR STAWKS all you sheeple

Wed, 12/11/2013 - 09:00 | 4235538 EscapeKey
EscapeKey's picture

The Fed should step in and buy the houses to support the recovery. /s

Wed, 12/11/2013 - 09:21 | 4235599 yogibear
yogibear's picture

Good luck with that. They can buy the debt, buy as far as taxes and maintenance forget it.

When the Fed owns all assets, you have the old Soviet Union. Stagnation.

Wed, 12/11/2013 - 10:10 | 4235763 ElvisDog
ElvisDog's picture

At a $1 trillion QE annual run rate, how long will it be before the Fed owns all assets in the U.S. Just saying....

Wed, 12/11/2013 - 09:04 | 4235547 papaswamp
papaswamp's picture

So when will the cash investors realize no one is coming to buy or even rent? As previously noted...household formation continues to decline. Back are the days when families stayed together with younger generation not moving out and in many cases moving back in. Wages stagnating, not many are moving up...all those 'investments' are going to start looking very ugly soon.

Wed, 12/11/2013 - 09:43 | 4235669 Life of Illusion
Life of Illusion's picture

 

Politically correct investor’s unloaded rental backed securities onto public (pensions) and ran.

Fed could buy up RBS and give out free rent if you are a little late. You have to understand this is a government housing program for a 3rd world USA going down.

 

Wed, 12/11/2013 - 12:13 | 4236098 Freddie
Freddie's picture

+1

What kind of "households" get formed in Vegas?  Degenerate gamblers or a card dealer hubby and showgirl/prostitue wife?  Las Vegas is vile.  Nevada with scumbags like LDS Harry Reid is a hellhole.

I stopped watching Hollywood's shit years ago but Cooler about Vegas is pretty accurate with Wm Macy and fat head Alec Baldwin.  A town filled with dirtbags.

Wed, 12/11/2013 - 13:32 | 4236537 smartstrike
smartstrike's picture

Actually people here are a lot nicer than in Florida and Texas--places where I have lived. Gambling in LV accounts for a small percentage: it's all about entertainment. All the gamblers and drunks come here from other places. The retired locals with 'nice' pensions are the only regular players--they play poker for fun against morons like you.

There is more prostitution in Houston and Miami than in Las Vegas, when I lived in Houston there was a 'whore house' right next to the police station. It's shows how little idiots like you know. There are casinos in Ohio. Pennsylvania, Iowa etc.  As far as job opportunities are concerned, almost all the dealers in LV are Asian, Filipino or Eastern European. Downtown LV is beginning to look beautiful.

The gaming and entertainment business is no different than in other industry: it's all about profit margins and getting customers to leave with empty wallets.

The two people that I would call dirtbags are Steve Wynn and Sheldon Adelson, big Republican scum backers.

Wed, 12/11/2013 - 09:05 | 4235554 j0nx
j0nx's picture

Thank God I sold mine over the summer. Blissfully renting now and waiting for the next crash although in the DC area that is a tall order outside of a few mezcan infested zip codes.

Wed, 12/11/2013 - 09:05 | 4235555 Seasmoke
Seasmoke's picture

WATER

Wed, 12/11/2013 - 10:10 | 4235767 ElvisDog
ElvisDog's picture

Realtors insist there is a 100 year supply everywhere in the desert Southwest. It must be true cause they said it.

Wed, 12/11/2013 - 09:14 | 4235583 yogibear
yogibear's picture

Ding, Ding, Ding, housing bubble #2 is being served. 

Wed, 12/11/2013 - 09:14 | 4235589 jubber
jubber's picture

who was the big buyer of all this shit, was it Blackrock? Who else is holding the bag?

Wed, 12/11/2013 - 09:23 | 4235609 fijisailor
fijisailor's picture

Sure looks like a popping bubble here in my area of S FL also.  Lots of inventory not being sold.  It's obvious driving the streets.

Wed, 12/11/2013 - 09:31 | 4235630 RobD
RobD's picture

Northern Nevada has rolled over also. Looking at zillow, my underwater home has lost 7.5K in the last 30 days.

Wed, 12/11/2013 - 14:54 | 4236993 Clycntct
Clycntct's picture

If I gave you a + it would mean I approve of your loss- I don't.

I feel for ya man.

Wed, 12/11/2013 - 09:32 | 4235637 BearClaw
BearClaw's picture

Using the last chart presented as evidence, it would seem the Las Vegas real estate market is actually alot more healthy than it was 10 years ago. The median price is 25-30% lower and the comparable mortgage is a plain jane 30yr fixed. What isn't healthy is the job market needed to sustain it.  

Wed, 12/11/2013 - 09:48 | 4235675 Hongcha
Hongcha's picture

Next up San Francisco?  The condo projects for the iKidz and Chinese expats being built South of Market.  This is imvho the only aspect of NASDAQ Bubble 2.0 that has exceeded 1.0.  In all other respects 2.0 has been a dim echo of the late 1990's.  And yet Moonbeam and his Controller are hanging their hats on it.

They have overcooked this thing and there are hundreds of construction applications still waiting on the permitting desk at City Hall.

Wed, 12/11/2013 - 10:12 | 4235777 ElvisDog
ElvisDog's picture

The Chinese don't particularly care about appreciation. They want a place to bug-out to if/when the shit hits the fan in Mother China. They pay cash for the homes so don't need to worry about making a mortgage payment.

Wed, 12/11/2013 - 16:30 | 4237363 ronaldawg
ronaldawg's picture

Wait until the property taxes are more than their mortgage - suckers.

Wed, 12/11/2013 - 17:45 | 4237629 Hongcha
Hongcha's picture

True ElvisDog but there is not an unlimited supply of well-heeled Chinese and LV is one of their fave places in the whole wide world.  If Vegas is cooling SF and Seattle, in the fact the CA seaboard is very likely next.

This has been my desk-pounding argument with my wife in order to leave our cash in the 1% 1-year rather than jump in.  It's painful spending all the time driving to/from the far East Bay but a 20-40% haircut on the appraised value of a condo you just bought that comes with a $600-800/mo. HOA ticket, surrounded by defaulting fellow owners, is greater.

No one knows where this ends up but I got a bad feeling ... I think Mayor Lee has stars in his eyes and is thinking in terms of millionbillions.  He better hope he can fill those units ... and the many more a'comin ... and the iKidz are just not getting paid that much.

Wed, 12/11/2013 - 12:00 | 4236200 Freddie
Freddie's picture

If San Fran ever has a bad earthquake - it will be a nightmare.

The battle between the grungie locals in the rundown-being gentrified areas versus the Google/Apple bus riders is hilarious.  Good little liberals all.  The programmers write apps all day long to spy on innocent people.  The working and non-wroking aritists poor hate the bus riding techies.

Wed, 12/11/2013 - 10:04 | 4235749 Bluz
Bluz's picture

Just add Helocs to the mix and the match is lit.

Wed, 12/11/2013 - 10:24 | 4235813 Mitch Comestein
Mitch Comestein's picture

Once again the author is twisting the info to get his desired result.  Comparing 30 year fixed mortgages, the most expensive product, to 5/1 arms and option arms, the cheapest of mortgage products.  Good analysis....sarc.

Wed, 12/11/2013 - 10:29 | 4235827 falak pema
falak pema's picture

According to this report based on Deutsche Bank (hmm) this is not representative of countrywide situation as per this classification : 

Canada, Belgium Top Ranks of Overvalued Housing Markets - Deutsche - MoneyBeat - WSJ

Wed, 12/11/2013 - 10:36 | 4235859 youngman
youngman's picture

I don't care how cheap the house is...its hot...and always windy there...no water..and dingy harry is your man???

Wed, 12/11/2013 - 11:09 | 4235969 bh2
bh2's picture

"The next year in Vegas could easily bring a 50% retracement of the past two years historic annualized gains, which to all the investor models predicting 10% appreciation in perpetuity, will feel like a crash."

Only if they are flippers. Not if they are enjoying strong positive return from rental income.

Given favorable tax treatment and cash flow, why would short-term market changes in median sales prices really matter to an investor not interested in selling? The investment horizon for residential real estate is perhaps 7-15 years, not 7-15 months.

What exactly is wrong with enjoying a stable and relatively reliable net annual return of 8% or more? Would the same dead money be safer invested in the stock market? In bonds? Really?

It is ludicrous to imply most cash buyers of real estate are laundering illicit money when the most obvious explanation is that they are sensibly putting dead money to work to achieve safe and solid in-pocket profits in no way dependent on speculative flipper strategies.

Wed, 12/11/2013 - 12:16 | 4236256 John Law Lives
John Law Lives's picture

"What exactly is wrong with enjoying a stable and relatively reliable net annual return of 8% or more? Would the same dead money be safer invested in the stock market? In bonds? Really?" - bh2

There is absolutely no guarantee of a net annual return of 8% (or more) in this game.  With a flood of new landlords looking to play this game, increased competition should be expected to drive rental rates down (or at least stagnate).  Meanwhile, municipalities in need of more revenue may resort to raising property taxes.  Insurance could go up.  Maintenance costs.  Irresponsible tenants etc.  The returns landlords anticipate may prove to be far removed from reality.

Wed, 12/11/2013 - 11:40 | 4236103 Martel
Martel's picture

Vegas should declare itself as a Bitcoin Free Enterprise Zone. It wouldn't turn the tide of U.S. bitcoin entrepreneurs escaping the country, but might create some new innovations vs. gambling.

Wed, 12/11/2013 - 11:48 | 4236126 starman
starman's picture

Come on guys every body is buying stocks, housing is to high to get in to.

Wed, 12/11/2013 - 13:06 | 4236465 TheFreeLance
TheFreeLance's picture

You want to see some real panic selling -- check out mountain getaway properties in NC/TN/GA. Dipped my toe in and almost got my leg taken off. Property taxes are past due in a couple weeks and even the banks who thought they could sit tight are freaking out. You bring cash and you are God. The problem is that the tax valuations are still tremendously out of whack and jurisdictions absolutely will not reval downward without a fight. That's why I'm thinking the way to proceed is wait til next fall, with the prospect of another year of tax bills going upaid, to ask for a 10-year 50% abatement. By then $300K-500K cash should net you property valued at $3m-5m. -- and money will talk even louder. Something will beat 100% of nothing every time.

Wed, 12/11/2013 - 13:18 | 4236509 SmittyinLA
SmittyinLA's picture

There's a ton of City of LA overpaid employees buying spec homes in Vegas, when LA goes bust not only will they lose their overpaid job, as well as unfunded pensions they'll also get stuck with upside down Nevada mortgages.

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