February 2nd, 2008
As the market continues to slow....
Since 2005 when we closed 41 total residential units in the local Mesquite nv MLS, January closings have gone to 38 in 2006, 28 in 2007 and now 26 in 2008. Inventory, specifically property being listed, grew 7.2 new listings to each 1 that went into pending status in January 2008.
While the total number of properties for sale only increased about 3%, the other properties went out as failed listings, either expired or withdrawn. The number of vacant properties remains very high and most of what has been rented is running large negative cash flows. Some of those failed listings will be tomorrow's foreclosures and short sales. Many people must sell.
The speculative buying fad of the recent past, that pushed builders to capacity, caused lenders to become shady street venders hocking stolen goods in dark alleys and led normally smart buyers into mindless bidding wars, now looks like an $8 cup of cold Starbucks coffee.
If you are wondering where they got the stolen goods, take a look at the consumers faced with payments they can't afford combined with negative equity positions. Take a look around the world at the values of the CDO's held by every type of investor, from institutions to pensions to 401K plans and individual investors. It is the stuff you hear on the nightly news; those write downs that they now say exceed 260 billion and are likely on their way to half a trillion. Greed at every level seems to have gotten the best of them all.
At January's closed numbers there is a 16 month supply actively listed today. There are at least 50% more out there that need to sell, that's a 24 month supply, without any new starts until 2010. The builders will keep building because they have to. They speculated on the land and lots of it!
Mortgage interest rates are extremely attractive. Qualifying for a mortgage has gone back to: Can the borrower actually afford to make the payments? Key word being afford, and that of course relates directly to prices, as well as rates.
Banks generally have not received the memo, REO prices are not adjusting down yet. So while more listings fail and notice of mortgage payment defaults increase, the bank inventories will grow. The negative equity will lead the world wide write downs on this debt to march higher and creating a pressure cooker for those holding the property and those with the notes. A tug of war between need to sell and need to get the higher price and the interest clock keeps ticking.
So where does the market go from here? We have to work our way through the inventory. Some sellers are far more motivated than others. Many will eventually do what is required to sell, even to the point of turning it back over to the bank.
The principles of, supply and demand, price competition, and affordability will be setting the rules for 2008 and beyond. Stimulus plan or not.
Chris Miller
435-862-5951
ERA Brokers Consolidated
702-346-7200
Mesquite NV 89027
Fourth Quarter 2007
By Chris W. Miller ABR, CRS, GRI
New home building permits issued by the City of Mesquite went up; 114 issued in 2007 Q4 compared to 42 in 2006 Q4. For the year permits increased from 262 in 06 to 463 in 07 or 76% more. This increase is compounding the market slow down and pushing prices down across the board. Listed "for sale" inventory grew faster than 4 to 1 compared to "sold and closed" units. Based on December closings as an absorption rate there is a 30 month supply sitting out there, many are vacant.
Today the average asking price for a listed home stands at $197 per square foot. October sales prices were at $169 with 15 sales, November was at $159 with 22 sales, and December was at $150 per square foot with 11 sales. There were only 17 resale homes closed during the Q4 of 2007 with an average sold price of $170 per foot. There were 33 new home closings with an average price of $157 per foot, including 17 at Sun City which averaged $147 per foot!
Town home/condo market did not fare any better, with only 18 closings for the last quarter 2007. The average sold price dropped to $146 per foot from the low 160's earlier in the year. For the year builders pulled less multi family building permits, 55 in 2006 vs. 16 in 2007.
The Mesquite MLS Market Comparison of Residential Properties Statistical Report, December to December shows depreciation in prices from 19.81% to 30.01%.
No commercial land or building sales transactions took place during Q4 2007. Yet commercial building permits issued tripled for 2007 over 2006, from 11 in 2006 to 35 for 2007. Commercial vacancy rates were high starting out 2007, they will go higher.
No single family residential land sales closed during Q4 2007. Lots "for sale" increased 10 fold during 2007, from very few to over 50 active today. Add this fact to the new developments around town which include as many as 14,000 vacant home sites and you get some very nervous land speculators.
The number of bank owned foreclosure properties and short sale properties being offered is climbing. Most, just like existing home sellers, are not quickly embracing the falling prices and these homes are sitting out there vacant.
While rates have come down during this past quarter, qualifying has become much more challenging if not impossible for many buyers. This fact eliminates some buyers and reduces the demand side of the equation.
Rental rates on residential properties have come down some and vacancy rates remain high. Commercial space asking prices have not come down much yet, but that looks likely to change.
Mesquite, Nevada remains a wonderful place to live. Sun City/ Pulte Del Webb continues to shine a huge spot light on Mesquite, and many new visitors arrive daily. Sun City sales representatives tell me they wrote over 300 new home purchase contracts since the grand opening in June 2007. Mesquite will continue to be one of the top choice areas for the graying baby boomers to consider. From the looks of the current market it will be less expensive and more affordable than it was, at least for some time to come. The market is creating some great buying opportunities for 2008.
Weekly Mesquite market reports available on pod cast at www.radiomesquite.com
Water Rights For Sale in Nevada
Chris W. Miller
ERA Brokers Consolidated
702-346-7200
435-862-5951
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Mesquite Nevada Real Estate, 32+ Years Real Estate, Experience you can trust. Nevada farm and ranch land with water rights, irrigated land, cattle ranches, agricultural land. Market reports available
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