Friday, April 01, 2005

Las Vegas Home Boom Headed Down?

These charts from SalesTraq appear to show the Las Vegas, NV home market has moved past a top.

19 Comments:

At 8:07 AM, Anonymous JJ said...

Ben,

Superb stuff as usual -- keep up the muckraking. Las Vegas is the epicenter of middlebrow speculation.

On a side note -- it would be worth your time dissecting the platitudes of this BW article:
http://www.businessweek.com/magazine/content/05_15/b3928001_mz001.htm

While one could interpret the overall tone is moderately bearish, it's filled with less than truthful nonsense like "strong jobs and income growth" should keep things OK when the end of the mania comes. Oh-so-typical BW cheerleading and hand-holding...I would expect nothing less from their pabalum-filled analyses.

Wait a minute.... if you bother to look at the data, incomes have not kept up with even the heavily downward-biased CPI numbers and the job-recovery is the worst post-WWII on a percentage of the workforce basis. Crud, look at today's BLS report -- 110K jobs added (of course, many related to RE construction) -- even then, 179K of those jobs were BLS birth/death model pulled-out-of-thin-air jobs. Hilarious!

You don't even need a recession for values to fall....you only need for prices to get too high. That's it. People don't get this and never will it seems.

At some point -- there's an air pocket where's there no next bid. Anybody who's actively traded in securities markets for some time knows this. Nobody really understands the dynamics of how market breaks work, but they are ineluctable when asset values get way ahead of themselves.

The analysis in the mainstream financial press is nauseating....even more so, because it's easily falsifiable.

 
At 8:26 AM, Blogger Ben Jones said...

jj,
Thanks. Its funny, I am reading that article now. I always have a hard time knowing if THB readers are interested in taking apart the bulls propaganda. I do it sometimes, but spend more time looking for data.

Lots of people don't know that we need 150k jobs a month just to keep even. This is the worst "recovery" ever.

See this mornings' Australian post to buttress your statement about prices breaking the market. The housing slowdown may spark a recession.

BTW, check out Walmarts 52 week low this morning. Hows that for insider opinion on where we are headed. Please keep posting your educated insight. It helps me out and adds to the discussion. Thanks! Ben

 
At 9:05 AM, Anonymous Anonymous said...

jj,

i agree with you... there's really no need for a recession to happen to cause home prices to fall or correct... most of the components that make up a depreciating housing market are already in place... which are... rising interest rates, nearly non-existent salary increases, and a majority of homeowners with mortgages that have a variable rate...

 
At 9:14 AM, Anonymous Anonymous said...

(strong jobs and income growth)

prechter and shiller showed the other day how crazy housing prices have gone up and roach has written a lot about how much real wage growth and job growth has been subpar. so basically, strong jobs and income growth are a lie. we've had not enough of both, yet housing takes off at almost records. it's all about the money flowing into mortgages and the crazy loans people are getting.

I've had people tell me I don't know what I'm talking about- that the problem is supply and demand and I don't understand that. I tell them the demand is because of the money flowing into that sector which creatively finances demand and causes supply to appear to be low.

 
At 9:35 AM, Anonymous Tim said...

[Lots of people don't know that we need 150k jobs a month just to keep even.]

Lots of people don't know that state lotteries are just a clever form of taxation.

 
At 10:19 AM, Blogger Ben Jones said...

(strong jobs and income growth are a lie. we've had not enough of both)
Right, at the end of the day, home prices can't maintain the current levels unless wages grow, which isn't happening.

(Lots of people don't know that state lotteries are just a clever form of taxation.)
Hi Tim,
I am glad to say I have never bought a lottery ticket..Ben

 
At 10:42 AM, Anonymous Anonymous said...

I recently came across this blog and like the commentary; albeit bearish commentary. It appears as most folks here are in the bearish RE camp, myself included. Everyone has their own reasons. Me, bought a brownstone is Brooklyn 8 years ago with $100K down and today have over $1mill 'paper profits'. Others are bearish because they 'missed the train' and are hoping for another chance. Since everyone seems to be taking a trading approach to RE, one of the biggest rule in trading is THE TREND IS YOUR FRIEND. Sure, dont fight the Fed is another, but not before the trendline is broken. I'm suprised the uberbears at Ewave are jumping on the bear RE bandwagon. Prechter only looks at the bearish count. From a bullish perspective, the late 80s to mid 90s was a Wave 2 correction. We are currently in the middle of Wave 3, which still has plenty of room to move. Just remember, if you followed Prechters advise years ago and got out of the Dow at 3600, you missed the biggest bull market in recent history.

--IAC

 
At 11:01 AM, Blogger Ben Jones said...

(Me, bought a brownstone is Brooklyn 8 years ago with $100K down and today have over $1mill 'paper profits'.)
I'm very curious, what are you going to do with the home? There are literally millions of people in a situation similar to yours. We've had the boom, now what?

(if you followed Prechters advise years ago and got out of the Dow at 3600, you missed the biggest bull market in recent history.)
No question about it. But do we face a bear, now?

 
At 11:12 AM, Anonymous Anonymous said...

IAC,

I hear ya... FYI... my wife and i bought our home in 2002... and in the summer of 2004, we sold at double the price... why? because it was just a once-in-a-lifetime opportunity... and why did it double in price in just a little bit more than 2 years? you got me... it was the same house... in the same neighborhood... with the same paint job... nothing changed... there wasn't a housing shortage... imo, it was because of unusually low interest rates and lax lending standards -- which are both currently in the process of change...

 
At 11:32 AM, Anonymous Anonymous said...

Ben, I'm seriously thinking about selling. However, right now i'm leaning towarding holding on. I'm not holding on for more $$, i'm holding because i love my place. Currently i'm under 15% LTV, live rent-free and have tenants that provide me with positive monthly cash flow. At this time, i'm thinking about doing a refi cash-out and bringing my LTV to about 50% and just sitting on cash until the price is right. Whats the downside? Price keep going up. Then i benefit from still owning an income-producing property and didnt get a chance to buy another property. Oh well. Whats the other downside? Prices collapse. Then i benefit also. Money borrowed today under 6% will be earning over 10% in the bank(carry-trade) or I could be a RE buyer if returns are right.

--IAC

 
At 11:41 AM, Anonymous Anonymous said...

where do you guys get this 3600 prechter comment? he called the bull back in the late 70s/early 80s. he might have called the 87 crash, I don't know, but At the Crest of the Tidal Wave wasn't published until 1995. conquer the crash is bearish on RE too, so he's not jumpin on the wagon.

 
At 11:53 AM, Blogger Ben Jones said...

IAC,
(Whats the other downside?)
If an owner is savy, your strategy can work. Your LTV puts you in the drivers seat. The downside is all those folks out there who are over-leveraged. Thats a downside for owners & non-owners alike. Good luck!

(where do you guys get this 3600 prechter comment? )
I can't remember the year Prechter went bearish, but I do remember he was in 95. I like the EW and agree with RP on deflation. Timing is difficult for every observer.

(conquer the crash is bearish on RE too, so he's not jumpin on the wagon.)
I didn't read it, but he has been bearish on RE for a good while. He is good at spotting bubbles, IMO.

I wish his subscription wasn't so high. Maybe Mr. Prechter could send me a free-bee? Thanks for commenting guys..Ben

 
At 11:59 AM, Anonymous Anonymous said...

I'd rather drown than read at the crest of the tidal wave, but Conquer the Crash is a MUST READ. don't worry, you'll probably finish it in 3 days or so.

 
At 12:08 PM, Blogger Ben Jones said...

(Conquer the Crash is a MUST READ)
Other people have told me the same thing. I'll get a copy. Thanks for the heads up..Ben

 
At 12:10 PM, Anonymous Anonymous said...

Prechter is a mortal who makes mistakes. Some people give him credit for calling the 87 top. But that was a missed called. His call was for 3600 as the top. Investors following his advise did not get out in time as the Dow went from 2750 to 1616, without every reaching 3600. After the Dow broke 4000 in 94, Prechter re-iterated his Top call. A broken clock is correct twice a day. Prechter fanatactics missed the whole move from 4000 to 11800. Some even went short a lost their shirts.
Let me ask you, are equities currently in a Wave 5 to new or is the Big Top in and we are currently headed for a nasty Wave 3 down.

 
At 12:10 PM, Anonymous Anonymous said...

Prechter is a mortal who makes mistakes. Some people give him credit for calling the 87 top. But that was a missed called. His call was for 3600 as the top. Investors following his advise did not get out in time as the Dow went from 2750 to 1616, without every reaching 3600. After the Dow broke 4000 in 94, Prechter re-iterated his Top call. A broken clock is correct twice a day. Prechter fanatactics missed the whole move from 4000 to 11800. Some even went short a lost their shirts.
Let me ask you, are equities currently in a Wave 5 to new or is the Big Top in and we are currently headed for a nasty Wave 3 down.

--IAC

 
At 1:35 PM, Anonymous Anonymous said...


I've had people tell me I don't know what I'm talking about- that the problem is supply and demand and I don't understand that. I tell them the demand is because of the money flowing into that sector which creatively finances demand and causes supply to appear to be low.


If they are saying the problem is increased supply, ask them where those people used to live. Did they appear from nowhere ? Our population doesn't seem to be growing at any significant rate. We don't seem to be getting significantly richer. I agree that the demand came from the Fed putting money in peoples pocket via "free" easily available mortgages.

 
At 1:49 PM, Blogger Ben Jones said...

(If they are saying the problem is increased supply, ask them where those people used to live.)

Excellent point.

(We don't seem to be getting significantly richer.)

Overall real wages have fallen since 1973.
Great points..Thx Ben

 
At 8:39 PM, Anonymous Anonymous said...

(If they are saying the problem is increased supply, ask them where those people used to live. Did they appear from nowhere ? Our population doesn't seem to be growing at any significant rate.)

In the case of immigrants that make up the majority of US population growth, they used to live outside the US - so this is real new demand for land and housing in the US.

Also, social trends like increasing numbers of single people living alone and single parents are increasing the number of households much faster than general population growth.

So there is a real increase in demand, but it is clearly not enough to explain the increase in house prices because rents have increased only in line with general inflation over the last few years.

 

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