The Center for Business and Economic Research
University of Nevada, Las Vegas
|
|
The Center for Business and Economic Research University of Nevada, Las Vegas
|
|||||
| Site map | Southern Nevada's economy | Government information resources | Academic and data resources | About CBER | CBER publications | Join the CBER mailing list |
In the first quarter of this year we reported an estimated excess supply of 15,465 housing units. This quarter we find a slight improvement in the overall excess supply; the estimated excess supply dropped to 13,124. See Table 1 for the estimates. We found fewer vacant single-family units, condominiums, and townhouses, but more vacant apartments. The vacancy rate for multifamily units has lost ground to the other housing types. As one might expect, the large excess supply of vacant units put pressure on housing prices. Not surprisingly, as prices decline and affordability improves we see that sales volume has increased.
| Table 1 Estimated Excess Supply of Housing Units in the Greater Las Vegas Area by Housing Type: July 2009 |
|||||
| Type of Housing Unit(1) | Vacant Units | Estimated Units in the Greater Las Vegas Area | Assumed Percent Normal Vacancy Rate (%) | Estimated Normal Vacant Inventory | Estimated Excess Supply2 |
| Single-family detached | 11,902 | 426,761 | 1.5 | 6,401 | 5,501 |
| Condominium | 2,625 | 67,034 | 3.5 | 2,346 | 279 |
| Townhouse | 1,018 | 32,788 | 2.0 | 656 | 362 |
| Multifamily(3) | 16,503 | 158,680 | 6.0 | 9,521 | 6,982 |
| Total | 32,048 | 685,263 | 2.76 | 18,924 | 13,124 |
| 1Excludes mobile homes 2Estimated excess supply = estimated units less estimated normal vacancy inventory 3Includes apartments and multiplex units |
|||||
Though we have every reason to believe that the data give us a correct view of the oversupply of housing in Southern Nevada, the hidden inventory of unoccupied units that has not been listed leads us to believe that the estimated excess supply might be biased on the low side. Holding units off the market avoids the loss of value of units being sold. The magnitude of the hidden inventory is unknown, but trulia.com has some ballpark estimates of the hidden inventory, suggesting a shadow inventory-to-listings ratio of 3.15. See Table 2. In short, the shadow market increases the excess supply of housing units by a factor of three
| Table 2 Number of Real Estate Listings within 10 Miles of S&P/CS1 20 Cities |
|
The move to greater affordability comes with declining housing prices. The best measure available for Las Vegas is the Case-Shiller Housing Price Index, which makes adjustments for the mix of housing over time and includes nonconforming home purchases. In Figure 1 we show the price index for Las Vegas and the U.S. Composite Index. A linear trend line is shown as a broken line. It was calculated over the 1987 to 2002 period and extends to 2009. The housing bubble clearly appears as a sharp price increase from 2003 to 2006. Since then, Las Vegas housing prices have tumbled and now are below the long-run trend line. The sharp and steady price decline is consistent with the large excess supply of housing estimates.
| Figure 1 Case-Shiller® Housing Price Index: January 1987 to May 2009 |
|
Home purchases have been elevated because of the tax break for first-time buyers and the rush of investors coming into the market to purchase, hold, and then sell or to purchase and rent. Anecdotal evidence suggests that some of the earlier investors may have mistimed the market. Better buying opportunities exist today than in the past months.
R. Keith Schwer, Ph.D.|
|
||
|
CBER Home Page |
 UNLV Home Page |
|