NAR Says Existing Home Sales Have Hit Bottom

Great article by Blanche Evans published in Realty Times

MONEY QUOTE:
Despite wailing from banks that late or non-payments on sub-prime loans are sinking their profits, continuing fear from homebuyers that they're catching a falling knife, and predictions from housing analysts that the pain is far from over, the outlook looks sunny for housing, says the National Association of Realtors.

While 2006 ended as the third-best sales year on record, it was because the winter/spring months still had momentum going from a record-breaking 2005. The fourth quarter, on the other hand, was a rout. Existing home sales, including condos, dropped 2.7 percent in the fourth quarter compared to the same period a year earlier -- the biggest year-over-year drop on record.

Analysts say that a number of causes kept buyers away including affordability, the financial media, rising gas prices, rising mortgage interest rates, and buyers' fear of becoming "the greater fool."

Housing bulls suggest that the drop in housing sales is primarily due to fear -- that housing fundamentals are actually better now than they were during record housing conditions. Unemployment is down, wages are up, gas prices and mortgage interest rates have somewhat modified. Rising inventories have encouraged builders and sellers to offer incentives and negotiate, respectively. That results in better choices for homebuyers.

In fact, inventories are already being absorbed. Both the National Association of Realtors and the National Association of Homebuilders reported in February that inventories of homes are improving. In December, new home units hit a 10-month supply in November and were down to a 5.9-month supply in December 2006. Existing homes were at a 6.8-month supply in December, down from a 7.3-month supply in November.

That's why David Lereah, NAR's chief economist, said it appears the fourth quarter was the bottom for the current housing cycle. "This information confirms 2006 was the year of contraction, and hopefully the fourth quarter was the bottom of this current business cycle," he said. "Home sales are leveling at historically high levels, and examination of data within the quarter shows home prices stabilizing toward the end. When we get the figures for this spring, I expect to see a discernible improvement in both sales and prices."

BOTTOM LINE FOR LAS VEGAS?
we haven't seen anything yet. There's another million people headed here in the next 10 years, and many are baby boomers bringing their "previous home equity" with them. Rents are rising fast and investing in Las Vegas real estate may prove to be the best investment ever.