Sunday, Oct. 25, 2009 | 12:09 a.m.

Construction of new homes edged up slightly in September, helped by a rebound in single-family construction. But applications for building permits fell by the largest amount in five months, a worrisome sign for future housing work.

The Commerce Department said Tuesday that construction of new homes and apartments rose 0.5 percent in September to a seasonally adjusted annual rate of 590,000 units. That was a weaker showing than the 610,000 economists had expected.

New applications for building permits, considered a good sign of future activity, fell 1.2 percent in September.

That’s the biggest decline since a 2.5 percent drop in April and underscored worries the fledgling housing revival could be derailed by rising unemployment and the expiration on Nov. 30 of the government’s $8,000 tax credit for first-time home buyers.

Meanwhile, the Labor Department said wholesale prices fell 0.6 percent last month on a drop in energy costs. Outside food and energy, core inflation fell 0.1 percent. In the 12 months ending in September, core wholesale prices rose a modest 1.8 percent.

The drop in wholesale prices was another sign the recession had kept a lid on inflation. Last week, the government said consumer prices edged up a modest 0.2 percent in September.

Housing has been struggling to recover this year following a steep collapse that helped pull the overall economy into the worst recession since the 1930s.

But the industry still faces high unemployment, tighter bank lending standards and worries that home sales could falter once the first-time home buyers tax credit expires. The is lobbying Congress to extend the credit.

The 0.5 percent rise in overall construction in September followed a 1 percent drop in August that was revised down from an initial estimate of a 1.5 percent gain.

Construction of single-family homes rose 3.9 percent last month to an annual rate of 501,000 units, reversing a 4.7 percent drop in August. Multifamily construction, a much smaller and more volatile segment, posted a 15.2 percent drop following a 20.7 percent rise in August.

Construction rose 7.1 percent in the South, but all other regions showed weakness. Building activity fell 5.5 percent in the Northeast, 1.8 percent in the Midwest and 8.8 percent in the West.

An index from the National Association Home Builders that measures builder confidence slipped slightly in October to a reading of 18, from 19 in September. Builders blamed the slippage on the approaching expiration of the home buyer tax credit.

The industry contends that extending and expanding the credit for one year would generate nearly 350,0000 jobs and $11.6 billion in additional tax revenues.

We buy and sell real estate, which includes houses, lots, multi-family units, and commercial buildings in any condition or location in Las Vegas area.

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The first shows the Inventory of available REO single family residences listed in the MLS and the number sold in the last 30 days. Note that this statistic requires a week or ten days to fully stablize. Basically the sales trickle in over a period of time rather than appearing on day one.

The message is obvious. The REO listings are approaching and likely at one month of sales and still going down strongly. Those negative on a recovery are projecting a slug of foreclosures. That would likely manifest itself as a leveling or even increase in the inventory level.

Maintenance of present trends is likely not possible. The inventory is at or close to a month. If it continues the present trend we will soon be to weeks of inventory. There is likely some unsaleable residue in this inventory. So we are within a month or two of a throttled REO sales scenario. They are still coming on the market but at well less than the market demand.

Should be an interesting time.

Let us also look at pricing during this period…

This is a 30 day median and average for the Single Family REOs sold in Las Vegas. The trend is still down though with less slope than earlier periods. Over time we should see if prices stabilize or increase as the inventory drops.

These charts will be updated at least a couple of times a week so we can all watch this unfold.

A foreclosure feeding frenzy is attracting buyers in Las Vegas, where foreclosures compose nearly three-quarters of all home sales. The discounted properties are accounting for new record numbers of home sales monthly. However, the median sales price is low, hovering around $140,000, indicating that the first time home buyers federal tax credit and other government incentives are boosting the marketplace.

The median price of a home has dropped more than half since the markets peak. But the inventory of Las Vegas homes is rising as a result of foreclosures. Many aren’t listed by real estate agents and are sold at auction or over the Internet.

Las Vegas, North Las Vegas and Henderson have formed a consortium to apply for a second round of government funds from the federal government’s Neighborhood Stabilization Program to improve the local economy. The program is part of the government’s $787 billion federal stimulus package. Housing Predictor forecasts Las Vegas home prices will sustain average housing deflation of 21.7% in 2009, a full six-percent less than forecast the beginning of the year due to the larger than expected volume of sales.

City	Forecast
Las Vegas	− 21.7%
Henderson	− 18.8%
Reno	− 17.2%
Lake Tahoe	− 15.0%
Carson City	− 13.8%

Investors compose a large part of home buyers in Las Vegas, who are also buying in Henderson, which has seen builders stop the construction of many new housing developments in their tracts. The market just couldn’t absorb any more homes at the height of the boom. Henderson is forecast to sustain average housing deflation of 18.8% in 2009.

In Reno fallout from the financial crisis has also been severe, where homes have deflated at double-digit rates. Foreclosures and increasing walk-aways by homeowners with growing negative equity are troubling the local economy. The number of vacant homes in and around Reno are increasing and adding to the surplus of 2.1-million homes sitting vacant throughout the nation. The sell-off will take a number of years in Reno, which grew to one of the most over-built housing markets in the country, and is forecast to deflate 17.2% for the year.

In neighboring Lake Tahoe in the Sierra Nevada Mountain range, a second home market dominates the area. It started deflating much later than many other vacation resort markets, and is now suffering through what is projected to be the worst downward spiral in Tahoe’s illustrious history. Home and condo prices are taking a bruising. Housing values are certain to fall further before financial markets find their footing. Lake Tahoe average housing values are forecast to deflate 15.0% in 2009.

In Carson City the economy counts on tourists to hit the slopes of neighboring Lake Tahoe’s many snow ski resorts. Buying at or near the top of the market has become a costly lesson for many. The downward spiral is hurting as foreclosures climb. Prices will be cut by a forecast 13.8% in 2009.