A wonkish look at Clark County housing

Here's a graphical examination of Clark County housing. Some of what I write here is a bit of a stretch, so please take it with a grain of salt. I welcome your comments and corrections.

First, a look at the number of new homes sold through November graphed against the average sale price of new homes, January through November, using numbers from "benchmarks," a report put out by appraisal firm Riley & Marks:



In a normal supply and demand situation, the number of houses sold would go down if the price went up, and the number sold would go up if the price went down. But the number of homes sold has been dropping since 2005, whether prices were going up or down. I wish I had data going back further, but that's all that's available to me. If nothing else, this suggests that supply and demand are out of whack.

Next, here's a look at the number of Clark County home building permits issued through November, according to county figures, graphed against U.S. Census Bureau data on how many people are moving to Clark County. (I extrapolated 2008 population figures based on recent history and drivers license data.)



Population growth fluctuates up and down, but if you average it out about 9,600 people have come to Clark County per year since 1999, and there is no evidence yet that that's going to drop off much. From 1999 through 2005, home builders built about one new house for every five additional people in the county. In 2006, there was one new house for every six new people; in 2007, it was one new house for every seven new people; this year: one new house for every 16 people. Some of the homes being built in recent years were speculative, and it's pretty clear from other numbers that Clark County is over built. But this graph makes me think that the home building downturn can't last long if the county's population continues to grow, unless we get a boom in new apartment construction. There have been only two multifamily construction permits issued in 2008. People have to live somewhere, and eventually they're going to have to start buying houses again.

My final final chart looks at the total number of January-through-November Clark County home listings, graphed against November inventory - how long, in months, it would take to sell every house on the market. This information comes from RMLS, a database of regional market listings that real estate professionals use to list homes and track sales. The other charts I've posted deal exclusively with new homes, while this chart looks at any new or used home listed by a real estate professional.



It's taking eight times longer, on average, to sell a house now than it took in 2004. New listings are off, but only by 10 percent from the peak. Some of the inventory growth is because there are fewer speculators, and they're gone forever (or until the next bubble). Flippers who bought two or 20 or more houses, with plans to sell for more within a few months or years, have largely exited the market. But I haven't seen any evidence that these flippers accounted for half of the homes bought and sold in Clark County, which suggests that a lot of potential buyers are still sitting on the sidelines waiting for prices to drop and uncertainty to ease.

We can extrapolate a few things from this, I think:
- If you have to sell a house now, you can't wait for the market to improve. People looking to upgrade or move down can wait, and most of them have probably dropped out of the market for the time being. But people who have to move, who can no longer afford their houses, and builders whose projects - started years ago - are now complete have little choice. In economics jargon, this suggests that supply is relatively inelastic.
- If you move somewhere new now, however, you don't have to buy a new house right away, because there are several good substitutes for a new house. You can rent. You can live with friends or family. Or, if you do want to buy a house, you can buy an older or smaller house instead of a new house. People may not always be able to buy a home, even when they want to, because of stricter lending rules and because of economic hardship.

In the long run, however, Clark County's newcomers are going to eventually want to live in their own homes. When that happens, the recent huge drop in new home construction will start to catch up with us. If the economy was stronger, the turnaround could start now. But with so many people worried about layoffs, and with credit tightness making it more difficult to get a loan, it's hard to know when the turnaround will finally arrive.

If that's not enough charts and economic wonkery for you, let me point you to the Portland Housing Blog, which on Tuesday took its own look at some Clark County housing and real estate numbers.