Jeremy Aguero, Principal, Applied Analysis
BY IAN MYLCHREEST -- The newly-created Nevada Housing Stability Index shows the market is “out of whack,” said its designer, Jeremy Aguero. His firm Applied Analysis teamed with the Nevada Department of Business and Industry and UNLV to create the measure, which tries to capture several variables to describe the state of the housing market.
The report card for the first quarter is D+ and that’s not good, although this system has not undergone grade inflation. A score of “C” would be average and an “A” would be exceptional. But we’re not close to the best of all possible housing markets yet.
Aguero concedes that the market feels much better than it did a few years ago but it is suffering right now from strong demand and weak supply. Nevada is currently a national leader in price appreciation. “We’re also at or near the nation’s highest in terms of the number of people that are living in homes they’re not making payments on. Those two things cannot go on together,” he said.
Aguero is predicting “some kind of shakeout.” The number of homes for sale is “artificially low” and that’s pushing up prices. More instability would come if banks start selling off homes where the owner is behind on mortgage payments or owners stop fighting to keep their homes.
The high number of mortgages still under water and the fact that nearly 50 percent of homes are distressed sales – where the owner is facing foreclosure or cannot meet the mortgage – are also troubling. “Right now, we’ve created a second bubble within the housing market and what we’re doing right now is putting some additional air into that,” Aguero said.
One bright spot is new construction, according to the index. But we need that to balance the demand for housing for new population. Prices over the next year will go up because demand is high but there is some reckoning in the future. When it happens it will affect prices, he added.