Bundling of Las Vegas housing statistics hurts the industry

Erstwhile Nevadan Mark Twain popularized the saying that there are three kinds of lies: lies, damn lies, and statistics. That goes hand-in-hand with news reporters’ common vernacular that statistics can do anything, and you can do anything with statistics.

It was statistics—erroneous statistics—that ostensibly burst the Las Vegas housing bubble last week, causing bankers and other lenders to wring their hands and scratch at their vestments…all in vain.

Turns out that what we said in our Aug. 24 blog was correct—It ain’t necessarily so.
Allegedly there occurred a July drop of 41 percent in new home sales compared with the same month a year ago, along with a fall of 35.1 percent of existing home sales in July as against July, 2005.

The 1,808 new-home sales closings in July were the skimpiest since April, 2003 and somewhat more than half of the closings in June, reported local research company SalesTraq.

Barely a week later comes a recognition that “July’s housing numbers do not signal a bursting of the bubble in Las Vegas, nor is the market as depressed as preliminary reports have suggested, a local analyst said Tuesday,” over which the Las Vegas Review-Journal headline read: “About that housing bubble…Sales up 6.1 percent; SalesTraq revises data.”

Dennis Smith, president of Home Builders Research, said 2,869 new home sales in July, compared with 3,071 sales in July a year ago.

Smith added that the slowdown is really being felt on the resale side of the market, wherein sales of existing homes in July totaled 3,512, down from 5,361 in July of 2005. For seven months of 2006, resales have dropped 22 percent to 26,817, Smith said.

Then came roasted crow time for SalesTraq guru Larry Murphy with a mea culpa that his original stats failed to include all of the Clark County Assessor’s files for new home closings in July. He attributed the misinformation to “human error,” according to the R-J. “He’s now reporting 2,794 new home sales for the month at a median price of $337,272, substantially higher than the 1,808 sales and $299,152 price he quoted last week.”

We won’t take Larry Murphy to task, for anyone can err. On the contrary, we salute him for owning up to it and correcting the mistake.

What’s fundamentally wrong with the reporting of Las Vegas housing statistics is that it’s based on the old traditional measure of new single-family home sales. That may have been valid in the 1950s and 1960s, but it’s not accurate today.

As we pointed out on Aug. 24, the Las Vegas housing market has morphed into vertical construction of mid-rise and high-rise condominiums.

To be more accurate and more reflective of what’s happening in Las Vegas home sales, the statistics need to be divided into three segments: