Why JPMorgan Is Bullish On The Worst Housing Market In America

las vegas

“Slightly higher optimism and stability in Las Vegas” was the takeaway from JPMorgan’s spring real estate tour, according to a note out this morning.

Recently Vegas has been deluged with bad news, including the country’s highest rate of foreclosures and negative equity.

However, local builders say the market “feels better than last year.”

JPMorgan says declines in new home prices have stabilised, even if they are selling at a significantly higher premium to resales than historical average. Likewise, inventory appears to have stabilised in September, even though it is up strongly YOY.

Ultimately the bank has upgraded its Vegas outlook to neutral. Nearby Phoenix remains slightly negative:

As a result, above-average exposure to Phoenix represents a modest relative incremental negative, in our view, while Las Vegas is a neutral. Builders with the largest exposure to Phoenix, as an estimated per cent of their total 2009 closings, include MDC (UW), PHM (N), and MTH (N), at 18%, 13%, and 12%, respectively; SPF (UW) and DHI (N) have more moderate exposure, at 9% and 6%, respectively. Builders with the largest exposure to Las Vegas, as an estimated per cent of their 2009 closings, include MDC (UW) at 18% and KBH (OW) at 6% followed by DHI (N) and RYL (N) at 5% each.

Nationwide JPMorgan predicts a 3% decline in home prices, which is a positive stance relative to the market.

Although dangerously high, Las Vegas home inventory has declined since September

The decline in single family home sales has slowed

Likewise the decline in prices has slowed

National home sales may be stabilizing; and the extremely volatile Vegas market will follow

Vegas home prices are relatively affordable; more so than national home prices

Renting has never been a worse idea in Vegas; but it's a good idea nationally

But the bleeding hasn't stopped everywhere

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