Here is a look at the current MLS stats. Some improvements, but the news keep stalking about the impending wave of foreclosures that will add listings to the already over-supplied market.
1/15/08
Pending Sales: 3,656 (+309 from last week)
Pending + Active W/C 4,216 (+353 from last week)
Closed Escrows 493 ( -106 from last week)
Active Listings 54,164 (+898 from Last week)
Month to Date Closings: 822
Here is what I am seeing this week: it is a bit of a mixed bag, but there are some positive signs. First, the bad. The number of active listings is climbing a bit again. Not unexpected, if you look at the traditional January pattern. Its not really spiking sharply, but I would have preferred to see it stay somewhat level. It is up a couple of thousand for the year. The other minorly bad component is the number of closed. It is down from last week, but this was a middle week, and it usually lags the first week of the year, where there is a spillover of closings from the previous month that boost the totals a bit. The last week is usually the biggest, and the first week is the second biggest. We are probably going to see modest sales in January, as closings coming out of the holiday month just can't happen fast enough to fall in January. The examination of that trend makes a nice segway to the positive data.
As you can clearly see, the number of pendings is rising sharply from previous weeks. That is key. What you can also see, if you do the math, is that the number of AWC contracts is also rising quickly-a very positive sign. If these new contracts continue at a clip replacing AWC contracts that turn into pendings, it obviously means we have sales growth. I think not everyone does the entry the same way, with many contracts going directly to "pending" in the system, so the statistical math will not be perfect, but it is still a relevant number in that it shows new contract activity in a shorter time frame than pendings. A contract can be pending for the entire length of the escrow, while most AWC entered will become pendings after 10 days, if the system is to be believed. A positive growth in either of these numbers is an excellent sign, and hopefully this trend will continue through January, as it forecasts sales in February and March, both crucial months for us.
I wanted to answer a question that I received. I don't track the sales prices for homes because it is such a long term number to analyze. It is far more effective over the course of a year, than it is to observe over a month or even a quarter. There are so many factors that could an aberration that I don't find it useful in what I am trying to accomplish here, even though it does play a substantial role. I will offer up this one bit of info about it though. If prices were to fall further in the resale market, we would get an increase in sales, but not a net gain in value sold. The prices could fall, but prices are not the only factor in play here. People are not buying for other reasons, so I guess my point is that if average asking prices fell 2%, you are not going to get a 2% gain in the (volume x price) relationship with sales. Many of the homes would continue to languish on the market, until people start to understand it is okay to buy a house again. Price drops are not always the answer. I talked to a builder about some of their vacant lots and if they had any wish to sell them, and I was told that they were not interested in selling, because they felt that no matter how reasonably they priced them at, they couldn't sell them. It would take a fire sale, and they weren't interested in that. The housing market could be looked at in a similar way, but in a macro sense. I do think that most homes, if the price is lowered substantially would sell, but in a broader picture, if all homes were lowered in price at the same time, the market as it is, could only absorb "X" amount of those homes, as currently there are only so many buyers. Thus, price cuts and reductions work for the individual, but may have a hard time moving the market as a whole. The demand line would have to shift, and that might take a little more time. A good example of this is the new home market, where prices have already adjusted downward. This has had some impact, but growth of new home sales is still flat or even negative, as there are outside factors just "I want to sell" and "I want to buy". The factors for both participants are many, including difficulty qualifying, can't sell any lower because the debt is too high, waiting for a better deal, increased competition and (therefore choices) from many sellers, paralyzing buyers who may have otherwise bought (fear of loss is a massive psychological buying trigger, especially in real estate, and when you have a myriad of choices, you don't tend to be in a hurry). There is a definite psychological aspect to our downturn, and some of those issues need to change before we see real buying strength. It might already be happening, but not quick enough for anyone in our industry.
Chris
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