PENDING SALES STILL SPIKING
INVENTORY REACHES ANOTHER MULTI-YEAR LOW
Agents are listing homes to be auctioned as pending...how many?
PENDING : 9,656 ( +595 from last week)
PENDING SINGLE FAM.: 8,746 ( +535 from last week)
ACTIVE W/Contingency: 1,490 ( +131 from last week)
ACTIVE W/CONT. SINGLE FAM: 1,348 (+123 from last week)
CLOSED: 1,242
CLOSED SINGLE FAM: 1,100
ACTIVE LISTINGS: 50,278 ( -401 from last week)
ACTIVE SINGLE FAM.: 40,737 ( -393 from last week)
CLOSED MTD: 2/22/09 3,300
CLOSED SINGLE FAM MTD: 2,943
We have more encouraging news from the housing market in the past week! Pending sales continue to spike, and inventory rates continue to fall sharply. Although this month isn't going to be a great month for sales, it is favorable to 2004, 2007, and 2008. 2004 was not a slump year by any means. It was a very good year. 2005 and early 2006 were still part of the boom, so this is great evidence that we are reaching a condition of normal demand, and the problem that remains is we simply have too much supply.
Just briefly, I would like to display stats for February 1-February 22nd, from the years 2004-2009...I think it is very relevant to point out the comparable position we are in to those months. Here is the chart:
CLOSINGS from February 1st through February 22nd...
2004: 3269
2005: 4,568
2006: 3,582
2007: 2,950
2008: 2,150
2009: 3,300
This gives us a great historical perspective of where we are on the demand side right now. Obviously, Arizona is not insulated from the national economic downturn as a whole, but our housing market seems to be acting as if its in full recovery mode right now. That could change, of course, as economic conditions change, but for right now, all the numbers are headed in the right direction. Most encouraging is the inventory level. We are right on the edge of crossing a psychological barrier that we have not seen in a very long time, in both single family and overall. Inventory levels are our biggest problem, and the market seems to finally be making some inroads into the high levels.
I think we can also do a little projecting of March and April here, using past figures in order to illustrate how quickly we could find ourselves back in some kind of equilibrium. Using the pending figures from my 2008 archives, we can see that pending sales at this time were at 6275; about 2/3rds what they are now. This translated into March sales of 4,263 (using UPDATED MLS STATS)....we can safely extrapolate that there will be at least 5684 sales in March: a third more. I think that might end up low, given our trend growth rate of not only pendings, but continuing strength in the Active W/Contingency category. It shows there are sufficient new contracts coming in, and I would expect closings to be impacted by these numbers. 5684 is very safe for March, and using the same numbers for April's calculation, we may expect 6405 sales in April.
I think these will end up low, but these higher volume of sales will cause a further depletion in inventory, by several thousand in both single family and overall. If inventory by the end of April is at 48000, and we have have 6400 sales, that translates to a 7.5 month supply, which is very close to historical norms for sustainable markets. We have been a growth market, so we have had less months' inventory traditionally, but I don't think anyone is looking for the 7% annual growth in prices that we usually experience any time soon. Current single family numbers are running about ninety percent of all pendings, and only 80% of all inventory, so the effect of increased sales will reduce single family inventory even quicker.
I do think realistically that we will see greater sales numbers than that over the next few months, with increases for May and June. The upshot is that we may be down below a 7.5 month supply of homes on the market by the end of April, when we will be heading into our best sales season traditionally. I won't make predictions that far out, but if we are at a six month inventory supply by the end of May, we should count ourselves fortunate, because it means we have been through the worst of this crash and are approaching pricing sustainability.
One note I wish to make regarding pending sales. It came to my attention while doing research that there are some listings that go in under pending sales if they are up for auction. I disagree with this practice, and I was concerned how much they skew the numbers. Jay Butler last year got in some credibility issues for including foreclosures in his sales numbers-I have used MLS numbers because they represent market activity, not government forced activity. I want these numbers to be credible to even the biggest sceptics, and therefore I needed to see how many of these "auction properties" were influencing the rise in pendings. Here is what I found. I am not going to change my methodology, as it has been consistent throughout. The numbers of auction homes, while significant, doesn't change the percentages a whole lot at this point. There are approximately 248 of the 9600+ pendings that are listed as auction properties; again, significant, and I don't like using them as pure pendings, but there are not enough to change the overall market trends. Some will sell at auction, some will go back as active, some will be sold before getting to auction, I think. We can't subtract all 248 properties from the pendings, as if they are sold, they are no longer on the market. I will monitor the total number of auction properties for massive increases that would skew the stats, but at this point, they are insignificant, and a fair amount of them will end up as sales, just like the other properties. I don't like it, but they are there, and I thought I should note this for anyone who thinks I am being too optimistic with my numbers.
Have a great week!
chris just
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