January Closings fall short of Target, but beat '08 by 60%!
Pendings continue to rise, Inventory continues to fall
Pending Sales: 7585 ( +282 from last week)
Pending Single Fam. 6885 ( +263 from last week)
AWC: 1195 ( +34 from last week)
AWC Single Fam. 1077 ( +15 from last week)
Closings: 1606 (+699 from last week)
Closings-Single Fam. 1444 ( +621 from last week)
Active Listings: 51,483 ( -925 from last week)
Single Family: 42,026 ( -674 from last week)
Closed in January: 4,725
Single Fam. 4,276
The final closings tally for January disappointed me a bit; I had hoped we would reach 5000 sales, but the second to last week was a little light, and we just couldn't finish strong enough to get there. That is the only real negative we are looking at that; the rest of the numbers paint a really nice picture that is going to develop beginning in March. The predictive numbers are all looking very strong-pendings are showing surprising strength; last February at this time there only 4,252 Pending Sales-by April of last year, we had reached 6000 pending sales. We were also ecstatic that March Sales topped 4000! If we have a similar rate of increase, we could expect as many as 10500 pendings by April, and further increases to follow, as the summer months did very well; much better than April. We already have more pending sales than we had at any time last year except for one week in June '08.
I think it is very clear that we have demand growing, and while it may not yet be back to a healthy market level, it is not far off, and it may get to a sustainable level by May. The other side of the equation, of course is the supply side, and those are the numbers that we have to worry about.
The good news is that inventory is falling. Home sales haven't been particularly strong this month, but the inventory fell all through January. I was surprised by that, as January last year saw a rapid increase in the number of Listings, from about 52000 in the beginning of the month, to 55385 by Feb 3, 2008. -That's approaching a six percent increase, and was no laughing matter at the time, as it took the rest of the year for that to come back down. This January worked out differently. We know there is some government intervention in probably preventing new foreclosure inventory from coming on the market, but it is part of the equation now, and so be it. Home sales were also very strong in December, here and nationally, and that might denote a trend of stronger demand. January, while weaker, still was better than last year, by a large margin- 4725 to 2866...that is very significant, as demand is what will take us out of the downturn.
Regardless of the "why", we are now at lower inventory levels that we haven't seen since I began recording these numbers weekly in 2007. Check the archives; we came close last summer, but the inventory started rising again. The predictors tell me that inventory will fall this year; we have buying strength even in the weakest of months, and that bodes well for the March-August period to show definite strength. We might have just started to run out of excess listings as well, as eventually the panic was going to stop. The government intervention is also going to start making a difference, with homebuyer incentives, mortgage workouts, etc.
I am going to go out on a limb here and say that there will be a completely different tone to our real estate economy by July 1st. We are not going to be fully recovered, and there will still be downward pricing pressure, but the downward pressure is almost spent. Inventory levels will still be elevated, but they will have likely fallen into the mid 40K's by that time, and the single family home inventory is going to be sub 40k's. Inventory rose all through January and February last year. That doesn't appear to be the case this year, and we may see some swift deterioration in supply of listings, as sales will be much stronger than 2nd quarter '08, and it is not expected we will see as much inventory go on the market. A few thousand homes a month reduction is possible during the best months if you look at the way the statistics play out. I did a little unscientific statistical model, and given current trends, would expect us to reach 84000 sales in MLS this year.
I should mention the other factor in this-we are not dealing with a massive new home inventory as we were in 2007-2008; builders are cutting back specs, and therefore people in need of buying a home are going more to resale options than having countless specs to choose from. The builders, who I thought would be the first to recover as they had pricing power more than homeowners, may have to suffer a bit longer, unfortunately. Banks have changed that equation with the willingness to let sellers reduce prices.
These factors all point to inventory being substantially reduced by the end of the third quarter. I have a lot more confidence in this than I did in December.
Overall, an excellent week. We should be able to expect further signs of strengthening our market. Prices are down to acceptable levels, mortgages rates are historically low, (which further reduces the effective price of housing), and the government is going to make buying a home even more attractive. I don't know that it will help the land market come back in 2009, but I think housing may be off life support by the middle of the year.
chris just
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