PENDING SALES MAINTAIN ABOVE 10,000
ACTIVE WITH CONTINGENCY CONTRACTS RISE SHARPLY
Closings down from usual end of February spike; inventory slips slightly.
PENDING: 10,159 (+572 from last week)
Pending Single Fam: 9,227 ( +516 from last week)
Active with Contingency: 1,711 ( +148 from last week)
AWC Single Fam: 1,562 (+131 from last week)
CLOSED 3/2-3/8/09: 1,280 (-903 from last week)
CLOSED SINGLE FAM: 1,168 (-798 from last week)
CLOSED MTD 3/8/09: 1,315
CLOSED SINGLE FAM: 1,194
ACTIVE LISTINGS: 49,186 ( -93 from last week)
ACTIVE SINGLE FAM: 39,615 ( -177 from last week)
Pending sales continue to forecast better times ahead for the resale housing industry, as pendings hover just over 10,000. Backing up the number of pendings was a sharp rise in Active with contingency contracts. This number could also be attributed to longer term short sale tie-ups, but regardless, it does show demand is out there. I have not done a price study of what these homes are selling for, but I am fairly sure many are of the lower priced entry level variety. That sector had been priced out for a while, and they are the building blocks of a strong housing housing market. The number of AWC contracts is encouraging to me, in both that it continues to grow along with pending sales. This indicates demand, which is what we lacked for the last couple of years. Closings are down for the week, but this is typical following an end of the month spike in Sales. Actually 1280 is not a bad number for the first week out of the gate.
Although it wasn't a big drop, I am encouraged by the fact that inventory was down. Our biggest challenge is still inventory levels. Its difficult to see if inventory reductions will continue at the pace they did in February; this past week's reduction was fairly small, although I would point out that single family inventory reduction occurred at twice the pace of overall reduction. That's good news, but its even better than that, as single family inventory is a smaller number to start with, so the effect is it gets us 20% closer to equlibrium for single family homes, our primary concern. A sales figure of 7000 overall sales in March might net us 6300 Single Family sales, which combined with a conservative reduction in inventory to let's say 38000 listings, would put us right at 6 months worth of single family inventory. That is a significant milestone in my mind, as that is fairly normal for many markets. Ours might be used to something different, so it might not have the effect on everyone's psyche just yet. The real beauty of that is of course that we would be just starting to reach our optimum activity period for sales, and if inventory doesn't have another wave coming, there could be drastic reductions April-June. I am not predicting that yet, but one can maybe start seeing the mechanics of a Recovery.
There are a couple of things regarding inventory and pricing that are worth pointing out. I still hear so many people talking about the median prices posted by various news organizations- I have no doubt that they are real numbers, but here the grain of salt that you need to take with those numbers. Those prices are deeply reflective of foreclosure homes-essentially, fixups with no SPDS provided by the lender, little info available for the buyer about the state of the home, and essentially no warranty. Now, if you are in the real estate business you understand what that means. The price of these properties is going to be far below market and is going to drag down the overall average. These are the equivalent of buying the Patek Phillipe watch at the pawn shop. You don't know the history, there is no guarantee it won't need work, and the price is going to be cheaper than getting it at your favorite jeweler. Yes, its still a Patek Phillipe, but what you paid for it is not representative of the true retail price. Many-no, most people are not going to buy that fixup, they are going to look for a house that is move-in ready, aren't they? If its priced like a fixup, good for them, but we are going to see some stabilization of pricing in the "ready to go" housing market, despite the dragging effect of foreclosure sale pricing. The foreclosure inventory is still ridiculously high, and there are many bargains for investors, who will look like geniuses for buying up those properties in 5 years, but these properties become more and more marginalized as part of the market as "good" inventory falls, and the number of buyers becomes larger.
I am still encouraged about the state of things going into the second quarter of the year. Our inventory levels are sliding, pending sales portends excellent sales in the short term, and we are reaching what is traditionally our best sales season. It will be interesting to see where we are at the end of June. I have high hopes for the resale market.
By the way, if anyone has any land clients, and you are not comfortable working outside your specialty, I certainly will be happy to speak with them, and more than happy to pay a 25% referral to you.
Have a great week!
chris just
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