Inventory Falls, Pendings Rise, Closings Off to Good Start
Pending: 13,422 ( +502 from last week) Pending Single Fam: 11,983 ( +458 from last week
AWC: 5,035 ( +308 from last week)
AWC Single Fam: 4,555 ( +264 from last week)
Closed 6/1-6/7/09 1,610 ( -1255 from last week)
Closed Single Fam: 1,434 ( -1143 from last week)
Active listings: 33,804 ( -543 from last week)
Active Single Fam: 26,007 ( -482 from last week)
A sharp rise in AWC contracts shows demand is still strong, and should hold fairly steady, at least through July. The number of AWC contracts denotes new contracts generally, but this number could also mean that short sales are difficult to get through. That flies a little bit in the face of conventional wisdom, as most industry people will say that short sales are easier and quicker now than they were a year ago, so it appears we do have continuing growth in demand.
Pending sales did come back from the end of the month drain that occurs when close to 3000 homes sell in the last week of a month, but they have not come back to yearly highs. They may not reach that level again this year, as June is usually the most active months, meaning the pendings peak prior to, but in a housing recovery year, we may see strong continuing demand as more buyers take advantage of the $8000 tax credit, and the generally cheap housing that is available.
The other good bit of news is that the first week of the month got off to a pretty good start. 1,610 sales would put us on par with May sales, more or less. It would be nice to top May Sales, but it is a little too early to tell. I am hopeful that the strong AWC number translates into a sharp rise in pendings over the next few weeks. I think we would all like to see a blowout month of June. It would eliminate a lot of doubt in the media about the housing recovery.
Inventory levels continue to fall, but they did not fall at the almost 1000 per week clip that had been the norm during May. It could be that there were a lot of foreclosure properties that became available in the first week of June, as many had been saying. It could also be that we have reached the end of the universal theory of elasticity relating to declining inventory; the number has become so much smaller that larger drops become more difficult. The fact that inventory is still declining is frankly surprising, even in a good sales month. We were supposed to see this tsunami of foreclosures hitting the market in June, and they very well could be, but the market seems to be absorbing this wave. We already saw prices rise a little in May, and anecdotal evidence points to strong demand for quality properties, as buyers are flocking to quality bargains right now. My guess is that inventory will decline for a while longer, but we are going to start seeing a new factor come on the board that affects housing inventory : new construction.
We are starting to see some urban projects being picked up, as the number of single family inventory declines. There was also an article last week published about some of the big builders like DR Horton and Toll Brothers thinking it was time to start building up their spec inventory-at least nationally. Builders are going to re-enter the fray, as demand and prices start to pick up and with inventory levels fairly low, there is some opportunities for them. There is some cheap already buildable land out there, and we have even seen some of the ready-to-build lots start to sell. This is the germination of the housing market's recovery if we are struck by no other freak cicrcumstances. It may not be an overwhelming recovery, as the only real buyers now are going to be first time buyers and perhaps locally, a new crop of snow birds or retirees finding their way to the sun, but it does look like recovery to me in the near term. Move-up buyers are going to have a tougher time, as these owners are not likely to realize gains on their purchases, and therefore less likely to buy significantly higher priced properties. This will be mostly an entry-level recovery, and I think that is where we will see construction. Over half of all sales last month occurred in homes priced between $75000 and $200,000.
I think at this time we can say we are doing well, but I do think we are topping out a bit in demand, as pending growth is peaking, and inventory is probably going to stop falling sometime in June as we reach a short term price-inventory equlibrium. I don't expect sharp runup in prices overall; maybe at the low end there will be stronger pricing; stronger sales will likely attract more inventory from those optimistic about reaching a price level they can afford to sell at. This will tend to level the price a bit, but these are normal market factors, and the good news is if we reach that point, it means we are likely back in a normal market, which is something we would all like to see.
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