Single Family Listings fall to 25,000's
Sales Pace slightly ahead of May '09
AWC Contracts Rise, but Pendings dip-Short Sales to Blame?
PENDING: 13,302 (-120 from last week)
Pending Single Fam: 11,865 (-118 from last week)
AWC: 5,260 ( +225 from last week)
AWC Single Fam: 4,753 ( +198 from last week)
Closed 6/8-6-14/09 1,723 ( +113 from last week)
Closed Single Fam: 1,529 ( +95 from last week)
Active Listings: 33,275 ( -529 from last week)
Active Single Fam: 25,536 ( -471 from last week)
Closed MTD (6/14/09) 3,405 (MTD 5/14/2009: 3,331)
Closed MTD 6/14/09) 3,029 (MTD 5/14/2009: 2968)
Inventory continues to recede in Phoenix despite dire predictions of a wave of foreclosures overwhelming market. It is still likely that we are also going to have a W-Shaped recovery in housing, with inventory staging a rise either in the late summer, or during the fall when buying activity abates somewhat. There are foreclosures out there, without a doubt, and they will return to the market at some point, and will make an impact. Whether or not that can turn around a recovering market is debatable. For now, inventory has reached a very comfortable place for us compared to many markets around the country. The Twin Cities supply is over 7 months, Las Vegas is similar, and the L.A. Times reports that California's supply is "back to normal" with just under a 10 month supply. We are in relatively good shape here inventory wise. I think it will probably create some sense of stability for homebuyers, which will in turn lead to us exiting the psychological minefield we have been wandering through for several years. As we saw in May, our median home prices in the MLS are already rising (see last week's post). We continue to hear anecdotal evidence of buyers climbing all over each other for the best listings, and the obviously, we are seeing the number of homes available drop precipitously over the last several months.
Let's put the inventory numbers in even better perspective. 7,990 single family homes sold in May between $0-$500,000- June is slightly ahead of that pace, but let's just say 8,000- I think it will be higher, but let's use a conservative number. There are as of now 19,383 listings between $0-$500,000 in the MLS. At current sales rates, that is a 2.4 month supply of homes. Someone might look at that number, and say well that is the best month of sale for the year, what about the months of January and February, etc? A fair point, but we have to consider we are six months away from January, and we are anticipating being in full recovery in the resale market by that point. There will be foreclosures, there will be pricing issues at the higher end, but we will be stable by that time. In the meantime, we are in a strong sales season until October, at least, in which inventory will continue to abate. The statistic itself is a current snapshot measurement, so when we were back in January, the supply ratio was much higher. If you want to look at the yearly rate, why wouldn't we wait until all the statistics are in for the year? We are trying to look at this in the now, and right now, our supply of homes in this category is 2.4 months.
I am also hearing evidence of builders raising their heads, preparing for another run at construction. No doubt, the housing industry will be a leaner place, with less opulent homes, but if they are seeing reasons for starting up operations again, all the better. We need them for the jobs they provide, and for those of us in the land market, we need them to start viewing where they anticipate growth to be.
I wanted to touch briefly on the pending- AWC relationship. Our AWC contracts continues to rise, but are we seeing that rise because of new contracts, or is it being inflated by the number of long-term short sales clogging it up? July is not expected to be as strong as June, so it is entirely possible that our demand numbers have peaked, and that pendings will start to recede. The number of AWC may predict slightly otherwise, but until the evidence of sales starts showing up with these dramatically higher AWC levels, I am going to tend to think the number is artificially high by short sale listings. It still means they are potential sales, so that is a good thing, but the number should be thought of as diluted, as whatever number of sales that number represents is probably going to be spread over several months time, at least, as short sales take that kind of time to manifest. I run into the same thing with short land sales- they just don't occur rapidly as a normal contract.
I do think we will probably finish ahead of May's sales in June-the fact we are slightly ahead predicts this, as in the past a slightly faster pace is amplified at the end of the month by the last week of sales, so there is a chance we could finish considerably stronger than May, although right now, given some of the demand numbers, I wouldn't predict it. June is likely to be statistically a dead heat with May, although inventory levels look to be lower by that time, making the numbers somewhat better.
It is going to be interesting to see what effect the $8000 tax credit starts having on sales going into the late summer; however, the talk of extending it and even increasing it might dent its effectiveness. I think extending it past this year at this time, might be wholly unncessary; I think you want to drive people to buy sooner than later, and by allowing it or increasing it may not necessarily have the desired effect. A downside effect may be that it causes another real estate bubble, as anytime you start filling a baloon with subsidies this is the case. Look at the automotive business in Arizona a few years ago, with the renewable fuel fiasco, the boom in ethanol production that has now gone bust in the midwest, and frankly, we probably needn't look past the housing bubble created here by cheap easy financing. I think the view to shut that down after November may be unpopular in my industry, but these things need to be curtailed, and we are going to be in recovery or not, regardless if they pass that subsidy again. It should have been done 2 years ago, and we would have not suffered through as bad a slump as we are. To pass it now is just pouring gasoline onto a fire. The fire is lit, sometimes you just need to step back and let it burn.
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