INVENTORY RISING AS EXPECTED
Pendings Rebound, AWC flat
Sales start well in November.
Real estate in the news:
PENDING: 12,246 ( +225 from last week)
Pending Sfam: 10,743 (+173 from last week)
AWC: 6,435 ( +17 from last week)
AWC Sfam: 5,679 ( +9 from last week)
Closed: 11/2-11/8 1,308 ( -1,532 from last week)
Closes Sfam: 1,138 ( -1,321 from last week)
Active: 33,193 (+704 from last week)
Active Sfam: 25,696 (+618 from last week)
Active listings continue to rise due to seasonal slowdowns in buying activity, but more so due to increased lender inventory. We normally would see inventory start to fall off as we reach the holidays, but I don't think we will see that this year. We are likely to see a bit of an inverted "V" in inventory for the next six months, as inventory will likely rise for several months until we get to the spring selling season, which will start somewhere in February. All bets are off on timing of things, as the recently passed home buyer tax credit may spur stronger activity starting now or even after the first of of the year.
I do expect somewhat of a rise in inventory levels, but we are also likely to see stronger sales than normal during the same period, certainly better than the sales in the same months last year. Last year, the reporting period for this week was 11/3-11/9, and we had 778 closed escrows. We are almost double that this year. we have double the pending sales, six times as many active with contingency, and 21,000 less active listings. No doubt we are in better shape, but the inverted V inventory number is going to be a reality. I do expect prices to flatten over the next several months, until spring. Even with the homebuyer tax credit, we would have to see a massive surge in demand across the price spectrum to really counter-act inventory level gains during what is traditionally a seasonal slowdown. Normally, this period is accompanied by inventory reductions, but I think banks are not bound by these rules, and are placing new inventory on the market. Do expect a good sales month in November, but it is not going to be enough to ward off an inventory increase completely. I think it may be a month in which price gains may stall out- temporarily.
Obviously, the big news this past week was the homebuyer tax credit extension and expansion. This makes move-up buyers eligible for $6500 in tax credits too, but with certain stipulations. This should encourage some sales at slightly higher prices. This is an area that needed help, as low prices homes have dominated. This credit is a huge boost to our industry and combine it with continuing low interest rates, and we have the opportunity to pull ourselves out of the almost 4 year slump we have been in. (The land slowdown happened before home realtors felt it)
There was also this story about the luxury market, which has been suffering, as the higher-end buyer had also lost confidence in the idea of owning a home. There is some evidence that sales are starting to happen in this category, as confidence in general is improving. These sales are happening in part to some very attractive pricing for luxury homes, but these buyers were no where to be found over the last few years.
This was another story relating to pending sales that I think is worth reading, but I don't think it is necessarily on point with current conditions. Our pendings are doing pretty well, but we do have inventory rising to a degree as well. What I would take from it is that there is continuing strength in the demand numbers, but we are not really leaving inventory issues behind. The foreclosure and short sale market are too big a part of our market, and we can't truly recover until that inventory dissipates.
If you want to find bad news in the market, it is always possible to do so. This article from CNBC is typical of something they run, which shows you can create a headline to say whatever you want. We of course know that sales prices took a massive hit in the last year; prices from this time last year have fallen precipitously. Yet the headline of this story makes it sound like this is new and current info. Yes, year over year we are still struggling. This article should be accompanied by a quarter to quarter comparison. I think CNBC's purpose is to create news that contradicts, thereby causing investor discomfort, so they will continue to buy and sell from day to day depending on good or bad news. CNBC is the investment broker industry's best friend. We could easily go back in the last week and find an article that says that prices have risen- same generic headline, completely contradictory, but using a quarter to quarter analysis.
We are entering our winter doldrums now, and even though the homebuyer tax credit will be a tremendous support for the industry, I don't expect that we will be working inventory numbers down until at least March, except for maybe a period of time in December when most of the new marketing activity does stop. The key is whether inventory levels remain low enough for the sales growth season to quickly dissipate the extra fat that comes on the market over the winter. Price growth is not likely to happen with inventory levels rising.
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