Inventory and Pendings Flat
June Sales off to a good start....
Pending: 12,521 (+5 from last week)
Pending Sfam: 10,756 ( +33 from last week)
AWC: 7,839 ( +78 from last week)
AWC Sfam: 6,734 ( +71 from last week)
Closed: 5/31-6/6 1,859 ( -841 from last week)
Closed Sfam 1,579 ( -723 from last week)
Active Listings: 33,192 ( +51 from last week)
Active Sfam: 26,210 ( +34 from last week)
New listings and pendings are flat after the first week of June, indicating we may have reached a short term equilibrium in the resale market. We are probably seeing as many home sales as the economy will allow for right now, but we are also seeing some evidence of a slow down in the amount of foreclosure activity. Only 37% of the closings in May were bank owned properties. That is down substantially from a year ago. Delinquencies on FHA loans nationally has been falling, according to the federal agency. Three months is enough to be a trend, so that is very encouraging.
We are also seeing stronger homebuilder numbers. This also has an effect on resales, as perhaps more than in the past year; first time buyers are buying new homes as builders begin slowly ramping up and offering incentives. This tends to blunt the sharp upward spike in resales-if a new home is available at the same price, some people are going to choose new homes, even if location is not as optimal as a resale. There is a balancing act there, and we definitely want to see new home sales occurring, even if it slows resales. In my own mind, we are getting close enough to "normal" levels of inventory and sales that I would want builders to jump in and start building again. Consumers want choices, and sometimes it requires the existence of an alternative to cause a buying action from a consumer-we don't need to be down to the last house on the market before builders should start building again. I will use a common fishing theme to illustrate my point. If you have ever fished for trout, you have probably drifted a nightcrawler in front of a fish many times where it shows complete disinterest. Finally you change to a miniscule little fly, and as soon as it is in range, wham! That fish is on it. Now, the juicy nightcrawler you threw out should have been more attractive to the fish, but the fish didn't think so.
Its the same with homebuyers- just because there are X amounts of resale homes sitting on the market at an attractive price, it doesn't mean they want one of those. They might have a completely different buying trigger. Builders need to have activity to create desire from buyers, and we are just starting to see that happening. Builders crank up subdivisions, and people start buying. I don't want to use the word demand-creative marketing, but I will. The picture has to be painted in their head of a beautiful home in a beautiful neighborhood that they come back to every day after a hard day's work. Its crucial for people buying new homes, the same way the consumer who is looking at buying a new Harley-Davidson might need to see the wind whipping through his or her hair, the open road twisting through the cool pines of the Black Hills as the faces of Mount Rushmore come into view. Empty subdivisions with 1 or 2 scattered homes in place in a ghost town subdivision does not inspire confidence or the image of the happy home life in buyers. Activity begets activity, and builders that are stepping up are beginning to take some buyers who previously might have purchased a resale.
We are hearing some national blogs that keep talking up a double dip in housing. I have no doubt we will have a choppy recovery in housing, but right now we are so far ahead of where we were, it is hard to imagine going back to the bottom. The underlying numbers are getting better- jobs, lower inventory numbers, median prices rising manageably, demographics- so I am not buying the substantial dip. We are in a relatively strong season for sales, and I think that will continue through the summer and into the fall. Most people do expect a stronger economic footing by the end of third quarter, and that will only further support the idea we will continue to return to normal here. The biggest problem we still have is actually a matter of perspective: pricing. If you purchased your home at a much higher price, then you are disappointed that prices are so low. If you are looking to buy a home, you should be a ecstatic about the lower pricing. We can't complain about inventory numbers, as they are not very high, buying activity is strong, interest rates are exceptional, the amount of foreclosure activity is receding-even with traditionally riskier FHA loans, so it really comes down to prices. Prices haven't recovered strongly yet, but they have beeing going up, and this gives new family formations a tremendous opportunity to participate in a rising market. Its all in your perspective, but the case can be made that even if prices slip somewhat, we are still in full recovery.
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