Inventory falls sharply, New listings continue to Lag 2010
Pendings trending well, March sales should exceed 9000.
Prices to remain flat for March
Pending: 13,388 (+219 from last week)
Pending Sfam: 11,422 ( +195 from last week)
AWC: 7,032 ( +84 from last week)
AWC Sfam: 6,057 ( +68 from last week)
Active Listings: 31,662 ( -816 from last week)
Active Sfam: 25,580 ( -709 from last week)
Closed 3/14-3/20/11 2,040 ( +342 from last week)
Closed Sfam: 1,717 ( +292 from last week)
Closed 3/1-3/20/11: 5,197
Closed Sfam: 4,324
New Pendings 3/14-3/20: 2,631
(Prior 2 weeks: 3/13: 2,281
3/6: 1,952
Sales for the ARMLS service area continue to trend strongly upward, with large increases in pending sales, and closed sales as well. Given current sales rate, it is likely we will surpass 9000 homes sold in March. We are also seeing a significant upward trend in the forecast for April sales, as the trend line for pending transactions is also up very sharply; almost 35% since the beginning of March. This bodes well for the next few months of sales. While short sale AWC contracts are also up, which do denote sales, 70% of the new weekly AWC's are short sale listings. It is good they are under contract, but they definitely do take some time to go to closing.
Sales prices remained locked at around $110,000. After reviewing some of the data, it is becoming apparent why we have such a sticky low price. Condos are selling, and a lot of them are selling cheap. Condos are still considered a commodity right now that not many buyers want or can get financing for. So the bank owned condos that are listed sell for in the teens and twenties have a massive effect on pricing. Single family residence prices are running around $120,000, and it is trending up a several thousand dollars. Condos are responsible for some of that drag. I am not saying that there is still not a downward bias on home prices out there; surely there is, especially at the upper end, but we are getting to a lower point of inventory, and with that we are going to see some increases in home prices.
We are also seeing now that home rental prices are rising with some sustainability, and this is going to pull some investor interest. There is a tight rental market. KPHO published an article about the rental market here.
I think my favorite statistic of all however, and the one that makes me the most optimistic, is the number of listings continues to fall sharply; even better, the number of new listings is definitely showing a sharply negative trend from last year. That means the higher number of sales are not being quickly replaced by large numbers of new listings, which is why we can see active listings fall more than 800 since the same time last week.
To put the inventory numbers in perspective, on March 24, 2009 there were 48,460 listings in the MLS system. Today, there are 31K and some change. By the end of May, there were less than 35,000. Now granted, 2009 was a better year than last year in many ways, as last year we had a very heavy influx of inventory start in March and continue steadily throughout the year. This, combined with lighter sales, pressured prices to where they are now.
This year, the different starting point is telling. There is far less slack available in inventory, and we are likely to end up with sharply lower new listings. If we see inventory drop to 25,000 total and near 20,000 single family residences by the end of May- well, I think the laws of supply and demand will determine that prices will not be falling at that point.
Now, these trends could revert and we could get back into troubled area where we were last year. If you recall, March and April were excellent months for sales last year, but they were also a terrible month for inventory. Inventory kept rising, and sales faded after that into a very mediocre summer. Here is a quote from last year at this exact time:
"I would expect inventory to have started to fall, so I have some concern, but overall, the numbers are fairly positive: we are going to have a decent month of sales in March, the inventory could be lower, but it is not terribly high, and we are seeing month over month median price gains." March 23, 2010
I had taken notice of the lack of inventory draw, but obviously not as concerned as I should have been. I think we are on much sounder footing than we were overall last year, and we start with lower inventory and much smaller inventory flow, but sales could fade as they did, and we could have a mediocre summer again. Right now, I don't see that as the likely scenario. More than likely, Arizona is creating jobs, the people with jobs are feeling more confident about their own, and buying a home at the current price and interest rate seems like a very good idea. With all of these in place, we have a real chance to break out this summer. I don't see massive price gains just yet, but I do see a much better inventory picture for us locally than the national numbers point at. If we have a 20% reduction in inventory over the summer, we will see price gains by the start of 3rd quarter; they may not be sharp gains, but the trend will be up on what will likely be a continuing basis.
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