ARMLS Stats 3/15/2011

Pendings again on the rise; Inventory falls sharply again

Pending: 13,169 ( +401 from last week)

Pending Sfam: 11,227 ( +301 from last week)

AWC: 6,948 ( +162 from last week)

AWC Sfam: 5,989 ( +160 from last week)

Active Listings: 32,478 ( -596 from last week)

Active Sfam: 26,289 ( -546 from last week)

Closed 3/7/11-3/13/11: 1,698 (-689 from last week)

Closed Sfam: 1,425 (-561 from last week)

Closed through 3/13/2011: 3,345

Buying activity continues to improve in the ARMLS service area; pending sales continue to rise as the market draws more buyers to its exceptionally low prices. I would expect that we would see a similar rise next week in pendings. Last year's reading on 3/23/10, there were 13,665 pendings; a number we might not get to at the same time frame. Last March seemed to be a very good month, with good pending sales, followed by good sales numbers in April, but then sales disappointed for the rest of the summer, as inventory just kept swamping the boat. This year, we don't seem to have the same problem. Inventory is around 10% lower than at the same time last year, and it is not being replenished so far in March. March 2010, we added 14,709 new listings. This year on March 15, we have added only 5,384. March 15 does not a full month make, but listings are spread evenly through the month than closings. The trend is clear. This is an important change. March has been the biggest month for listings, so a soft number of listings in March is a strong signal that inventories may begin fading. The trend line so far is that the number of inventory is falling; I will post the first quarter listings at the end of the month, but at this point it looks to be substantially lower than 2010.

To expand a bit further on the inventory question, I will also say this: the lack of inventory coming on the market is not because banks are selling less. Those numbers, as mentioned before, are fairly stable. Regular people are not selling their homes; either choosing to sit tight because they can't qualify for what they want anyway, or just deciding to make a go of it. Either way, that is less homes on the market, and good for price stability over a slightly longer term. Lenders still make up a large percentage of listings, but if all they are doing is replacing other people who decide to stick it out, we end up with lower pricing in the short term due to being foreclosures, and a return to market stability as there is not a flood of inventory. There are three trend lines occurring right now that if continued, would point toward sharp reduction in inventory:

• Monthly sales are up sharply through the first quarter this year.
• We are starting with substantially lower inventory than we did last year.
• New inventory numbers are sharply lower in both the first two months this year, and trending solidly lower for the current month.

These three trends together allow me to be cautiously optimistic that the market has a chance to break out a bit this year. We are going into our best 6 months of sales, we have a head start on inventory reduction already, and the sales so far are trending stronger. The economy is also on better footing than at any time since 2008, so even the most pessimistic observer has to acknowledge that we are starting the selling season race this year in a much better position than we have in the last few years.

I did want to touch on prices a bit as well. Median prices have been infamously down this year from prior periods; essentially a double dip in pricing, as we saw some recovery last year. I don't think it is quite as simple as that, however.

First of all, condo sales, whose prices also suffered, are selling at an increased rate compared to all inventory; averaging about a 20% increase in sales compared to last year through the first two months of this year. These are selling at lower prices than a year ago, so their increased weight of numbers combined with even lower prices are pushing median prices down. However, it should also be noted that median condo prices have been rising so far this year as well, and the downward gravity is going to allow prices to float upwards a bit. Lets remember, condos only make up a small portion of the market, and don't have a massive impact, but when their median price is half the median of overall prices, their weight doubles its effect overall.

One of the chief demons of lower sales prices is simply that the homes that sell are homes in the lowest price ranges. People that are buying homes are buying lesser homes, leaving the higher priced homes to languish longer on the market until ultimately they lower prices. Also providing an impact is the fact that homes listed for $500,000 and up are selling at a lower rate than last year. This is doubly telling since, overall sales are up fairly sharply. The median price for homes in the $500K and up continues to slide, so that also affects price.

I want to be cautiously optimistic that all of our figures show a return to normal, but we did see a strong march last year turn into a mid-summer fizzle. Circumstances are a little different this year, but we have to prove we can keep eating up inventory, and keep sales strong.