ARMLS STATS 5/31/11

May Sales finish Strong, 9K+ expected, to beat 2010
New monthly listings continue to lag last year; inventory drops again
Prices not yet rising, even as inventory falls to very low levels
***INVENTORY FALLS UNDER 24,000***

Pending: 13,905 ( -471 from last week)
Pending Sfam: 12,058 ( -346 from last week)

AWC: 7,865 ( -74 from last week)
AWC sfam: 6,786 ( -72 from last week)

Active: 23,992 ( -605 from last week)
Active Sfam: 19,192 ( -494 from last week)

Closed weekly: 2,420 ( +202 from last week)
Closed Sfam: 2,045 ( +194 from last week)

Closed MTD (5/29) 8,497
Closed Sfam: 7,143


Stats are going to show that we are doing very well in the ARMLS area, except for one: price. Prices are not rising, and its a puzzling thing, as we have reached very low levels of inventory, strong demand for housing both in MLS and at Foreclosure auctions. Prices were actually being pushed up due to demand at foreclosure auctions. So why not in MLS sales?

I think the quick easy answer is lending. Much of the price flatness in sales in the MLS has to do with such a large portion being cash sales, as lenders still are unwilling to lend on Condos, and restrictions for any kind of lending are tight. Mortgage rates continue to fall for the qualified, but qualifying is something not achievable for many people burned by the economic downturn. The ugly side of it is that you will see rents at 2-3 times what the mortgage would be for the same property. This is not beneficial to the consumer who can't get out of the rental market and into the ownership market. Lenders have over-reacted in their lending restrictions. They should be less concerned now that all of the fat in pricing has been sliced away, and more cognizant of the ease with with people can afford homes should take center stage. Instead they make it more difficult to borrow, further hurting the consumer, but also the economy. They are holding the prices down, and the economy with it. Banks, instead of lending the money, have taken zero interest loans from the fed, and have invested heavily in commodities, like oil, further damaging consumers. An article in CNBC a few weeks ago said JPMORGAN CHASE had DOUBLED their holdings in commodities futures this year; what effect does that have on the price of oil and gasoline? Then, you start seeing them call higher prices for oil going forward, just as Goldman Sachs has done. I am not going to write about the facts of all this, so I will step off the soapbox now, but I think the idea of these banks being both investment banks and consumer banks is a bad one.

As far as our numbers go, our inventory is still falling fast, sales have been strong, and are likely to be strong in June as well. The second half of the year, I don't know. Its a little early to tell the numbers, but I do expect them to be better than last year. Sales were slow over the third quarter last year, and we don't want a repeat of that. Much depends on if new inventory in MLS continues on its current trend line or starts to rise. Right now, inventory has been falling steadily and we are in more than a healthy place in that regard, but we still don't have a sense of recovery yet. It could be the media, it could be the fact that prices aren't improving, but we have not turned the corner mentally yet. We are quite likely to gain some inventory in third quarter over today's levels- that is fairly normal, as sales do slow in July and August, but we are at such low levels now that we could absorb heavy listing numbers and slower sales. We are approaching a 2 month supply of inventory, which maybe sounds unbelievable when they are tossing out the shadow inventory like its a foregone conclusion these will swamp the boat. The fact is, they are not on the market, so i can only look at what is on the market, or what is coming on the market, and the last six months says we don't have a lot of available inventory. Look at the stats- inventory drops, new listings are sharply lower, sales are stronger.

I expect that we will cross 9000, and if something weird happens, it will pass 9500. The last day of the month always sees heavy sales, and even though our last two days are affected by a holiday, we could still see a big rush in closings today. If it is a good day, we could see 9800 plus, but I am not going to call it that way, and I don't want to sound too optimistic.

New listings are lagging again this month, with probably a 13-14% fall from last year. This has been a consistent theme all of 2011. There are simply not as many homes going on the market. May could end up with the lowest number of new listings of any month this year to date.

We should start seeing some optimism about the housing market in Arizona pretty soon, as long we quit monitoring the 24 hour news cycle. All knowledge is not empowering; sometimes it is enslaving, and we are currently enslaved by media who revel in telling us how bad we have it. If we are waiting for someone to come and tell us the recession is over and to go back to your normal lives, its not going to happen. We have problems with pricing to work through, but we don't have problems with inventory to work through, or apparently demand. What we have is mostly an image problem in real estate. The picture is not that bad, but no one wants to look at it from other than the prism of the financial downturn that has plagued us for the last several years.

ARMLS STATS 5/24/11

Active Inventory Still Falling
Auction prices rising due to competition
Number of Sales in May murky due to holiday on last day of month



Pending: 14,376 ( +121 from last week)
Pending Sfam: 12,404 ( +128 from last week)

AWC: 7,939 ( -34 from last week)
AWC sfam: 6,858 ( -22 from last week)

Active: 24,597 (-634 from last week)
Active Sfam: 19,664 (-518 from last week)

Closed thru 5/22/11: 2,218 ( +337 from last week)
Closed Sfam: 1,851 ( +280 from last week)

Closed MTD(5/22) 5,974
Closed Sfam: 5,016

Active inventory is still rising as home sales remain strong in the metro area. Pending sales are still rising a bit, but probably reaching near their plateau heading into June, a traditionally good sales month for Arizona. We are not sure what it will look like after that, but the pending numbers are still forecasting a solid month of June. We should expect 9000 + sales in June, but from that point it is unclear how the summer will go. It could be excellent, we just don't know yet.

I don't have time to do the full article today, but our precarious market is continuing to hold in most areas; prices are still wobbly, and are likely to continue to be, but at least homes are selling.

ARMLS Statistics: Milestone!

****NEWS FLASH****
ARMLS Single Family Homes Listed Falls below 20,000!
Overall listings under 25,000!


We don't know how long this trend will last, but at least for right now we have fallen below 20,000 single family residences listed in the Arizona Regional Multiple Listing Service. Why is that significant? 20,000 is really more of a psychological milestone than a real one, since inventory is relative to sales more than an absolute number, but we have to think about this in terms of where we have come from, and inventory has fallen by more than half since the worst of the housing crisis. Builder inventory has also fallen substantially, so we are just not in the woods the way we were just a few years ago. This is important for builders and job creation, but it is only an early step. Builders are likely to face some tough sledding for a while, as they have not shared as much in the increased homes sales as has the resale market. A likely reason for this is price; they are not likely to be able to compete with the prices of foreclosure homes, which has been a substantial part of the sales. Another reason is that many of the sales are bought by investors to be converted to rentals. The rental market is very strong here now, and for that reason, investors are buying homes. They are not likely to buy new homes for this purpose however, and that is apparent when you look at new homes sales that continue to drag. There are simply not the choices that there used to be in new home sales, with less than 25% of the projects (new subdivisions) as there were in 2007! This means fewer choices in fewer areas, and this is without a doubt the reason for some of the lower sales we see from builders.

What begins to change for builders is that we simply are running short of housing. Apartments can only be built so quickly, and these are not always appropriate for everyone. New housing will be in demand again, but jobs need to be created first. Arizona seems to be doing a fair job of creating jobs, but it is a still a relatively poor job market. As the job market changes, the builder market will change, and create even more jobs.

For today, the fact that we have fallen below 20,000 single family residences listed for sale is an important milestone, and one that seemed like we would never reach. It is worth acknowledging at the very least.

chris

May 17, 2011 ARMLS STATS

Inventory Falling Sharply
Pendings still rising: June to be good sales month
When will low inventory translate to increased optimism?


Pending: 14,255 ( +193 from last week)
Pending Sfam: 12,276 ( +179 from last week)

AWC: 7,973 ( +123 from last week)
AWC Sfam: 6,880 ( +108 from last week)

Active: 25,231 ( -781 from last week)
Active Sfam: 20,182 ( -665 from last week)

Closed: 1,881 ( +202 from last week)
Closed Sfam: 1,571 ( +178 from last week)

Closed Through 5/15/2011: 3,647
Closed Sfam: 3,047

Inventory continues to fall sharply, surprisingly, as new listings remain relatively stable and at lower levels than last year. There are good numbers of sales occurring, but not overly high. I don't think we are having a sharp recovery, but we are having a sharp reduction in inventory. What does this mean? I don't know yet. If it meant a little boomlet, it should have already been happening. That is not really the case, as it appears that median prices are still holding steady at an awfully low number. The average price is higher slightly, up in the $162,000 range. It is not a major move yet, but a higher price bias at least means we are moving in a good direction generally.

With inventory numbers this low, you would expect there to be some more word about it in the media, at least locally. That has not been the case. The level of inventory is the item they spent most of their time harping on for the last several years, but there is scarce mention of just how far it has fallen. All we hear about is the foreclosure problem ad nauseum. Is there a foreclosure problem? Sure there is, there are far too many and prices aren't going up quickly enough to alleviate that. Is this problem overwhelming our local housing market anymore? Clearly its not, as we are reaching the lowest levels of inventory that we have seen since 2005. At least not right now. I don't expect it too either, as the overall economy is improving, and the number of potential foreclosures still to come through the timeline is just not big enough to swamp the boat, barring a catastrophe beyond normal expectations.

The continuing slide in inventory has been surprising; I thought it would start to level off, but it has continued to slide. We would expect prices to start rising more sharply than they have, but that is not the case yet. We are certainly aware that there is not a large number of new homes available, and the available new home reports, while incomplete at best, are not showing major sales numbers. I am very curious what is keeping sentiment down so low still. Its an unanswered question at this point, because our local market, as much as any place in the country, is now positioned for a solid return to normality in housing. The prices are going to find a new level of normal; no one knows what those are, but it seems like they would be higher than where they are.

We are going to see single family inventory in the ARMLS area fall under 20,000 homes this week. It is a major milestone. We are likely to see overall listings fall under 25,000 as well. How long is inventory like this sustainable- when does it translate to more construction, or will bank inventory fill this breach? Last year, sales fell off sharply in the summer after the end of the tax credit, and what turned out to be a very poor job market and generally poor economy. However, 2009 summer sales were very good, and if we maintain levels I would say within 20% of July, August, and September of 2009 sales, we are going to be suffering a housing shortage. I know that sounds odd, but demand at current prices seems to be outstripping demand, and if there is continued strong sales, inventory will continue to be eaten away, or prices will have to go up. It is economic law. Of course, that is if inventory trends stay stable. Maybe there is a massive wave of foreclosures coming on the market; I suppose that is still possible, but inventory is so low now, that a new influx may hardly matter.

ARMLS STATS 5/10/2011

**Single Family Homes now at 20,000 Range**

Inventory at lowest level in Half a decade

Pendings rise; Inventory could rise a bit.

Pending Sales: 14,062 ( +553 from last week)

Pending Sfam: 12,097 ( +438 from last week)

AWC: 7,850 ( +243 from last week)

AWC Sfam: 6,770 ( +190 from last week)

Active: 26,012 ( -735 from last week)

Active Sfam: 20,847 ( -590 from last week)

Closed: 1,639 ( -1482 from last week)

Closed Sfam: 1,393 ( -1225 from last week)

While all statistics look like they are heading in the right direction, May could prove to be the bottom of the inventory level. New listings in May started at a fairly rapid rate, and while not on a dramatically different pace than the last few months, it is on pace to come close to last May's number of new listings. Still, inventory is slipping to levels that usually scream "price acceleration", so more inventory in relation to the relative amount of sales is not going to kill the market. Pendings did also rise sharply in the last week; May could just as easily see an acceleration in buying activity. Compared to the last several years, we certainly can experience a little run on inventory, or a monthly blip in the number of sales without upsetting the market.

What is an important milestone to us this week is the fact that we have reached 20,000 single family listings. It means we are at the doorstep of being under 20,000 home listings, and given the number of sales we experience, this is actually a very low number. We are not even back to what I could consider to be normal number of sales for a market as large as ours is, and yet here we are, pushing right to a psychologically important number.

We did hear yesterday about the double dip in national home prices- this is not the news we like to hear, but it was telegraphed early. Arizona may not be part of that trend, however, as our prices have stabilized it appears, and the average price has even risen this year. Foreclosures and short sales will negatively impact prices for a while, but it is difficult to look at our inventory numbers, both new and resale, and not see our market as perhaps healthier than others. We as a patient, if you will, have seen our fever break, and while we are not going strong yet, we are on the mend. I am also tempted to say, with the disclosure that I have not researched it, that national trends in lowered prices I.E. the "double-dip" have as much to do with people's choice in what kind of home they are going to buy now, and the number of investors who would choose to buy lower priced homes as investor properties as it does about the relative value of housing. This is something Arizona has already experienced, and we are going to be fine. The wringing of hands over the double dip in national pricing is over-done. The stock market calls this "capitulation" and it is the basis typically for a change in direction, as people realize that you are at or near the bottom. The relative economic value of a place to live is beginning to be much higher than the economic cost of owning a home, and this drives consumers to purchase, whether as a domicile, or as an investment. This is a market inequity that does not last long. Consumers will see the opportunity, or investors will see the opportunity; or should I say money will find the opportunity.

What I would really want to look for in the next several weeks is if inventory does keep falling, and if sales pick up or at least stay level with April. We closed what is a hair breadth away from 9500 homes in April, and that would be a perfectly decent level to maintain through at least May and June; if our economic recovery holds, and we can sell close to that many through the summer, even better, because it would mean builders would have to take notice at the demand and want to get their share of the buyer pie. We are moving into much better territory right now, but getting a mortgage is very tough, and jobs are still not what they should be. The slow economic recovery is is not helping, but it does look like our market is far ahead of many others around the country right now. We were one of the first in the housing crash, we may be among the first out of it as well.

ARMLS STATS 5/3/2011

**April Sales Top 9300**

Inventory inexplicably drops further- 2.85 months of Inventory

Average prices climbing

Pending: 13,509 (-641 from last week)

Pending Sfam: 11,659 ( -497 from last week)

AWC: 7,607 ( -50 from last week)
AWC Sfam: 6,580 ( -33 from last week)

Active: 26,747 (-1065 from last week)
Active Sfam: 21,437 ( -852 from last week)

Closed 4/25-5/1: 3,121

Closed Sfam: 2,618

Closed: April: 9,379

Closed Sfam: 7,851

New listings in April: 10,962 (April 2011: 14,078)

April finished with good numbers of sales, although less than March. More importantly, inventory continued to slide at a rapid pace through April. It continues a very good trend for us of inventory reduction through 2011. The number of listings has indeed fallen sharply to numbers I wouldn't have expected even at my most optimistic. We without a doubt, in the ARMLS area, have a normal level of listings compared to the number of sales. There is no other way to say this. We are quickly falling to a level where price appreciation would occur, or where builders would be required to pick up the slack. Currently, the builders are being conservative, but there are opportunities for them out there.

So we are improving, but how does it compare to where we have been over the last several years? Pretty well, but I think this chart will show just just how well. You can click on the chart to make it bigger.

The improvement from 2008 is pretty incredible. If we think about where we were to where we are, it is probably safe to say that if we were optimistic at that time, we were being foolish. The level of inventory was just too massive for our crippled buyers' market to deal with. Even though 2009 was a very good year in terms of number and cutting into the inventory, the economy couldn't sustain the momentum, and by the middle of 2010, the inventory actually started rising again. This particular chart doesn't show that, as we have had some incredible gains in 2011.

As bad as those numbers looked in 2008, we also have to remember that we were still trying to absorb a massive amount of new inventory. There were some numbers bandied about that in 2006, there were 60,000 new homes under construction or for sale in Arizona; a recent stat I saw in CNNMoney placed it in the 8000's. That was an overwhelming wave of available homes at too high of prices. This chart is a good indication of how much better position we are in to see improvements in pricing.

Pricing seems to be what the media focuses on as to whether we are healthy or not, so I have pulled together the average and median prices since the beginning of 2010. The trends are interesting. While we had a dramatic drop in median pricing, the average pricing, while falling, didn't fall as far, and is making a stronger comeback. The market has certainly been affected by the number of homes and condos, especially, at very low prices, thereby affecting prices. The average paints the picture that the dollar volume of sales has held up better than the median price; again, I think the median gets weighed down by the number $10-$20K condo sales that have been occurring more so than the average price does. The trend in pricing is better in 2011, so this is also very positive.

Lastly, we have what is happening this year in the Greater Phoenix market. There has been some dramatic changes since the beginning of the year, with very good trends in most measurables.
It is plain to see what the inventory trend is doing. Very regular, very sharp decreases in available housing, despite the difficulties in getting mortgages, and the continuing high unemployment. The inventory level has fallen below the magical 3 months of inventory, and looks to stay there at least through our busy season. It is simply not feasible for inventory to continue to fall, and for prices to languish at the same time- unless there is an influx of affordable housing into the market from either a wave of foreclosures, or from a rash of new construction. New construction is tricky though; in a city like Phoenix, there is limited opportunities for infill in areas where population tends to be densest. Most construction is on the fringes of the city. New construction can serve the needs of a strong buyer base in Gilbert, for example, but if there is a shortage of homes in Scottsdale, you are likely to see price gains, as new construction means custom home construction, and we don't appear to be quite there yet for the smaller builders who do those projects.

We can also see that the pendings have been rising steadily, but not quite spectacularly. It is my belief that Active with Contingency contracts are spending less time in that category, as lenders expedite short sales. The number of short sales has vacillated to some degree, and is not really in a growth trend any longer. Even though pendings are not as high as they have been in the past, sales are still stronger because I think AWC are turning into pendings at a faster clip. Still, the overall trend in new sales is still positive.

The last stat that I included in the graph is the "New Listings" figure. This is how many listings are going on the market in any given month. I have included the 2010 figures as well to give this some meaning. Clearly, the trend in 2010 for new listings is down and down substantially. For the first four months of the year, the number is down over 15%. That is significant, as we are not replacing the inventory. Between pendings and AWC contracts, we are chipping away at excess inventory rather quickly. Couple this with the relatively few new homes sitting on the market, and you can quickly see where we are going with this. As I said before, new home inventory is tricky; it tends to be concentrated, and concentrated on the outskirts of the metro area. Demand is not necessarily concentrated that way, so you can get a bit of an uneven push in pricing. Some parts of town that are attractive to people because it is close to their work may see higher pricing than some suburbs where there is a new home subdivision nearby.