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.