Pendings down as summer nears, closings rise
Sales finishing strong in June, should top 9000 easily
Inventory slide flattens, but new inventory lower this month as well
Median price up, but slides toward $110,500
Pendings: 13,284 ( -356 from last week)
Pendings Sfam: 11,582 ( -266 from last week)
AWC: 8,022 ( -1 from last week)
AWC Sfam: 6,930 ( +7 from last week)
Active Listings: 22,011 ( -289 from last week)
Active Sfam: 17,542 ( -223 from last week)
Closed 6/20-6/26 2,257 (+97 from last week)
closed Sfam: 1,903 ( +54 from last week)
Closed MTD: 7,791
The summer slowdown is starting to show up this week. That sounds bad, but compared to last year, pendings are very strong. Pendings stood at just 11,474 at this time last year according to the archives. That means we have over 15% stronger demand numbers than last year. That is significantly better. Also helping is the 15% less new listings that are coming on the market each month. June has a chance to be the lowest new inventory of any month this year; I am betting on that being the case as of right now. There is an outside chance we could finish with less than 10,000 new listings, but I think it will settle in above that. We should still see another 1800 closings this month, which would put us up and over lat June's numbers. Its hard to read right now how many to expect; it could be higher than that. we should finish in the 9500 sales in June though, and that is pretty good.
Inventory is going to finish the month much lower, of course, but I think the decrease is going to flatten for much of the rest of the year. There is definitely stronger demand than last year, as we noted with the number of pending sales being higher by 15%. But last summer also saw a pretty strong increase in inventory that demand wasn't keeping up with; its possible we could see that this summer as well. Last July, August, and September saw 12,500 homes plus added to the inventory each month; the trend is lower than that this year, so we may see more in the range of 10K-11K, but sales will not be in the 9500+ range all summer either, so we might see inventory bounce back slightly over the summer. Inventory has reached a safe zone, though, so adding even 10% back doesn't really hurt anything, and I don't think it will lower prices either; prices are being driven entirely by something other than inventory right now: lack of lending. Best guess here is that inventory stays flat or slightly higher over the summer, but if we continue to sell 8000+ homes a month over the summer, there won't be any increase either-probably. I can be wrong. Case in point-
Just last week, I wrote we were at $115,000+ for a median price. Well, that has fallen substantially since then, as apparently everyone closes their cheap condos all in the middle of the month. The median is now $110,500. Its still up from May, but not at statistically relevant numbers. Just thought I would mention it. Prices should be up given demand and supply, but lack of lending and distrust of the economy are hampering prices.
There was just this report in April that sent a strong signal to Wall Street; the normally very dour numbers of the Case Schiller index surprised, showing a gain in home prices in April. Phoenix' prices even eked out the slightest of gains. Truthfully, it will show up for Phoenix that we lost it in May however; median prices were lower in May. Of course, I have no idea what kind of index Case Schiller uses- does it include condos, does it include mobile homes, is it a median price, or is is an average price? I don't know, and I don't really watch their index too closely since it is several months behind and is a national number. Still, Wall Street liked it today, and if wall street likes it, then the market goes up and optimism goes up. Perhaps this price gain will stick with us for a while.
Tuesday, June 28, 2011
Tuesday, June 21, 2011
ARMLS STATS 6/21/2011
Median Price set to rise in June
Pendings rise stalls out as summer slowdown season arrives
Inventory still falls, on pace to add just less than 10,000 new listings this month
Inventory numbers falls deeply into to unseen levels since 2005...
Pending: 13,640 ( -253 from last week)
Pending Sfam: 11,848 (-197 from last week)
AWC: 8,023 ( +42 from last week)
Sfam AWC: 6,923 (+36 from last week)
Active: 22,300 ( -408 from last week)
Single Fam: 17,765 ( -345 from last week)
Closed 6/13-6/19: 2,160 ( +378 from last week)
Closed Sfam: 1,849 ( +303 from last week)
Closed MTD (6/19) 5,072 (June 2010 same date: 5,054)
Median price through June 21st: $115,000. May: $108,200 Up: 6%
It is highly likely that the median price will rise in June, and possibly showing an exceptionally strong gain, as months of inventory burn and fairly strong demand force buyers into competition. The backup information supports this: the average selling price is also up, from the $168K level from $158K last month. That is a strong gain, and was inevitable given sales and inventory numbers. It is not just low priced condos whose price is rising; that was a thought I had as the number of condos has dwindled, driving those prices higher than where they were. Single family home sales are also pushing about $5000 higher than last month. A strong gain in the median price is one of the last wheel chocks before the plane can take off, and while it certainly can be an aberration, the predictive stats would offer support: low inventory, strong demand, low interest rates, low new home inventory that is increasingly being pushed to the fringes of the valley. These should have predicted price gains months ago, if we had normal consumer confidence, but alas, we don't. The fact that finally price gains might be shining through is evidence that there is some potential for recovery
These are signs that the recovery is taking hold. The inventory numbers are not there for people to be as choosy or tight with their offer. If they are in need of a home, there is likely competition for it right now, prompting them to loosen the purse strings a bit more. The level of inventory is not increasing; it is still decreasing. Once again, I refuse to get in to the "theoretical inventory" idea, because in real estate, we don't count it as inventory until it hits the MLS. Every house built from the first days of Arizona that still stand is "shadow inventory", and there is no proper way to measure it until its actually for sale. The good news is that we have reached a very low level of inventory that even given the summer slowdown, is low enough that if it does inflate, will have to go a long way to exit the "safe" level. This summer slowdown might not be as bad as last summer, as is indicated by pending numbers. Last year at this exact time there were only 11,474 pending sales; that is about 16% below where we are right now. If you could extrapolate that to sales, adding sixteen percent to last years sales figure would take us to 8000 sales for July; not a great number, but July is not a great sales month either. I don't know if that number extrapolates exactly, but I tend to think we will reach 8000 sales in July.
I am still surprised by the low number of new listings on the market; they seem to be falling each month, and I would not be surprised if we stayed below 10,000 new listings for this month; that is the pace we are on, but I don't know if the end of the month is a heavier listing period or not; I haven't studied that. Right around 10,000 listings is still incredibly helpful to our inventory situation. We will assuredly pass 9,000 sales in June; maybe even 9500, and an equal number of new listings to sales means inventory burn, as besides the actual sales, many go into pending, expire, or go active with contingency, and therefore they are all deficits on the total inventory side. Perhaps there will be a surge of foreclosures this summer; there are no indications of it as of yet; the opposite seems to be holding true. We have gone six months of 2011, and we have fallen about 14% in the number of new listings compared to last year, and last month had the fewest additions of all, and is likely to be challenged by this month. This is continuing to lead inventory through a downward plane through June, and it appears it is safe to say we right now have a tight supply of available homes. I have even heard some anecdotal evidence from in-demand housing markets in the metro area that builders are trying to pick up land or even get land downzoned from commercial back to residential, as there is becoming a dearth of available homes in these cities; Chandler is a noticeable one, and Gilbert is likely also experiencing a bit of this. These are both areas where prices for new homes are higher than the median, giving builders an opportunity to actually make a little money.
The sales figure MTD sales is a little deceiving; the pace looks similar to last year, but it is a little bit of a weekend trick, as of today, we have gained a little distance on last year's pace. One extra weekend day in this year's count can make a big difference. There is starting to be some daylight between the paces, and we should finish better than last year's final tally of 9156. Maybe not markedly better, but I am thinking 9,500. That is not bad at all.
Regardless of the mediocre news about housing nationally, we seem to be holding our own here. That is born out somewhat by the news today, that the west was essentially flat, while other areas, May sales were down. Not entirely unexpected, given the weather issues throughout the midwest and south. Arizona's own sales in May were up from April and from last May; of course, we have weather on our side, and an improving state economy and jobs picture. Its by no means strong yet, but it appears to be improving at a strong pace.
Pendings rise stalls out as summer slowdown season arrives
Inventory still falls, on pace to add just less than 10,000 new listings this month
Inventory numbers falls deeply into to unseen levels since 2005...
Pending: 13,640 ( -253 from last week)
Pending Sfam: 11,848 (-197 from last week)
AWC: 8,023 ( +42 from last week)
Sfam AWC: 6,923 (+36 from last week)
Active: 22,300 ( -408 from last week)
Single Fam: 17,765 ( -345 from last week)
Closed 6/13-6/19: 2,160 ( +378 from last week)
Closed Sfam: 1,849 ( +303 from last week)
Closed MTD (6/19) 5,072 (June 2010 same date: 5,054)
Median price through June 21st: $115,000. May: $108,200 Up: 6%
It is highly likely that the median price will rise in June, and possibly showing an exceptionally strong gain, as months of inventory burn and fairly strong demand force buyers into competition. The backup information supports this: the average selling price is also up, from the $168K level from $158K last month. That is a strong gain, and was inevitable given sales and inventory numbers. It is not just low priced condos whose price is rising; that was a thought I had as the number of condos has dwindled, driving those prices higher than where they were. Single family home sales are also pushing about $5000 higher than last month. A strong gain in the median price is one of the last wheel chocks before the plane can take off, and while it certainly can be an aberration, the predictive stats would offer support: low inventory, strong demand, low interest rates, low new home inventory that is increasingly being pushed to the fringes of the valley. These should have predicted price gains months ago, if we had normal consumer confidence, but alas, we don't. The fact that finally price gains might be shining through is evidence that there is some potential for recovery
These are signs that the recovery is taking hold. The inventory numbers are not there for people to be as choosy or tight with their offer. If they are in need of a home, there is likely competition for it right now, prompting them to loosen the purse strings a bit more. The level of inventory is not increasing; it is still decreasing. Once again, I refuse to get in to the "theoretical inventory" idea, because in real estate, we don't count it as inventory until it hits the MLS. Every house built from the first days of Arizona that still stand is "shadow inventory", and there is no proper way to measure it until its actually for sale. The good news is that we have reached a very low level of inventory that even given the summer slowdown, is low enough that if it does inflate, will have to go a long way to exit the "safe" level. This summer slowdown might not be as bad as last summer, as is indicated by pending numbers. Last year at this exact time there were only 11,474 pending sales; that is about 16% below where we are right now. If you could extrapolate that to sales, adding sixteen percent to last years sales figure would take us to 8000 sales for July; not a great number, but July is not a great sales month either. I don't know if that number extrapolates exactly, but I tend to think we will reach 8000 sales in July.
I am still surprised by the low number of new listings on the market; they seem to be falling each month, and I would not be surprised if we stayed below 10,000 new listings for this month; that is the pace we are on, but I don't know if the end of the month is a heavier listing period or not; I haven't studied that. Right around 10,000 listings is still incredibly helpful to our inventory situation. We will assuredly pass 9,000 sales in June; maybe even 9500, and an equal number of new listings to sales means inventory burn, as besides the actual sales, many go into pending, expire, or go active with contingency, and therefore they are all deficits on the total inventory side. Perhaps there will be a surge of foreclosures this summer; there are no indications of it as of yet; the opposite seems to be holding true. We have gone six months of 2011, and we have fallen about 14% in the number of new listings compared to last year, and last month had the fewest additions of all, and is likely to be challenged by this month. This is continuing to lead inventory through a downward plane through June, and it appears it is safe to say we right now have a tight supply of available homes. I have even heard some anecdotal evidence from in-demand housing markets in the metro area that builders are trying to pick up land or even get land downzoned from commercial back to residential, as there is becoming a dearth of available homes in these cities; Chandler is a noticeable one, and Gilbert is likely also experiencing a bit of this. These are both areas where prices for new homes are higher than the median, giving builders an opportunity to actually make a little money.
The sales figure MTD sales is a little deceiving; the pace looks similar to last year, but it is a little bit of a weekend trick, as of today, we have gained a little distance on last year's pace. One extra weekend day in this year's count can make a big difference. There is starting to be some daylight between the paces, and we should finish better than last year's final tally of 9156. Maybe not markedly better, but I am thinking 9,500. That is not bad at all.
Regardless of the mediocre news about housing nationally, we seem to be holding our own here. That is born out somewhat by the news today, that the west was essentially flat, while other areas, May sales were down. Not entirely unexpected, given the weather issues throughout the midwest and south. Arizona's own sales in May were up from April and from last May; of course, we have weather on our side, and an improving state economy and jobs picture. Its by no means strong yet, but it appears to be improving at a strong pace.
Tuesday, June 14, 2011
ARMLS STATS 6/14/2011
Active Listings: Now only 22,708!
Pendings rising, but does it signify a strong summer?
Can inventory keep falling?
Price gain forecasting for June...
Pending: 13,893 ( +248 from last week)
Pending Sfam: 12,045 ( +199 from last week)
AWC: 7,981 (+160 from last week)
AWC Sfam: 6,887 (+147 from last week)
Active: 22,708 ( -583 from last week)
Active Sfam: 18,110 ( -506 from last week)
Closed 6/6-6/12/11: 1,782
Closed Sfam: 1,546
As we can see, inventory continues to fall in the ARMLS system. Sales seem to be continuing on a strong path, as pendings rose and homes are not coming onto the market anywhere near the pace required to keep up with demand.
Let's take a quick look at pending sales from last year to this year. Last June 8th, we were at 12,521 pendings; This year, we are nearer 14000. We also saw two weeks later last year that pendings had started to slide from that number, and the mediocre summer began. The fact we are still around 14000 pendings, which is over a 10% increase, means we are likely to see stronger summer sales than we did last year. I do think pendings will start to fall a bit as we get into July, but if we are on the same trend line as we are now, its going to be a perfectly acceptable summer sales season. I would expect inventory to increase a bit going through the summer as sales fall; (inventory goes on the market at a more consistent rate than sales occurring) If we dip below 8000 sales during the summer, I think we will see a slight rise in inventory numbers if the current trend in new inventory remains. It has been lower than last year, though, so that could continue. We are at a more than acceptable number of inventory on the market, so some slight rises are not meaningful. We would really like to see demand increase to where there are bidding wars that raise prices, but we are not at that point yet. Inventory is in all likelihood going to flutter up for several months
In fact, I think price recovery might come with next spring's selling season. We have dramatically reduced inventory this year, which is great, but we haven't seen pricing pop back up yet; I think that unless we have a blowout summer selling season, we won't see them this year. I don't think- but, through the first part of half of June, we have a median selling price that is about $7,000 higher than last month. That is significant; I don't know if it will hold up, but its just possible that the market is reacting to the tighter supply and increased competition for the best homes. We have had three very solid months of sales, increasingly constricted supply, and what looks like what might be the peak of foreclosures. Its very possible that prices could now start to rise, even with mediocre summer sales. The inventory is remarkably low; 22,000 listings is not a lot for an area that sells as many as we do each month. Prices could surprise, but the price rise so far this month could be an early anomaly corrected to a large degree by the larger number of sales that occur in the second half of the month. It still looks like it could be biased upward though, which would be a great sign. A price increase is a price increase even if it is not 6% a month.
Here is an interesting comparison in real estate markets. This excellent website researching Las Vegas Single Family Home sales shows our relative position. We sold more homes last month than Las Vegas sold in the last 90 days, and we have only about 6000 more single family listings than they do (11,360 to 18,110.) Our relative health is much stronger than we realize at this point, and the market was eventually going to catch on to that, so a price change might be in the works for us. Let's hope so; its very important that lenders start to feel more comfortable extending loans on real estate, and they will only be happy when they see the price of real estate rising so their loans become more secure a year from now than they were today.
I am not feeling well today, so I am going to end it here. Thanks for reading!
Pendings rising, but does it signify a strong summer?
Can inventory keep falling?
Price gain forecasting for June...
Pending: 13,893 ( +248 from last week)
Pending Sfam: 12,045 ( +199 from last week)
AWC: 7,981 (+160 from last week)
AWC Sfam: 6,887 (+147 from last week)
Active: 22,708 ( -583 from last week)
Active Sfam: 18,110 ( -506 from last week)
Closed 6/6-6/12/11: 1,782
Closed Sfam: 1,546
As we can see, inventory continues to fall in the ARMLS system. Sales seem to be continuing on a strong path, as pendings rose and homes are not coming onto the market anywhere near the pace required to keep up with demand.
Let's take a quick look at pending sales from last year to this year. Last June 8th, we were at 12,521 pendings; This year, we are nearer 14000. We also saw two weeks later last year that pendings had started to slide from that number, and the mediocre summer began. The fact we are still around 14000 pendings, which is over a 10% increase, means we are likely to see stronger summer sales than we did last year. I do think pendings will start to fall a bit as we get into July, but if we are on the same trend line as we are now, its going to be a perfectly acceptable summer sales season. I would expect inventory to increase a bit going through the summer as sales fall; (inventory goes on the market at a more consistent rate than sales occurring) If we dip below 8000 sales during the summer, I think we will see a slight rise in inventory numbers if the current trend in new inventory remains. It has been lower than last year, though, so that could continue. We are at a more than acceptable number of inventory on the market, so some slight rises are not meaningful. We would really like to see demand increase to where there are bidding wars that raise prices, but we are not at that point yet. Inventory is in all likelihood going to flutter up for several months
In fact, I think price recovery might come with next spring's selling season. We have dramatically reduced inventory this year, which is great, but we haven't seen pricing pop back up yet; I think that unless we have a blowout summer selling season, we won't see them this year. I don't think- but, through the first part of half of June, we have a median selling price that is about $7,000 higher than last month. That is significant; I don't know if it will hold up, but its just possible that the market is reacting to the tighter supply and increased competition for the best homes. We have had three very solid months of sales, increasingly constricted supply, and what looks like what might be the peak of foreclosures. Its very possible that prices could now start to rise, even with mediocre summer sales. The inventory is remarkably low; 22,000 listings is not a lot for an area that sells as many as we do each month. Prices could surprise, but the price rise so far this month could be an early anomaly corrected to a large degree by the larger number of sales that occur in the second half of the month. It still looks like it could be biased upward though, which would be a great sign. A price increase is a price increase even if it is not 6% a month.
Here is an interesting comparison in real estate markets. This excellent website researching Las Vegas Single Family Home sales shows our relative position. We sold more homes last month than Las Vegas sold in the last 90 days, and we have only about 6000 more single family listings than they do (11,360 to 18,110.) Our relative health is much stronger than we realize at this point, and the market was eventually going to catch on to that, so a price change might be in the works for us. Let's hope so; its very important that lenders start to feel more comfortable extending loans on real estate, and they will only be happy when they see the price of real estate rising so their loans become more secure a year from now than they were today.
I am not feeling well today, so I am going to end it here. Thanks for reading!
Tuesday, June 7, 2011
ARMLS Stats 6-7-2011
***MAY SALES: 9900***
Inventory continues to fall, Single Family falls into 18K's.
Summer slowdown set to begin? Pending weaken-slightly.
Is May indicative of what we should expect from housing?
Pending: 13,645 ( -260 from last week)
Pending Sfam: 11,846 ( -212 from last week)
AWC: 7,824 ( -41 from last week)
AWC Sfam: 6,740 (-46 from last week)
Active: 23,291 ( -701 from last week)
Active Sfam: 18,616 ( -576 from last week)
Closed 5/30-5/5: 2,212 ( -208 from last week)
Closed Sfam: 1,895 (-150 from last week)
CLOSED MAY: 9,900
Number of New listings in May: 10,599 (-10.3% from last year)
May finished on a very strong note, with almost a 1000 more sales than last year, and besting Aprill '11 by 400+ (4.4 %). Active listings slipped sharply yet again, as May became another month where limited inventory was added to the market. New listings in fact bottomed for the year in May. If one were strictly looking at the MLS, you would think we have reached a level of inventory that would invite higher pricing. So far that has not been the case, but it doesn't seem logical that pricing can avoid the laws of economics forever either. The median price slipped a bit in May by $2,000. This is a fact that I didn't find surprising, considering the makeup of the homes sold. If you look at inventory, you can see there has been a sharp drawdown in the number of Active listings, especially compared to single family homes. This means there are a lot of condos and manufactured homes selling, and we all know where the prices for condos are. It takes a lot of sales of $150,000 homes to make up for the sale of a $20,000 condo. The mix of homes selling is what is dragging down the median, not necessarily the equivalent property value. Of course, that is not the only culprit, nor probably the main one. The problem is lending, as we have talked about before. We are seeing that lending is difficult, and this is dampening purchasing. I just spoke to an agent yesterday who told me she has heard from a lot of people who want to buy, but are prevented from doing so by the harsh 20% rules required by Dodd-Frank rider in the financial reform legislation. You can liken it to closing the barn door after the horses have already gotten out.
The continuing strong sales numbers and the weakening inventory numbers do point to a price increase at some point, but we are just not there yet. There is the talk of shadow inventory, but those homes never seem to reach the market do they? If the banks were so interested in getting properties sold, they would lend money and worse case, put these homes on the market, right? Well, in some ways they are. Foreclosure auctions are doing very well, and have seen some price increases due to strong competition. If they are able to sell at auctions, both foreclosure and private auctions, and the homes never reach the MLS, how do you count those as inventory? Our ARMLS market is based on the number of homes listed, and the number of sales that occur; this shadow inventory is not part of the MLS, as we are only comparing the number of inventory against sales that occur in MLS. If banks are getting their needs elsewhere, then we won't see it as inventory. We still sold 9900 homes last month, the second best month since 2005.
I would also make another point about shadow inventory. How many of these homes that they claim as shadow inventory would become inventory regardless? A lot if not most would. Divorces happen, people lose jobs or move away, financial condition changes- whatever the reason, many of the homes in "shadow inventory" are "the inventory"- They don't happen all that once, but if there were not these things, there would be none. There is no doubt a larger percentage of bank owned than there are in normal times, but the idea that these are all coming at once, or are swamping the market has proven to be a falsehood. We are always affected more by what consumer sellers are going to do than by the bank inventory. Right now, there is little inventory, in large part because consumers are behaving differently. I'll put this in these terms: consumer listing of homes has slowed; if they can afford to stay where they are, apparently people are not trying to sell their homes; let's call this "negative shadow inventory" because these are people who might normally want to move up, but have negative equity, or feel that they can't re-qualify for another mortgage, (a very real and justified fear), and therefore are not making their homes normal inventory as they would in normal times. Now, the reasons for this aren't all positive, but right now, lower inventory is better and necessary to prices making a comeback. Is negative shadow inventory quantifiable? No, not even a little bit. You would have to interview everyone who doesn't list their house to find out why they are not adding to inventory; not likely to happen. But, in defense of this theory, inventory is sliding sharply despite the foreclosures, and despite this idea of shadow inventory, so it seems like negative shadow inventory is offsetting the wave of foreclosure inventory. Inventory is falling right now, not rising; we have a slightly more than 2 month of supply of homes in the MLS, and we have a strong trend of lower new listings each month; prices at foreclosure sales are rising due to competition; I can't see home prices staying flat forever.
In fairness and solemnity to the dire situation of the housing market of the last few years, I am going to do a little forecasting. I don't necessarily see prices rising sharply this summer. June is likely to be a decent month for sales, but the pending numbers are already softening a bit, indicating we might see sales in the 7K-8K range in third quarter. Inventory is very low, both in MLS and in new homes, but we cannot expect a massive influx of buyers in the summer. We may in the fall, as people rush to avoid winter elsewhere, but I am not going to forecast on that either. More likely, we will see sales fall from second quarter levels 10-15%, and we will see our normal fall sales, but by next February we will see a sharp uptick in sales and demand. Inventory levels may put on some winter fat by then, as I feel we will start adding inventory at some point this summer, but come February, we will see some very strong sales happening, which will lead into a real estate recovery boomlet for us here. Our economy is likely to be in sounder condition by then, and perhaps the labor situation will improve. I also see the government doing something by then about down payment percentage. The government may not like the risk of 20% down, but it almost assuredly will be lowered, which will boost housing. Most voters can't put 20% down, so they will likely see this as something that needs to be done. In short, we won't see a price recovery until next year's strong selling season, but we may continue to see strength compared to last year throughout the summer.
I want to talk about May just a bit. 9900 sales is excellent; only 10599 listings going on the market is even better; we have gutted inventory, and history has shown prices will not linger at these levels of inventory and sales. The laws of economics have to followed, and 2 months of inventory will lead to home price increases, as long as people can get financing. If we remain in what is essentially a cash market, we will continue to have flat pricing; it will go up, but not as fast as it should. We have only 18K Single Family listings now; that is number we have not seen since prices were rising seemingly 10% a month in 2005. At some point the gears will mesh and we will wake up and realize that real estate is the most undervalued it has been in three generations, and people will do all they can to buy it. May is a good example of one of the best months of real estate that we will likely ever encounter in Arizona, and here we still sit not realizing that even if it is not the spark of a turnaround, it is the messenger. Despite all of the national economic bad news, high gas prices, foreclosures, high unemployment, and uncertainty, we still had one of the best months of sales MLS has ever produced. At some point, inventory levels matter, and the number of sales matter, and the fact that rent is double to triple the monthly mortgage on the same home matters; price is going to start rising broadly eventually, and May is an indicator of that.
Inventory continues to fall, Single Family falls into 18K's.
Summer slowdown set to begin? Pending weaken-slightly.
Is May indicative of what we should expect from housing?
Pending: 13,645 ( -260 from last week)
Pending Sfam: 11,846 ( -212 from last week)
AWC: 7,824 ( -41 from last week)
AWC Sfam: 6,740 (-46 from last week)
Active: 23,291 ( -701 from last week)
Active Sfam: 18,616 ( -576 from last week)
Closed 5/30-5/5: 2,212 ( -208 from last week)
Closed Sfam: 1,895 (-150 from last week)
CLOSED MAY: 9,900
Number of New listings in May: 10,599 (-10.3% from last year)
May finished on a very strong note, with almost a 1000 more sales than last year, and besting Aprill '11 by 400+ (4.4 %). Active listings slipped sharply yet again, as May became another month where limited inventory was added to the market. New listings in fact bottomed for the year in May. If one were strictly looking at the MLS, you would think we have reached a level of inventory that would invite higher pricing. So far that has not been the case, but it doesn't seem logical that pricing can avoid the laws of economics forever either. The median price slipped a bit in May by $2,000. This is a fact that I didn't find surprising, considering the makeup of the homes sold. If you look at inventory, you can see there has been a sharp drawdown in the number of Active listings, especially compared to single family homes. This means there are a lot of condos and manufactured homes selling, and we all know where the prices for condos are. It takes a lot of sales of $150,000 homes to make up for the sale of a $20,000 condo. The mix of homes selling is what is dragging down the median, not necessarily the equivalent property value. Of course, that is not the only culprit, nor probably the main one. The problem is lending, as we have talked about before. We are seeing that lending is difficult, and this is dampening purchasing. I just spoke to an agent yesterday who told me she has heard from a lot of people who want to buy, but are prevented from doing so by the harsh 20% rules required by Dodd-Frank rider in the financial reform legislation. You can liken it to closing the barn door after the horses have already gotten out.
The continuing strong sales numbers and the weakening inventory numbers do point to a price increase at some point, but we are just not there yet. There is the talk of shadow inventory, but those homes never seem to reach the market do they? If the banks were so interested in getting properties sold, they would lend money and worse case, put these homes on the market, right? Well, in some ways they are. Foreclosure auctions are doing very well, and have seen some price increases due to strong competition. If they are able to sell at auctions, both foreclosure and private auctions, and the homes never reach the MLS, how do you count those as inventory? Our ARMLS market is based on the number of homes listed, and the number of sales that occur; this shadow inventory is not part of the MLS, as we are only comparing the number of inventory against sales that occur in MLS. If banks are getting their needs elsewhere, then we won't see it as inventory. We still sold 9900 homes last month, the second best month since 2005.
I would also make another point about shadow inventory. How many of these homes that they claim as shadow inventory would become inventory regardless? A lot if not most would. Divorces happen, people lose jobs or move away, financial condition changes- whatever the reason, many of the homes in "shadow inventory" are "the inventory"- They don't happen all that once, but if there were not these things, there would be none. There is no doubt a larger percentage of bank owned than there are in normal times, but the idea that these are all coming at once, or are swamping the market has proven to be a falsehood. We are always affected more by what consumer sellers are going to do than by the bank inventory. Right now, there is little inventory, in large part because consumers are behaving differently. I'll put this in these terms: consumer listing of homes has slowed; if they can afford to stay where they are, apparently people are not trying to sell their homes; let's call this "negative shadow inventory" because these are people who might normally want to move up, but have negative equity, or feel that they can't re-qualify for another mortgage, (a very real and justified fear), and therefore are not making their homes normal inventory as they would in normal times. Now, the reasons for this aren't all positive, but right now, lower inventory is better and necessary to prices making a comeback. Is negative shadow inventory quantifiable? No, not even a little bit. You would have to interview everyone who doesn't list their house to find out why they are not adding to inventory; not likely to happen. But, in defense of this theory, inventory is sliding sharply despite the foreclosures, and despite this idea of shadow inventory, so it seems like negative shadow inventory is offsetting the wave of foreclosure inventory. Inventory is falling right now, not rising; we have a slightly more than 2 month of supply of homes in the MLS, and we have a strong trend of lower new listings each month; prices at foreclosure sales are rising due to competition; I can't see home prices staying flat forever.
In fairness and solemnity to the dire situation of the housing market of the last few years, I am going to do a little forecasting. I don't necessarily see prices rising sharply this summer. June is likely to be a decent month for sales, but the pending numbers are already softening a bit, indicating we might see sales in the 7K-8K range in third quarter. Inventory is very low, both in MLS and in new homes, but we cannot expect a massive influx of buyers in the summer. We may in the fall, as people rush to avoid winter elsewhere, but I am not going to forecast on that either. More likely, we will see sales fall from second quarter levels 10-15%, and we will see our normal fall sales, but by next February we will see a sharp uptick in sales and demand. Inventory levels may put on some winter fat by then, as I feel we will start adding inventory at some point this summer, but come February, we will see some very strong sales happening, which will lead into a real estate recovery boomlet for us here. Our economy is likely to be in sounder condition by then, and perhaps the labor situation will improve. I also see the government doing something by then about down payment percentage. The government may not like the risk of 20% down, but it almost assuredly will be lowered, which will boost housing. Most voters can't put 20% down, so they will likely see this as something that needs to be done. In short, we won't see a price recovery until next year's strong selling season, but we may continue to see strength compared to last year throughout the summer.
I want to talk about May just a bit. 9900 sales is excellent; only 10599 listings going on the market is even better; we have gutted inventory, and history has shown prices will not linger at these levels of inventory and sales. The laws of economics have to followed, and 2 months of inventory will lead to home price increases, as long as people can get financing. If we remain in what is essentially a cash market, we will continue to have flat pricing; it will go up, but not as fast as it should. We have only 18K Single Family listings now; that is number we have not seen since prices were rising seemingly 10% a month in 2005. At some point the gears will mesh and we will wake up and realize that real estate is the most undervalued it has been in three generations, and people will do all they can to buy it. May is a good example of one of the best months of real estate that we will likely ever encounter in Arizona, and here we still sit not realizing that even if it is not the spark of a turnaround, it is the messenger. Despite all of the national economic bad news, high gas prices, foreclosures, high unemployment, and uncertainty, we still had one of the best months of sales MLS has ever produced. At some point, inventory levels matter, and the number of sales matter, and the fact that rent is double to triple the monthly mortgage on the same home matters; price is going to start rising broadly eventually, and May is an indicator of that.
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