Pendings up slightly; Inventory Still trending Lower.
End of month on weekend will slow sales for July
Sales total should beat last year easily
Pending Sales: 12,304 ( +93 from last week)
Pending Sfam: 10,765 ( +99 from last week)
AWC: 7,749 ( -63 from last week)
AWC Sfam: 6,700 ( -38 from last week)
Active Listings: 20,595 ( -191 from last week)
Active Sfam: 16,371 ( -182 from last week)
Closed 7/18-7/24: 1,879 ( -122 from last week)
Closed Sfam: 1,626 ( - 97 from last week)
Closed Month to Date (7/24): 5,594
Sfam: 4,823
Trending numbers continue to move in the right direction for a recovery in housing in Arizona; Pendings are up, inventory is down, and sales are beating last year's figures, even in what is typically a very slow month for housing. New listings for July are also sharply lower; the projection for the end of the month new inventory in July is 9,208 listings; that would be the lowest figure of the year. Keep in mind that is a projection based the average daily listings for the month so far, so it could change, but its likely that an estimation can safely be made up or down within a 10% spectrum. It will probably be under 10,000 listings. As long we continue to see trends such as those, it means housing is getting healthier. The only truly disturbing number we see is that stubborn median price, which continues to hover around $110,000. I would have expected to see it rise a bit now, given low inventory, but as the condo inventory that is on the market continues to sell out at low prices, its probably not unexpected that we will see the broad price markers look flat.
August should be a stronger month than July, and we are seeing indicators like the pendings climbing again above last year's levels at this time. Now, I took a bit of a break last year at this time from doing the stats, so for the next six months we are not going to have a good weekly report to check the numbers against, but indicators last July at this time were noticeably softer than they are now. I am going to venture a guess that we will see August sales approach the 9,000 mark, which would be in line with the very strong spring numbers. At that level, we are probably still burning inventory, and since little exists, we could see some spot pricing pressure before next February. Crossing 9000 sales in August would be a strong indicator; August 2010 produced only 6965 sales, and August 2009, which wasn't a bad year number wise before the double dip, produced 8,042 sales. Getting to 9000 would be superb, but even getting to 8000 after last year's dip would be excellent.
There may be some indications too that homebuilders are starting to feel some increased demand; there is a lot of builder activity in the southeast valley, and you are seeing builders advertising for administrative and sales workers again. There is a lot of reason for optimism, and I think the general economy is just going to dictate if we will be on firm footing sometime yet this year, or if it will have to wait for February of 2012.
In the news, Case Schiller has now posted two straight months of home price gains spread across the top 20 markets in the country. Interestingly, despite our superior sales and inventory numbers, Phoenix's number were unchanged. Our median price was definitely higher in June, so our price gain might be lagging a bit. It was up from May to June well in excess of 1% however. It is a good sign nationally that the crisis of confidence may be dissipating to a degree.
There is also this little bit of counter-intuitive news from June: new homes sales fell- slightly- but prices were up sharply. But, at the same time, prices were up 5.8%. What does this tell us? Let's take a closer look at this. First off, why are prices up when it looks like demand is down? I have a hypothesis for this. Let's bring the new home inventory number into this. 164000 new homes available across the country. That is a record low number for the industry. This does show why prices are going up, but it doesn't explain the reduced sales.
Here is my hypothesis: the sales are reduced because there are not enough choices of new homes available. If there are not enough choices available, certain people will put off buying, buy a used home, or continue to rent.
Lets use an example to illustrate this principle. Let's say a real estate sign installer starts getting busy with requests from agents again, and figures out that his 15 year old truck has seen its better days, since he has it in the shop once a month. So he decides its time for a new truck. He starts going around to the dealerships to look for one; he goes to chevy, he goes to dodge, he goes to ford, but to his chagrin, discovers that they all have been selling fuel-efficient cars like crazy, and have cut production on the mid-size truck quasi-fuel efficient truck he needs to make his business profitable. He goes around to all the dealers but the only trucks they have are the big cummins diesel dualies and 3/4 ton trucks starting at $35,000, or we have some little ford rangers and nissan frontiers. The dealers tell him, well this is all there is now for new trucks, why not just buy one of these? Or maybe you would like to buy a Crown Vic, we can give GREAT deals on those right now, and look at our inventory. Well the man knows he can't profitably operate his business with paying for a truck of this size, in addition to the fuel costs, and the small trucks won't carry a big enough load, and obvously the crown vic doesn't help him, so of course, no sale. They tell him if you can wait three months we will have some dodge dakotas and Chevy Colorados in stock, or if you can't wait, we have some used ones reasonable on the lot. What does the guy do?
Well, the point of this little exercise as we know is to show that 1. He is not going to buy a new vehicle if it doesn't fit what his needs are. Its the same with a house. If the house available is a 2 bedroom condo, a young family of 4 is not likely to be the buyer; likeways, if it is a 6 bedroom behemoth, they are also not likely to be a buyer. So to me, the low inventory presents a matchup problem that decreases actual sales. Lets go back to the scenario. What does the guy do? We have already determined he's not buying a new truck that is either too big or too small, or a big sedan, no matter how cheap the price is, so the new vehicle is out. There are used trucks available, but this guy never had good luck with used vehicles, and besides the payment on the used is just as much and from experience he knows that he will spent a lot of money fixing it besides the payment, since it is a work truck and it gets used heavily, so he really doesn't like that option. The other alternative is that he turns around, looks at his truck, and says:
"well, I can maybe make it work for another three months until they build something that works for me."
So to add a corollary to my earlier hypothesis, sales are being suppressed by lack of choice. A guy who needs a midsize pickup isn't going to buy a sedan just to buy a new car, no matter how good the deal, or how much supply has driven the price down. It doesn't suit his purpose. Let's put this in another way too: Consumer activity is slowed by the lack of choice. Just because there is a load of product out there at cheap prices doesn't mean anything if its not what the consumer wants. Resale homes are not as sensitive to buyer whims as resale vehicles, but for those that want a new home that is 3 bedroom 2 bath that they don't have to remodel, no matter how many used condos or mansions are available at relatively cheap prices, they aren't going to buy it, because it doesn't fit their need, and they don't want used.
Now, just to throw the twist in the illustration, lets say the sales manager is in his office, and gets a phone call. Its the wife of a guy who ordered a new Dodge Dakota 4 months ago that was delivered this morning and is still sitting on the flatbed. In fact the sign guy looked at it, but hey the car is sold, so out of the question. Well, the manager takes this call, and hears a sobbing woman on the other end telling him how her husband had a heart attack last night and died today, and she won't be taking the truck. Sorry. Hmm. What does the sales manager do? He looks out mr sign guy out there turning up his nose at his used inventory and heading for his truck thinking he will scrape by with his pile of junk for a few months. Here he has a willing buyer who needs the singular item sitting on the trailer, but as far as he knows, is unavailable to him. The sales manager of course goes out, and says well, I tell you what, I feel for you, and here is what we can do. I worked out a deal with the guy who ordered this truck; he can wait, but I am going to have to throw in some wheels and underbody coating and some silhouette mudflaps, but he will wait four months to re-order. The thing is, those things cost us if we let you buy this today. We only got the one, mind you. If we can do that, would you be willing to pay the extra $2,000 it cost me to get this truck for you?
So the sign guy, looks at this truck with the mirror hanging off, the Arizona pin striping in the paint, and thinks
"this is the truck I want- no, better, its what I require, and I will probably spend $2000 fixing that hunk of crap in the next three months. I am just going to do it, because I will be happier this way, and I can get on with my business." Boom, there is your 5.8% rise in price. A lack of supply, a lack of choice, both contributing to lower sales and higher prices. My point is of course, that if builders were building more homes, they would be selling more houses, which is why the story goes into the fact builders are breaking more ground now.
I know that was a long illustration, but it is so important we realize that our economic problems are tied more to a crisis of confidence than any parties particular policies. We have survived a baker's dozen of bad presidents in our history, and the economy has always overcome. But when we operate like the sky is going to fall, we retard economic growth. Builders should be selling more homes, but they are not providing enough inventory in many locations to make it a a viable choice for consumers. The most attractive homes seem to be commanding some attention and getting sharp price increases. That wouldn't happen if there was more inventory, but then you would be selling more homes which would be better for them than the higher price for one.
My prime example of this is the Wittmann submarket. Wittmann is a custom home area that not everyone knows about, but is an area that has shown some excellent recovery in the last few years. Wittman lately has had far more homes under contract than there is available inventory; at one high water mark, there were twice as many pendings and AWC as there were available listings. Not an insignificant event. Consequently, we have seen strong sales at fairly good prices out there, but you know, not one builder has stepped up in the last year to try and meet the demand out there for a nice solid 1800 sqft home in the $150K-$200K price range. Resale homes sell within 60 days out there, land is relatively inexpensive and easy to build with few engineering issues, and you are working with the county planning, who practically hold your hand for you in construction. Yet no new builders. There is one guy who has some nice homes out there he has built, but god bless him, he is just still too high priced in the mid $200's. I wish him the best, but he outside the current sweet spot. Prices have come up, but not that far.
I have been told by builders that they could build for $40-$60 a foot. If you can build for that, then you would make money in Wittmann and you wouldn't even be over the price range that foreclosure basis homes are selling for. New homes will sell out there for $175,000, but there is no evidence of that because there is not currently even a choice for a consumer to make in that regard. Until a smart contractor out there decides to cowboy up and show some confidence in the market, there will be no proof that new home activity is improving, and certain people will put off buying instead of having to choose from the relatively few resales, and the zero new homes, which obviously then slows down economic activity for us all. Its a crisis of confidence, and we need to get past that soon, or this recession will continue.
Enough econ 101 for the day! Hope you enjoyed it, and I do appreciate hearing from you folks who read it. Thank you.
chris just
Tuesday, July 26, 2011
Tuesday, July 19, 2011
ARMLS STATS July 19th, 2011
Pending Sales Fall As Weekly Sales Rebound
Active inventory still falling??? Yes.
New listing activity weak
Recovery?
Pending Sales: 12,211 ( -186 from last week)
Pending Sfam: 10,666 (-157 from last week)
AWC: 7,812 ( +71 from last week)
AWC Sfam: 6,738 ( +54 from last week)
Active: 20,786 (-265 from last week)
Active Sfam: 16,553 ( -202 from last week)
Closed: 7/11-7/17 2,001 (+773 from last week)
Closed Sfam: 1,723 (+658 from last week)
There is something very odd happening in housing in Arizona. There is a a recovery and nobody knows about it, cares about it, even pays attention to it. I am continually amazed by what direction we are going in the raw data from the MLS...inventory levels are reaching very low levels, below what we saw in 2005, it appears; sales are close to being on par with where they were in 2005, and the supply of new inventory continues to drop. Yet, we still have weak pricing for houses, people talk about the endless inventory available- that's not quite true; they talk about the endless supply of inventory that will be available once the banks unleash the floodgates. This has been the topic of conversation for two years. April 2009 was supposed to be armageddon, a tidal wave of listings. It never materialized. Then prices started dropping last summer, and inventory rose somewhat for the next several months, and that was the end. Ok, there was more inventory, but sales were also lower as the hangover from the tax credit expiration in April. Still, inventory only rose so far given the weak sales. Enter 2011; well, not quite 2011-December of 2010 sales surprise, posting over 8,000. An aberration, they said; housing is going to be weak here. 2011 January is somewhat a normal January- not great, but not as bad the summer was. However, February demand comes out strong and housing sales pop up in March to nearly 10,000, then followed by another 9000 in April, nearly another 10,000 in May, but not quite there, and June then hits the magic number: well in excess of 10,500. (Originally it did 11,000, but has settled below that now.) Meanwhile inventory is sinking through the floor; Active listings, February 11, 2011: 35000+. Active listings today: barely 20,500.
There is a sea change happening, and no one notices. Anecdotal evidence suggests the best of the new home submarkets are selling new houses as well. What is it going to take for people to accept the facts? Are we having such a crisis of confidence in our country that we can no longer even accept good news? Its wholly disturbing to me that we as a market in this much better shape, yet overall we are getting crushed by the bad news. The real estate writer for CNBC lashes out at the 15% gain in construction starts last month; a wholly positive number that includes single and multifamily construction. So it wasn't good news, it was really bad news because 32% increase in multifamily meant only a 9% gain in new single family construction. Huh? Furthermore, this increase was only a makeup from the terrible May numbers due to the flooding and hurricanes and bad weather that hit the country in that period. What, so now its bad that demand came back after these events? Is the news now just meant for us all to take ourselves so seriously that we cannot accept a blessing without looking for the next reason to rend our garments smear ashes on our faces? I am completely over the 24 hour news cycle that predominates and I should say dominates this country. Wringing every little bit of analysis out of every morsel of information has become our favorite pastime, and it is the most destructive trend America has ever created, because it is our media giants are the creators/beneficiaries of this. We glue ourselves to network news while wondering what is going to happen next. It is ruining our optimism.
Off the soapbox....what I want to look at here is the inventory levels. They are still falling, and the new listings for July look to be coming in very much below last years levels, and in line to a little less than the trend so far last month and this month. Low levels of inventory eventually imply higher prices; they might not be there yet, but the pressure is building on home prices. We are going out of the peak season, so we don't expect prices to rise on overwhelming demand until next spring, but continuous decent demand coupled with dramatically lower inventory levels is a formula for price increases yet this year. It seems we have strong family formation, in addition to new people moving here that are pushing demand.
Think about this number 16,500: that is the approximate single family inventory level today. Lets look at some relevant dates:
One month ago, June 21: inventory: 17,765
Three months ago, April 19: inventory: 22,853
Four months ago, March 22 inventory: 25,580
Five Months ago, February 23: 27,918
That is a significant recovery in Housing inventory, isn't it? We are ahead of the game in so many ways on inventory. Whatever the reason, there is just not that much sitting around. Whether its a bank slowdown, which I am sure to some degree is true, or because the average guy is not selling, we just don't have the inventory available to the market. I think you would be hardpressed to find someone to say that the worst is yet to come; I don't think that is true unless the entire economic system implodes. I would tend to agree with that, as the number of foreclosure properties seems to have leveled and started to fall by most accounts, along with bankruptcies, etc. They haven't gone away, but the tide is receding not accelerating towards shore any longer. So, with that being the case, when are we going to start taking seriously the inventory levels? Do we really expect that this inventory level is going to supply the market in February when home demand starts to spike? We are still losing inventory; something I didn't expect going into July; what will happen when we reach the demand phase where demand strips a 1000 homes a week out of supply? Exactly right; price increases. Incremental price increases will lead to more supply, both by builders and by people who are just at the edge of being able to sell their home. We will see that, I am just convinced now that things could get a little crazy next February out there. If you are selling houses, be prepared to have to write competing offers with multiple buyers. There will be a buyer out there for every home that is available, but at any given time, a small percentage are the most attractive, and will get more than their fair share of offers. 5 homes in sunnyslope aren't going to get any offers by the potential buyer of a home in gilbert; its not feasible, so expect strong price growth in places like Gilbert and Chandler.
Overall, I would just say we are not in bad position here in Arizona; its been bad, but its getting better, and if I was a smart builder, I would be prepared with some inventory by February of next year in the appropriate areas; if you can at all compete on price, you will sell some homes at that point.
Active inventory still falling??? Yes.
New listing activity weak
Recovery?
Pending Sales: 12,211 ( -186 from last week)
Pending Sfam: 10,666 (-157 from last week)
AWC: 7,812 ( +71 from last week)
AWC Sfam: 6,738 ( +54 from last week)
Active: 20,786 (-265 from last week)
Active Sfam: 16,553 ( -202 from last week)
Closed: 7/11-7/17 2,001 (+773 from last week)
Closed Sfam: 1,723 (+658 from last week)
There is something very odd happening in housing in Arizona. There is a a recovery and nobody knows about it, cares about it, even pays attention to it. I am continually amazed by what direction we are going in the raw data from the MLS...inventory levels are reaching very low levels, below what we saw in 2005, it appears; sales are close to being on par with where they were in 2005, and the supply of new inventory continues to drop. Yet, we still have weak pricing for houses, people talk about the endless inventory available- that's not quite true; they talk about the endless supply of inventory that will be available once the banks unleash the floodgates. This has been the topic of conversation for two years. April 2009 was supposed to be armageddon, a tidal wave of listings. It never materialized. Then prices started dropping last summer, and inventory rose somewhat for the next several months, and that was the end. Ok, there was more inventory, but sales were also lower as the hangover from the tax credit expiration in April. Still, inventory only rose so far given the weak sales. Enter 2011; well, not quite 2011-December of 2010 sales surprise, posting over 8,000. An aberration, they said; housing is going to be weak here. 2011 January is somewhat a normal January- not great, but not as bad the summer was. However, February demand comes out strong and housing sales pop up in March to nearly 10,000, then followed by another 9000 in April, nearly another 10,000 in May, but not quite there, and June then hits the magic number: well in excess of 10,500. (Originally it did 11,000, but has settled below that now.) Meanwhile inventory is sinking through the floor; Active listings, February 11, 2011: 35000+. Active listings today: barely 20,500.
There is a sea change happening, and no one notices. Anecdotal evidence suggests the best of the new home submarkets are selling new houses as well. What is it going to take for people to accept the facts? Are we having such a crisis of confidence in our country that we can no longer even accept good news? Its wholly disturbing to me that we as a market in this much better shape, yet overall we are getting crushed by the bad news. The real estate writer for CNBC lashes out at the 15% gain in construction starts last month; a wholly positive number that includes single and multifamily construction. So it wasn't good news, it was really bad news because 32% increase in multifamily meant only a 9% gain in new single family construction. Huh? Furthermore, this increase was only a makeup from the terrible May numbers due to the flooding and hurricanes and bad weather that hit the country in that period. What, so now its bad that demand came back after these events? Is the news now just meant for us all to take ourselves so seriously that we cannot accept a blessing without looking for the next reason to rend our garments smear ashes on our faces? I am completely over the 24 hour news cycle that predominates and I should say dominates this country. Wringing every little bit of analysis out of every morsel of information has become our favorite pastime, and it is the most destructive trend America has ever created, because it is our media giants are the creators/beneficiaries of this. We glue ourselves to network news while wondering what is going to happen next. It is ruining our optimism.
Off the soapbox....what I want to look at here is the inventory levels. They are still falling, and the new listings for July look to be coming in very much below last years levels, and in line to a little less than the trend so far last month and this month. Low levels of inventory eventually imply higher prices; they might not be there yet, but the pressure is building on home prices. We are going out of the peak season, so we don't expect prices to rise on overwhelming demand until next spring, but continuous decent demand coupled with dramatically lower inventory levels is a formula for price increases yet this year. It seems we have strong family formation, in addition to new people moving here that are pushing demand.
Think about this number 16,500: that is the approximate single family inventory level today. Lets look at some relevant dates:
One month ago, June 21: inventory: 17,765
Three months ago, April 19: inventory: 22,853
Four months ago, March 22 inventory: 25,580
Five Months ago, February 23: 27,918
That is a significant recovery in Housing inventory, isn't it? We are ahead of the game in so many ways on inventory. Whatever the reason, there is just not that much sitting around. Whether its a bank slowdown, which I am sure to some degree is true, or because the average guy is not selling, we just don't have the inventory available to the market. I think you would be hardpressed to find someone to say that the worst is yet to come; I don't think that is true unless the entire economic system implodes. I would tend to agree with that, as the number of foreclosure properties seems to have leveled and started to fall by most accounts, along with bankruptcies, etc. They haven't gone away, but the tide is receding not accelerating towards shore any longer. So, with that being the case, when are we going to start taking seriously the inventory levels? Do we really expect that this inventory level is going to supply the market in February when home demand starts to spike? We are still losing inventory; something I didn't expect going into July; what will happen when we reach the demand phase where demand strips a 1000 homes a week out of supply? Exactly right; price increases. Incremental price increases will lead to more supply, both by builders and by people who are just at the edge of being able to sell their home. We will see that, I am just convinced now that things could get a little crazy next February out there. If you are selling houses, be prepared to have to write competing offers with multiple buyers. There will be a buyer out there for every home that is available, but at any given time, a small percentage are the most attractive, and will get more than their fair share of offers. 5 homes in sunnyslope aren't going to get any offers by the potential buyer of a home in gilbert; its not feasible, so expect strong price growth in places like Gilbert and Chandler.
Overall, I would just say we are not in bad position here in Arizona; its been bad, but its getting better, and if I was a smart builder, I would be prepared with some inventory by February of next year in the appropriate areas; if you can at all compete on price, you will sell some homes at that point.
Tuesday, July 12, 2011
ARMLS STATS July 12, 2011
***Inventory Still Falling***
Single Family Home listings fall to the 16K's
Inventory right at 21K, into the 20K's this week.
Pending sales rise- is there better than expected demand?
Pending: 12,397 ( +616 from last last week)
Pending Sfam: 10,823 ( +533 from last week)
AWC: 7,741 ( +223 from last week)
AWC Sfam: 6,684 ( +180 from last week)
Active: 21,051 ( -342 from last week)
Active Sfam: 16,755 ( -284 from last week)
Closed 7/4-7/10 1,228
Closed Sfam: 1,065
Inventory continues to be a top story in residential real estate, as inventory has now reached exceptionally low numbers given the size of our market. It has not translated into big price gains yet, but last month seemed to show that there is some progress on that front. While I think it is fair to say that much of the activity is investors, that is not all bad; they buy homes that are trashed and spruce them up, and make them available to buyers who may not have the expertise nor the money to buy and perform a fix up.
The amount of inventory coming on the market in June was also lower -again. We are down almost 15% from the number of listings last year, and while there is no guarantee that it will continue to trend lower, we have certainly fallen closer to a different kind of danger zone than inflated inventory- the danger of zone of too little inventory.
If this is truly the level of inventory, then we have reached now a point where we need to start feeling some optimism about the direction we are going, or resign ourselves to the fact that we are all permanently depressed by the economic situation, and no matter the news, nothing will re-invigorate the industry. If this is the level of inventory when we get to February next year, then there is going to be a big price spike by April. There is simply not enough slack in inventory to account for the demand boomlet that starts in the spring and continues through June. We started last February at 30,000+ homes. If we are at 20,000 homes in February, there are going to be some fights occurring over the homes available. Its just not enough inventory to see us through the brisk selling season. We have sold at near record levels this year for the last four months, and we are not even in a good economy yet. There are indications that the economy is getting better, especially in Arizona, with hiring picking up, and retail sales returning to normal levels. If we are in a stronger position economically by next February, we could see a run on homes. There will of course, be some incremental number of new listings added as some people realize they will be able to sell at a higher price than before and get out of their homes, but- people are funny. Once they realize that they may be able to sell their home at a higher price, they realize they will have to buy at a higher price, and maybe they won't be able to qualify as well as they have now. These things tend to balance out, so while some new listings will come about, others will choose not to sell because the home finally has rising value.
I think, barring the continuing idiocy of our leaders in Washington, that a stabilized economy for Arizona means that we will see a price spike in Second quarter next year. Write it down, because I am calling it right now. We might get it before that, if demand continues to accelerate in the dog days of summer, but I think it will be a stable market for some months forward. Median prices will likely stay flat as many of the homes being bought are in need of repair, which keeps the prices lower. As that works its way out of the system this fall, expect to see some better median numbers too.
I am a little bit surprised by the pending numbers rise going into July. I thought they would start to drop a bit. We are almost in the same league as 2009, when July finished with around 9000 sales. Of course, there were still 31,000 listings at that time, so 9000 sales is a strong number, given current inventory trends, and while I don't think we will finish that high, if we do, it will probably mean continued inventory reduction. If we continue to shadow 2009's sales pace through the summer and fall, I think we will be doing quite well by the time 2012 comes around, and we will see both price increases and more important to our economy, stronger builder activity as construction cranks up. Inventory did rise through the fall of 2009, so it wasn't all positive, and prices started to fall as a result, which was our double dip to where prices are today. Still, inventory is a different story now, so expect prices to rise with continued strong sales figures locally. We probably will receive some better activity going into the fall as well, so if July is good, expect August and September to be even better. If there is enough demand out there that just keeps inventory near its current state through the end of the year, then we will see a reason for optimism as the news turns towards bidding wars and families moving to the fringes to find affordable housing. If we have stronger than anticipated demand over the next several months, I think we will start to see price gains, as there simply is not the inventory to absorb strong demand. That will invite some people to sell which should equalize the market until we get the demand event that the inventory simply won't contain in the spring.
We are on the right footing it seems to finally exit the housing nightmare.
One last thing; here is a snapshot from the archive for stats on July 15, 2008. Click on the picture to enlarge it. The format was pretty barebones back then, but you can still see where we were inventory and sales wise. Obviously, we are in far superior position to this then we were back then. 52,000+ listings compared to 210,030 (its dropped since I started writing this post), pending sales are almost half of what they are today. Sales were scarcely 6,000. We are in a real estate recovery in Arizona, whether the naysayers wish to admit it or not. It may not be even for everyone, but it is recovering, and we will see that happen no later than March 2012.
Single Family Home listings fall to the 16K's
Inventory right at 21K, into the 20K's this week.
Pending sales rise- is there better than expected demand?
Pending: 12,397 ( +616 from last last week)
Pending Sfam: 10,823 ( +533 from last week)
AWC: 7,741 ( +223 from last week)
AWC Sfam: 6,684 ( +180 from last week)
Active: 21,051 ( -342 from last week)
Active Sfam: 16,755 ( -284 from last week)
Closed 7/4-7/10 1,228
Closed Sfam: 1,065
Inventory continues to be a top story in residential real estate, as inventory has now reached exceptionally low numbers given the size of our market. It has not translated into big price gains yet, but last month seemed to show that there is some progress on that front. While I think it is fair to say that much of the activity is investors, that is not all bad; they buy homes that are trashed and spruce them up, and make them available to buyers who may not have the expertise nor the money to buy and perform a fix up.
The amount of inventory coming on the market in June was also lower -again. We are down almost 15% from the number of listings last year, and while there is no guarantee that it will continue to trend lower, we have certainly fallen closer to a different kind of danger zone than inflated inventory- the danger of zone of too little inventory.
If this is truly the level of inventory, then we have reached now a point where we need to start feeling some optimism about the direction we are going, or resign ourselves to the fact that we are all permanently depressed by the economic situation, and no matter the news, nothing will re-invigorate the industry. If this is the level of inventory when we get to February next year, then there is going to be a big price spike by April. There is simply not enough slack in inventory to account for the demand boomlet that starts in the spring and continues through June. We started last February at 30,000+ homes. If we are at 20,000 homes in February, there are going to be some fights occurring over the homes available. Its just not enough inventory to see us through the brisk selling season. We have sold at near record levels this year for the last four months, and we are not even in a good economy yet. There are indications that the economy is getting better, especially in Arizona, with hiring picking up, and retail sales returning to normal levels. If we are in a stronger position economically by next February, we could see a run on homes. There will of course, be some incremental number of new listings added as some people realize they will be able to sell at a higher price than before and get out of their homes, but- people are funny. Once they realize that they may be able to sell their home at a higher price, they realize they will have to buy at a higher price, and maybe they won't be able to qualify as well as they have now. These things tend to balance out, so while some new listings will come about, others will choose not to sell because the home finally has rising value.
I think, barring the continuing idiocy of our leaders in Washington, that a stabilized economy for Arizona means that we will see a price spike in Second quarter next year. Write it down, because I am calling it right now. We might get it before that, if demand continues to accelerate in the dog days of summer, but I think it will be a stable market for some months forward. Median prices will likely stay flat as many of the homes being bought are in need of repair, which keeps the prices lower. As that works its way out of the system this fall, expect to see some better median numbers too.
I am a little bit surprised by the pending numbers rise going into July. I thought they would start to drop a bit. We are almost in the same league as 2009, when July finished with around 9000 sales. Of course, there were still 31,000 listings at that time, so 9000 sales is a strong number, given current inventory trends, and while I don't think we will finish that high, if we do, it will probably mean continued inventory reduction. If we continue to shadow 2009's sales pace through the summer and fall, I think we will be doing quite well by the time 2012 comes around, and we will see both price increases and more important to our economy, stronger builder activity as construction cranks up. Inventory did rise through the fall of 2009, so it wasn't all positive, and prices started to fall as a result, which was our double dip to where prices are today. Still, inventory is a different story now, so expect prices to rise with continued strong sales figures locally. We probably will receive some better activity going into the fall as well, so if July is good, expect August and September to be even better. If there is enough demand out there that just keeps inventory near its current state through the end of the year, then we will see a reason for optimism as the news turns towards bidding wars and families moving to the fringes to find affordable housing. If we have stronger than anticipated demand over the next several months, I think we will start to see price gains, as there simply is not the inventory to absorb strong demand. That will invite some people to sell which should equalize the market until we get the demand event that the inventory simply won't contain in the spring.
We are on the right footing it seems to finally exit the housing nightmare.
One last thing; here is a snapshot from the archive for stats on July 15, 2008. Click on the picture to enlarge it. The format was pretty barebones back then, but you can still see where we were inventory and sales wise. Obviously, we are in far superior position to this then we were back then. 52,000+ listings compared to 210,030 (its dropped since I started writing this post), pending sales are almost half of what they are today. Sales were scarcely 6,000. We are in a real estate recovery in Arizona, whether the naysayers wish to admit it or not. It may not be even for everyone, but it is recovering, and we will see that happen no later than March 2012.
Tuesday, July 5, 2011
ARMLS STATS 7/5/2011
***BLOWOUT SALES FOR JUNE! BEST EVER?***
Prices Rise slightly too; new listings in June lowest of year.
Inventory levels at lowest levels since 2005 or before.
Pending: 11,781 ( -1503 from last week)
Pending Sfam: 10,290 ( -1292 from last week)
AWC: 7,518 ( -441 from last week)
AWC Sfam: 6,504 ( -399 from last week)
Active: 21,393 ( -618 from last week)
Active Sfam: 17,039 ( -503 from last week)
Closed 6/27-7/3 3,909
Closed Sfam: 3,372
CLOSED June 2011 : 11,067
Closed Sfam: 9,486
Shocker for June: Sales top 11,000. That is big, and yes, it is the biggest number that I can find going back to 2005. Its not likely that there were bigger sales months before 2005, so it is probably the biggest ever. That is incredible; in the midst of all the doom and gloom we have been hearing, there were more homes sold in June 2011 than any month, even the boom years. That is significant and in a month or so, we should hear the mainstream news pick up on that. Granted this is very temporary, as we are going to go into an off-sales month in July, as it is a big vacation month in Arizona, but we literally reached less than two months worth of inventory. Can you imagine that, coming from where we have been?
To temper the enthusiasm a bit, lets remember that we will not see the same sales figures for July; it will likely be quite a bit less, and we will probably see a similar number of new listings, so we could see inventory grow a bit going into the latter part of the year. I just can't tell the direction of that; I think if we continue to see 8000+ sales a month, we will be in pretty good shape. Inventory may go up a bit, but it is now so low, we can afford to see it rise; if it keeps falling, we will be out of inventory. Normally, that could lead to rapid price rise, but given the gloom, it might cause people to not buy for a while as they won't want to pay too much. That is a short term condition, because eventually family formation will still pressure available inventory. We will still recover, but it could then take longer. That is the pessimistic side.
Now, on the optimistic side of the ledger, people still forget we are a growing state: a destination state even for both industry, retirees, and fresh starters, and they demand housing. Right now, housing is being created very slowly, and while no doubt many of the for sale homes are being bought to fix and flip or fix and rent, as opposed to long term purchase, they are still being sold, and inventory is still low. This is a recipe for price increases, and despite unfavorable lending conditions (excepting low interest rates) we have a chance to come out of the housing mess that has been created in Arizona in the next six months.
The last lagging problem is pricing, obviously, but even the median price rose a bit in June from $108,500 to $110,225. That may not sound like a lot, but annualized, that would be a 19% increase. We will get some fits and starts on the median price for a while, but it has been pretty obvious that we have at the very least reached a bottom based on current economic conditions on that this year. The average price was up slightly as well, so we can possibly start to believe that we have now corrected our inventory fundamentals here enough for prices to start to rise. Banks will be pumping foreclosures into the market for the foreseeable future of course, but they as of now are not overwhelming the market.
The short term outlook for housing in Arizona is probably a slowdown in sales and pending sales for July from the lofty sales figures of second quarter, followed by a slight uptick in August and September. Inventory levels are likely to moderate with a slightly upward bias. We might be surprised though; new listing inventory has been trending down 15% all year from 2010 levels, and if that is the case, we might see inventory continue to fall slightly. I really do think it will rise a bit though, based on the theory that new inventory infusion will remain similar to last year, and combined with slower sales in 3rd quarter will allow inventory levels to drift upward.
It would be easy to dismiss the recent positive news as temporary, but the reality is that the sales number is not a fluke; we have had excellent sales going all the way back to March; we are off to a great start in 2011, and by most metrics, we are in a statistical dead heat with sales numbers from the boom year of 2005. Our inventory is also at historically low levels; although much tougher to divine, the word is that new home inventory is less than 10,000 in the state compared to the 45,000+ new home inventory just a few years ago. Combined with lower levels of existing inventory, we are in position to recover, if people have jobs, and if lenders will lend. Sales at current levels are sustainable, and inventory levels at current levels are not; that means price increases unless new inventory is created. We are in recovery; it may take time until optimism takes hold, but we are in recovery, and eventually even the most pessimistic of people will have to acknowledge that.
Prices Rise slightly too; new listings in June lowest of year.
Inventory levels at lowest levels since 2005 or before.
Pending: 11,781 ( -1503 from last week)
Pending Sfam: 10,290 ( -1292 from last week)
AWC: 7,518 ( -441 from last week)
AWC Sfam: 6,504 ( -399 from last week)
Active: 21,393 ( -618 from last week)
Active Sfam: 17,039 ( -503 from last week)
Closed 6/27-7/3 3,909
Closed Sfam: 3,372
CLOSED June 2011 : 11,067
Closed Sfam: 9,486
Shocker for June: Sales top 11,000. That is big, and yes, it is the biggest number that I can find going back to 2005. Its not likely that there were bigger sales months before 2005, so it is probably the biggest ever. That is incredible; in the midst of all the doom and gloom we have been hearing, there were more homes sold in June 2011 than any month, even the boom years. That is significant and in a month or so, we should hear the mainstream news pick up on that. Granted this is very temporary, as we are going to go into an off-sales month in July, as it is a big vacation month in Arizona, but we literally reached less than two months worth of inventory. Can you imagine that, coming from where we have been?
To temper the enthusiasm a bit, lets remember that we will not see the same sales figures for July; it will likely be quite a bit less, and we will probably see a similar number of new listings, so we could see inventory grow a bit going into the latter part of the year. I just can't tell the direction of that; I think if we continue to see 8000+ sales a month, we will be in pretty good shape. Inventory may go up a bit, but it is now so low, we can afford to see it rise; if it keeps falling, we will be out of inventory. Normally, that could lead to rapid price rise, but given the gloom, it might cause people to not buy for a while as they won't want to pay too much. That is a short term condition, because eventually family formation will still pressure available inventory. We will still recover, but it could then take longer. That is the pessimistic side.
Now, on the optimistic side of the ledger, people still forget we are a growing state: a destination state even for both industry, retirees, and fresh starters, and they demand housing. Right now, housing is being created very slowly, and while no doubt many of the for sale homes are being bought to fix and flip or fix and rent, as opposed to long term purchase, they are still being sold, and inventory is still low. This is a recipe for price increases, and despite unfavorable lending conditions (excepting low interest rates) we have a chance to come out of the housing mess that has been created in Arizona in the next six months.
The last lagging problem is pricing, obviously, but even the median price rose a bit in June from $108,500 to $110,225. That may not sound like a lot, but annualized, that would be a 19% increase. We will get some fits and starts on the median price for a while, but it has been pretty obvious that we have at the very least reached a bottom based on current economic conditions on that this year. The average price was up slightly as well, so we can possibly start to believe that we have now corrected our inventory fundamentals here enough for prices to start to rise. Banks will be pumping foreclosures into the market for the foreseeable future of course, but they as of now are not overwhelming the market.
The short term outlook for housing in Arizona is probably a slowdown in sales and pending sales for July from the lofty sales figures of second quarter, followed by a slight uptick in August and September. Inventory levels are likely to moderate with a slightly upward bias. We might be surprised though; new listing inventory has been trending down 15% all year from 2010 levels, and if that is the case, we might see inventory continue to fall slightly. I really do think it will rise a bit though, based on the theory that new inventory infusion will remain similar to last year, and combined with slower sales in 3rd quarter will allow inventory levels to drift upward.
It would be easy to dismiss the recent positive news as temporary, but the reality is that the sales number is not a fluke; we have had excellent sales going all the way back to March; we are off to a great start in 2011, and by most metrics, we are in a statistical dead heat with sales numbers from the boom year of 2005. Our inventory is also at historically low levels; although much tougher to divine, the word is that new home inventory is less than 10,000 in the state compared to the 45,000+ new home inventory just a few years ago. Combined with lower levels of existing inventory, we are in position to recover, if people have jobs, and if lenders will lend. Sales at current levels are sustainable, and inventory levels at current levels are not; that means price increases unless new inventory is created. We are in recovery; it may take time until optimism takes hold, but we are in recovery, and eventually even the most pessimistic of people will have to acknowledge that.
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