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.
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