August Sales Rise Nationally 7.7%
Pendings up slightly, actives down slightly
New September listings on pace for less than 9000?
Pending Sfam: 10,519 ( +17 from last week)
AWC: 7,733 ( -87 from last week)
AWC Sfam: 6,707 (-69 from last week)
Active: 19,173 ( -34 from last week)
Active Sfam: 15,066 ( -20 from last week)
Closed: 9/12-9/18: 1700
Closed Sfam: 1,442
I apologize for not getting these out yesterday on the normal schedule; I was out of town.
September is not going to set any records for sales, but it looks like it will be okay. The pending numbers continue to hold up this summer compared to 2010, so the indications are that it sales are holding up pretty well. The fall is not a great time for sales until December, but we are holding up here. We are also seeing some substantially higher median listing price, which denotes people are either more confident in their pricing, or that there are fewer and fewer low priced properties coming on the market. That is the more likely reason. We are seeing that the condo market is absorbing inventory at these low prices, and there has been some news about luxury condo sales recovering locally. We also had the interesting headline this morning on CNBC about August home sales surprising. There was even another good bit of news (nationally) about the construction industry mending a bit. It was not about residential construction, but construction jobs of any kind would be most welcome. Its also an indicator of banks willingness to open up lending again, and that is crucially important to our recovery.
On the local front, new construction continues to be dogged by just how low the pricing for resale homes is. How do you sell a new condo for $100K when there are used condos for half of that price? Why would someone build a new custom home when you can buy a finished one for substantially less money? These are difficult obstructions for the market to overcome, and the primary reason that the new home construction business is so slow. These prices are assuredly under their economic value (meaning what is a reasonably expected rate of return for the asset class), and that condition will not last forever in a market. I have said it before, but if we get to the spring buying season without a reasonable uptick in inventory, buying a home at that time is going include a lot of bidding up prices for the best properties. We will be in a position of having half the inventory that we started this year's buying season with, and given the flow of 2011, that would mean we would drain ALL inventory off the market. Obviously, that will not happen, but what will happen is that as prices rise, more people will put their home on the market, thinking they can get a better price now. Builders who have some inventory ready may be able to sell specs to people who need a home now and don't feel like competing on buying a dozen properties before they are able to snag one with a blue sky offer.
This is not necessarily a bad thing; prices need to come up, and if this is the mechanism that shifts peoples' thinking, so be it. It could also happen that a lot of foreclosures may be coming available, and while I doubt there will be even a worst case scenario of 20% increase in the inventory levels over the next 3 months, that still amounts to very little. 20% would add 3 thousand extra homes to the single family market. A lot of Buyers' agents would tell you that they wish there were 3000 more homes on the market, because it is beginning to be slim pickings if you are a buyer. So if inventory increases by 3000 homes by January 1st, that would be just in time for the Spring Buying season, which will absorb 3000 homes in March Closings alone. When we go from 6K-7K closings a month to 9500-11000 for the next four months. The inventory wave does not appear to have sufficient legs to put these all out on the market in that short time frame. Regardless, I don't think that is going to happen; here's why.
I referenced in the title about inventory in September. Here are the facts. We have had a significant slowdown in the numbers of homes being listed all year. We are down about 17% from 2010. The trend all year is towards lower listing numbers; as a matter of fact, I went back to 2003, which is prior to any segment of the real estate boom years, and we are trending 6.3% less than that year. We have grown much larger as a city in that time, and despite the fact that our sales are 22.6% higher than 2003 sales, there is less inventory coming on the market. Most people will tell you that 2003 was a healthy time period for real estate in Arizona, but our inventory comparisons along with sales comparisons tell us that all things being equal, our inventory level is 30% below a historically healthy level. There is 22% higher sales, 6.3% less incoming inventory, so you have almost 30% higher inventory factor in 2003 than you do in 2011. I think that means that we can absorb a 30% increase in inventory and still be at the same levels as 2003. That is not bad. Of course, there is no evidence that we are going to see a 30% increase in inventory; as I said, the trend is lower, and right now, the trend in September could put us below 9000 listings this month, which would be the lowest total for a month for the year. So far, there are 5929 listings in September, through 20 days. That is about 296 a day. There are 10 days left in September, so an additional 2960 would be expected. That is a pace for 8889 for the month. I think it will finish a bit higher than that, but I don't have any evidence that more will be coming on the latter half of September than they normally do; listings tend to come on the market on a regular basis, as opposed to closings, which come as a rush at the end of the month.
It is difficult at this point to see where a big influx of inventory is really going to come from when by all appearances, it seems to be weakening. That can all change, I know, but my point is that the upside risk to higher inventory levels is very far below the dam wall at this point. The potential flood is not large enough at the current level of sales to matter much in the ARMLS region. I don't think there are too many experts out there who feel the next wave of foreclosures is going to be larger than the first wave of foreclosures; circumstances are simply different now.
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