Sales softer in October: 7502; Still higher than Oct '10 by 15%
Median price slightly lower, but is it really?
Inventory levels slip after rising slightly through most of October
New listing inventory: down sharply again from last year in October
Pendings Single Fam: 9,142 ( -799 from last week)
AWC: 7,495 ( -164 from last week)
AWC: 6,493 ( -127 from last week)
Active: 19,610 ( -123 from last week)
Active Sfam: 15,408 ( -99 from last week)
Closed 10/24-10/30: 2,001 ( +447 from last week)
Closed Sfam: 1,713 ( +390 from last week)
Closed October Preliminary: 7507 ( +986 from October 2010)
New listings in October: 9575 ( -2712 from Oct '10; second lowest '11)
Median Price: $112,000 ( - $1,000 from September)
October sales were softer, as expected, registering as the third worst month of 2011, after February and January. 7502 is a mediocre number, but not bad, considering its still 15% better than the 2010 October sales. October has been a traditionally slow month anyway, so it wasn't surprising. A 15% gain places it right in the swing zone for sales this year compared to last year; The average is 12.8 % increase in sales year over year, so its actually better than average. Of course, we would all like to see a much stronger sales figure, but this is not bad news.
On another front, active listings fell at the end of the month, after rising for a number of weeks in October; the rises were all quite slight, and this week's fall has wiped out about half of the inventory gains since the end of September. Inventory doesn't look like its going to rise much before February, since November is one of the slowest month traditionally for the number of new listings coming on the market. That could change, I imagine, but there is nothing in the statistics right now that are implying that: new listing inventory continues to fall, and sales are stronger than last year. The situation is this: we have two to three months before heavy seasonal demand comes around again, and two of those months, November and December, are not known for big inventory increase months; they are usually the opposite. September and October were those months last year, and that didn't materialize, as inventory has been basically flat since September 1st. December was actually a good sales month last year, so you could see some inventory burn at the end of the year even. There is a very good chance, as we have been predicting, that inventory levels going into the superb sales month of March will be just about where they are now. If that is the case, we will start to see a lot of inventory burn, unless there is a big influx of new inventory from the banks.
We are likely to see prices rise as well, since many people are going to be bidding on few properties. I didn't do stats for 4th quarter last year, but inventory September 22, 2010 stood at 38,840. That is twice where we are right now. That was also a time period in which sales were much softer than they have been running this year, and with inventory being added at a pace approaching 17.5% higher than this year. Its a 30% differential in sales and inventory, and we might be forgiven for anticipating even stronger demand for housing in 2012, as the economy seems to be picking up a little steam. March could be a very telling month for how the housing industry is going to be doing. There just seems to be an event coming that will change the impression of housing here. Unless more inventory comes available from banks or flippers, its going to be very difficult to find a home here that you want by May. There will just be too much competition for it. I keep trying to think of scenarios in which this would not be the case, but I can see only one: that people will be unwilling to pay higher prices for property than they have been, and demand simply folds up. Its possible, but given that rents have been strong, and new family formation, it seems to me that demand is likely to increase, despite prices rising, as housing is being absorbed, rental or sale.
In support of that point, I recently looked at rental listings for homes in Maricopa. There were a large amount of them, which is what I expected. Almost 200, in fact. What I didn't expect was that I could hardly find one that had been listed for more than 60 days. That tells me that even in a seemingly saturated market like Maricopa, rentals were turning over very quickly. To take the Maricopa example a little further, there were actually more listings pending than available, so housing is being absorbed very quickly on all front there.
I don't see this trend reversing before February, when the demand actually starts to really pick up. If you are an agent, be prepared to tell your clients that they may lose a number of potential purchases if they don't put their best foot forward.
I mentioned the slight drop in median price; it did fall overall, but there is something else behind the slight drop. The problem with the median price as a measurement is that it brings a great disparate kind of property into the calculations. The long and short of it is this: month over month, median prices of single family homes was level at $120,000. But the median overall fell by $1000, from $113,000 last month, to $112,000. I can tell you that right now, we are seeing a run on these very low priced condos that are on the market, and they are selling at cash prices from lenders, so they are not only becoming a significant portion of sales, they are at very low prices compared to single family homes. Single family homes since August, are up $4,000. We are not seeing a drop in the single family market, which makes up the bulk of sales. Condo prices, since banks are making it extremely difficult to borrow on, are forced to sell for cash prices to investors, which drives the values extremely low. This kind of inventory also appears to be drying up, as I have been pursuing these for investors, and we are having difficulty finding the same deals we had earlier.
I already touched on it, but I did want to mention again, new active inventory for October was down sharply from last year, and down from last month. It is the second lowest total all year, barely losing out to July. The trend is toward lower inventory not higher, and while that could change next year, I do think we can expect better level of sales too, and probably at higher prices. We have baby boomers who are retiring as well, and we have people gaining confidence in the economy, to some degree, and this will only increase demand.
The trends are overall pretty positive that February will be the beginning of a very interesting time in real estate in Arizona.
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