ARMLS DATA 1/31/2012

***Inventory falls into 17K's***

***Single Family Inventory falls into 13K's***

Inventory Dropping Sharply; new listings for January under 10K

Buying Activity Rising as Pendings top 11K for 1st time in 2012

Prices rise in Phoenix, even according to Case-Schiller

Pending: 11,027 ( +271 from last week)

Pending Sfam: 9,563 ( +221 from last week)

AWC: 7,249 ( +93 from last week)

AWC Sfam: 6,271 ( +88 from last week)

Active: 17,778 ( -442 from last week)

Active Sfam: 13,888 ( -406 from last week)

Closed 1/23-1/29/12 1,549 ( +270 from last week)

Closed Sfam: 1,319 ( +260 from last week)

Median Price: $120,000

New listings in January: 9,393 (-25% from last January)

Housing data in Phoenix continues to impress, as most statistics continue to show recovery -oriented results. Inventory has now fallen into the 17,000's a far cry from the nearly 60,000 homes that were on the market at one point. Single family listings are now in the 13,000's as well. This shows tremendous improvement, even over last year. Even in the middle of last February, we still had 34,000+ listings available; we are going to go into March with no such buffer this year. This is being exacerbated by the relatively few listings coming on the market in January; normally the biggest month of the year for home listings. It is likely we will end up with less than 10,000 new listings; that is 2500 less than last January. We are not building inventory in January this year; inventory continues to be pressured.

It is not just inventory that is improving; we also see that home prices are making a move forward, as so far in January, prices have moved ahead of December by $3000. That may not sound like a lot, but the first half of last year, we were mired in a $110K range; now we are breaking out of that range pretty solidly, and I do expect that to go even higher as we get to the strong selling season. Median pricing is without a doubt getting stronger. Even the notoriously dour Case-Schiller index is showing price retracement everywhere- except for Phoenix.

There is more good news. Pending sales are coming back very well, showing some resiliency despite January being a typically slow month. We crossed over into the 11,000's, which is an indicator of relatively strong demand. Expect that number to grow into the latter part of February as well. I don't think this will be a huge year for sales; there simply is not the inventory levels to accommodate the kind of sales we saw last year, but I would expect sales to be very solid, and at higher prices as I already discussed. Demand seems to be quite solid heading into the traditional buying season in Phoenix.

Still, there is more good news: Ryness' New home sales report is showing a sharp uptick in its data as well. I would love to show you the graph, but its copyrighted. What I can tell you is that the index is streaking above the last 4 years through statistics like a Traffic to sales ratio that this past week improved from 25-1 in 2011 to 10-1 this same week this year. Raw sales went from 22 last year to 52 in the same week. The percentage of canceled new sales was cut in half. This is just a snapshot example of a relative short period, but there is a marked increase in builder activity which is a result no doubt of the difficulty people are having finding resales.

Compared to normal times, prices are so low that yes, this is still a buyer's market. But from an operating point of view; it is not. Buyers who don't wish to over bid on homes are not having an easy time finding property. There are very few listings available at this time, and its not going to get any better. This is benefiting builders, who may have some inventory, but are also not being victimized as much by low prices as they were. With prices moving up in resales, builder prices tend to come back into line, and this makes selling easier for them. We are reaching that point and I am sure the builders are ecstatic. It doesn't help with the hollowed out inventory of the inner part of the metro area, but you are going to see a lot of sales that are going to happen in the suburb ring around phoenix. It is a step toward a healthy market for the builders.

My advice to someone looking for a home is to look now; the prices are not going to be the same again in Phoenix. I think despite Case Schiller, that housing is moving in the right direction across the country as a whole, but probably no place more so than in Phoenix, which is breaking the curve even now. Two months from now, we will have some intense competition for available homes, and this could very well lead to a housing shortage that will make homebuilders think about building some more specs, in turn hiring more tradesman. This is going to happen. If you are looking for a condo or a home, don't dawdle on it; you could save yourself 10% by doing it now instead of waiting until June.

ARMLS STATS 1/24/2012

Pending Sales continue to Rebound

New listings off 25% from last January; inventory declining precipitously

Median Pricing up strongly over January 2011

Median Listing Price rising rapidly as well.

Pending: 10,756 ( +427 from last week)

Pending Sfam: 9,342 ( +348 from last week)

AWC: 7,157 ( +156 from last week)

AWC Single Fam: 6,183 ( +120 from last week)

Active: 18,220 ( -236 from last week)

Active Sfam: 14,294 ( -144 from last week)

Closed 1/16-1/22/12: 1,279 ( -69 from last week)

Closed sfam: 1,059 (-51 from last week)

Median Price YTD: $119,900

Listings YTD: 7,173 (-2,470 from same day last year)

Median Listing Price: $144,900 (up from $119,000 in Jnauary of 2011)

Sales are on pace to be off from January of 2011; not unexpected given the relative lack of inventory, especially at lower price levels, where inventory is quickly drying up. The lower number of sales will likely be modest, maybe 400 less or so less, but the median price is also going to be much higher. We can see that right now it is up about 9% from last year at the same time, and I would expect that to rise over the next several months; possibly a slight hiccup in February, but the overall trend is going to be higher. I do expect the raw number of sales to be lighter in 2012, as more people will be opting for new homes as prices rise for resale, and also just because there are not as many "too cheap to ignore" assets for investors to pursue. Phoenix is not done with the foreclosure market by a long way, but as a force inflicted on the housing market, its impact is going to become negligible in 2012. Even a wave of foreclosures now would only likely flatten the price increases that are coming based on a whole year's worth of inventory and listing data. We see it showing up even in the listing data; listing prices are 21% higher than they were a year ago; sellers are more optimistic, and the low priced stuff has already sold.

We are also seeing a strong rebound in Pending Sales in January; we are up another 4.1% from last week. That is a fairly significant increase, and if it foretells what is going to happen in the Spring Buying season, Buyers will need to be prepared to fight for the home they want. Right now, sale prices are still historically ridiculously low, and many homes are being bid up over asking price. I have written 8 offers in the last few months that have been lost to other buyers who wanted the property more. It is the nature of things right now, and competition is only going to get sharper in the next few months.

Another quick note on inventory: I would have expected all of January to build inventory, but we are instead seeing sharp reductions. If March is only a mediocre sales month at 90% of last year's sales, we will still see our market at less than 2 months worth of inventory. If we have a blowout month, which I don't expect due to this very lack of inventory, but let's just say it is up to the 10K in Sales, we will be dangerously low on inventory, and prices could jet quickly. Builders are unprepared for this, and we also have to realize that most construction occurs at the edges of town, which doesn't help the bulk of buying pressure. There will be some who are happy to move to the outer suburbs, but more likely prices will shoot up.

Expect inventory to keep falling; expect prices to continue rising, and a sea change in what people say about real estate in Arizona.

ARMLS Data 1/17/2012

Buyer activity on the Upswing As Pendings Up Sharply

Listing Activity down from January 2011

Median Price?

Inventory falls slightly, insufficient for March Demand.

Pending: 10,329 ( +356 from last week)

Pending Sfam: 8,994 ( +315 from last week)

AWC: 7,001 (+160 from last week)

AWC Sfam: 6,063 ( +122 from last week)

Active: 18,456 ( -65 from last week)

Active Sfam: 14,438 ( -75 from last week)

Closed 1/9/12-1/15/12: 1,348 ( +477 from last week)

Closed Sfam: 1,110 ( +373 from last week)

New inventory Jan'12: 4,987

Median Price so far this month: $120,000. Up $10K from January 2011

Up $3K from December 2011

Buyer activity looks to be recovering after the holiday hangover, as for the second straight week, we've had a substantial rise in pending sales. Inventory slipped just slightly, which is fine. I would have predicted inventory to rise as January is typically a heavy listing month. We are on a pace for less than 10,000 listings this month, which is substantially higher than December, but that is completely normal. If we are around 10,000 listings for January, that will be a significant decrease from January 2011, which saw over 12,500 listings come on the market.

I don't like to talk about Median price so early in the month, but it is also trending higher. It might not finish that high, but right now its cresting at $120,000 which is substantially higher than a year ago, and a good monthly jump from December and November. Three months is a trend, and we will have to see where it finishes. I don't expect January normally to be a time when prices are pressured upward, but the momentum is likely there, and there is simply a lot less of the lower priced inventory available.

January is typically the calm before the storm, but we are half way through now, and we can activity picking up; I don't think we will have the raw numbers we saw in 2011, because we simply don't have the inventory to accommodate sales, but we will see higher pricing for the sale we do have. We might see substantially higher sales prices due to so few homes being available. I am calling for substantially higher prices by the end of the year, and I expect that conservatively speaking we will see median pricing in the $130's by June. The cheaper inventory is just not there like it was. We are seeing excellent activity, however, and I do expect us to have some very positive news by April.

MLS STATS 1/10/12

Pendings Rise Sharply

First week of January Sales off to sluggish start

Pending: 9,973 (+806 from last week)

Pending Sfam: 8,679

AWC: 6,841

AWC Sfam: 5,941

Active: 18,521

Active Sfam: 14,513

Closed 1/2-1/8/12: 877

Closed Sfam: 737

I am pressed for time this week, so I won't do the differentials from last week, but these are the raw numbers from Yesterday. Closings were off, not surprisingly, for the first week of the new year. However, pendings showed a dramatic rise, perhaps portending an earlier than usual buying season. I don't really expect pendings to start rising until the middle of next month, but if we have some fundamentally stronger buyer activity, I won't be surprised. We seem to be moving in the right direction economically, and that helps. I also saw a report that said mortgage applications are up, so perhaps we have some people getting back in the market.

Not surprisingly there is also word that nearly half of Arizona's home sales in 2011 were cash. It seems that investors have taken up much of the slack in the lower end of the home market. We have dramatically reduced inventory from the the peak, and I can speak with first hand knowledge about the competition for investor properties. I have gone through a streak of about seven contracts that we have attempted to buy properties for clients that we did not get the deal, and 4 of those were significantly over asking price. There is strong demand, it appears, and I do think that it will carry over to March.

On the downside, the first week of January shows awful sales. Its not surprising, but we still don't want to see that as a trend. The pending numbers probably indicate that is holiday hangover, though, as they rose very sharply. Inventory rose a little also, but as is typical in January when sales are somewhat limited. The rate of new inventory was on track to be a bit over 10,000- a significant fall from January 2011's 12,000+.

That is about all I have time to analyze this week; its not a very interesting time of the month or even month, but we are getting ever so much closer to the early spring buying season when we might begin to see sentiment shift to optimism.

ARMLS STATS 1/3/2012

December Closings: 7800+

Median Price Rises Again, Inventory falls sharply

Pendings also fall as seasonal demand slows

Pending: 9,167 ( -824 from last week)

Pending Sfam: 7,992 ( -728 from last week)

AWC: 6,605 (-348 from last week)

AWC: 5,709 ( -310 from last week)

Active: 18,366 (-434 from last week)

Active Sfam: 14,408 (-233 from last week)

Closed 12/26-1/1/12: 2,223 ( +492 from last week)

Closed SFam: 1,911 ( +468 from last week)

Closed December '11: 7,849 (-393 from December '10, +673 from November'11)

Closed 2011: 101,030 (+10,920 from 2010)

New listings for December: 7,351 (-2400 from Dec. 2010) Lowest monthly total of year

New Listings for 2011: 124,142 ( -26,655 from 2010)

Median Price for December: $117,000 ( +$6,750 from Dec.2010, +$2000 from Nov.'11)

Average price Dec. 2011: $162,110 (+$1000, from Dec. 2010, +$1600 from Nov.'11)

There are a number of year end stats to digest, so please bear with me on this. I will try to get to all of it. Lets take a look at December first.

2011 finished decently in December, although down a bit from 2010 in monthly sales. Pendings have also fallen sharply, as the holidays have taken their toll on buying activity. Also taking its toll: the lack of available inventory. I will touch on this later. This is expected behavior in the last few weeks of December. We will start to see buying activity pick up in the later parts of January. These stats give me no pause for concern at this point. It was a solid sales month for December; not spectacular, but solid. 7800+ was a good strong improvement over November.

INVENTORY

The actual amount of closings did exceed new listings, which obviously is going to point to lower inventory numbers. Inventory has fallen to remarkable levels, given where we have been. Two years ago at this time, there were 34,000 listings. I don't have the exact figure, but we can extrapolate a pretty similar number for 2011. We have nearly halved that figure, and there is no slack in inventory. I do expect a bit of an inventory rise through January, as it is traditionally a month in which many people list their home. A slight rise is not going to hurt us. We will be entering the spring buying season with a dearth of inventory, and if you are looking to buy a home, expect competition, especially in the good areas.

Overall, you can see by the new listing stats that for 2011, it was down sharply; almost 18% less than the previous year. That has been a critical factor in explaining our current inventory trend. If we see this trend continue, we are likely to see substantial price gains in 2012. We can expect upwards of 9000+ single family sales in March. We currently have 14,000 listings. How will the market react to the demand chasing such a limited supply? The caveat here is that single family sales could be stunted by the sheer low number of homes available. I can point to three less sales in December for this very reason in my own experience. There was a competition for properties, and someone was willing to pay more than my clients. These all would have closed in December, if we had been willing to pay enough, but they did not close, and all these buyers are still looking for property as we have been unable to find anything in the price range and area we have targeted. You can see how the count can be impacted by lack of inventory. We could get that effect, only larger, once we get to March. There will be a number of people who will focus on a property, only to be shut out when someone outbids. They may go through that process several times in order to get a home. Home sales may be driven down by lack of inventory, but you can also expect solid price gains as a result.

SALES 2011

Sales finished much stronger than 2010, topping the 100,000 for the first time since 2005 finished with 104K sales. This is significant. Short sales are going quicker now as well, so they are not gumming up the market as they were. Fairly soon, buyers who previously scorned buying a short sale because of the hassle may have to reconsider. 2011 was a very good year for number of sales, make no mistake. I don't think we will sell that many again in 2012. We don't have the soft prices or the slack to accommodate a huge sales figure this year. I know that sounds counter-intuitive to what we hear in the news, but I am taking stats directly from the living tree of MLS stats as they happen, as what agents can see and report as closed or as available. We have had a solid year of lower inventory trends in the Phoenix region. We just showed up in the Case Schiller index as the one city whose home prices showed an increase. We then increased again in December. I am trying very hard to be pessimistic to match what the rest of the media is saying, but I can't continue to ignore the very real stats that lie in front of us. Phoenix is pushing towards a housing recovery; its in the numbers.

I could be convinced of their fallacy if rents were falling, or if investors were having a hard time renting out properties to people. I have not seen that to be the case. Could this be the year many investors put their remodeled homes back on the market seeking a profit? We can only hope so, because the middle of the year could be a disaster for a homebuyer looking for property, and finding only a frustrating process of driving up prices along with a dozen other potential buyers. It would be good for the market were prices to remain stable for another year, but Arizona's housing history has always been boom and bust, and this will be boomlet- the fundamentals aren't there for a 2005 boom, but inventory will be scarce, and homebuilders do not have the sticks in the ground to quickly accommodate needy homebuyers.

PRICES

December, as you can see, crossed the threshold where prices are higher than they were the previous december. They nearly crossed in November, within $50, but December is when it actually happened, but it happened in a big way, with an increase of $6750 over the median of Dec'11. Significant. It was also an increase of $2000 over November, and $4000 over October. Significant. This is the first time in more than half a decade where we are on the right path in so many indicators-prices, of course being the last indicator to turn positive. We are still near the bottom, obviously, but the course does now look corrected, and as my inventory and sales paragraph lay out, we could move swiftly out of this price neighborhood come summer. Its all there, it really depends on how deep the desire to buy a home is. If the current level of demand is steady, there is no doubt of this. If there is a big increase of inventory, it could take longer, but it is difficult to see inventory doubling again, which would be required to maintain equilibrium at the current pricing level. Its just not likely the course we can expect. We are looking at much better economic conditions in this country; manufacturing seems to be going well, innovation and efficiency are high, and we are heading in the direction of more employment, not less. Its not particularly robust, but if the dregs of the economy we saw last year held up demand, surely more confidence can maintain our current trajectory of housing recovery. It is my belief that prices should be higher than what they are; the economic value of the home measured by what people will pay per month to live in a given property is much higher than what the monthly cost to own a particular property are right now. That economic in-equilibrium attracts buyers, and I would expect more household formation in the coming years. Apparently household formation has been dawdling along at half its normal rate. I have tried for the last few years to be as pessimistic as possible, and assume the worst, so again, lets not count "normal" household formation, and stick with "experienced" demand levels of the last few years. Give us 2010 and 2011 demand levels and we will see a marked improvement locally. Perhaps nationally the numbers are uneven; I don't study the stats in each market. Locally here, I don't see obstacles to housing recovery manifesting itself in continued higher home prices in 2012.

2011 was an awful year for many people, including me, but 2011 was also a year of stabilization- setting the foundation for future stability. The bugaboos of high inventory can no longer be pointed at, the bugaboos of falling prices can no longer be pointed at, and the bugaboo of low demand can no longer be pointed at. The evidence is all on the side of us heading toward housing recovery, at least in the ARMLS market area.