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.
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