ARMLS STATS 2/28/12

Inventory Drops Sharply Again

Pendings rise sharply as we reach Buying Season

Prices Rising as competition for available homes reaches boiling point

Pendings: 12,452 ( +406 from last week)

Pending Sfam: 10,735 ( +302 from last week)

AWC: 7,711 ( +89 from last week)

AWC Single Fam: 6,724 ( +116 from last week)

Active: 16,238 ( -577 from last week)

Active Sfam: 12,636 ( -455 from last week)

Closed: 2/13-2/19 1,821 ( +51 from last week)

Closed Sfam: 1,509 ( +45 from last week)

Median Sales Price: $120,950 ( +950 from last week)

New Listings in February: 8,150 (February 2011: 10,836; Last Month: 10,095)

Statistics this week bear out what I have been saying since last fall when inventory failed to rise as expected: We have a short term housing shortage on our hands. I have heard from several different agents about the difficulty of locking down a house, whether you are an investor or not, as there are a lot of buyers compared to the available product. Pending sales are rising pretty quickly, and we are also seeing a growing number of AWC's, as short sales do make up a large share of eventual sales. The number of Closed transactions in February that are marked as "Short Sale Approval Required" is 1393. That could end up being something like 20% of the total for the month. Banks are streamlining this process so it does go faster, and I expect to see short sales hanging around for quite a while. On the other hand, lender owned sales so far this month are at 1254; a lower number than I would have expected to see. Last February through the 27th of February, there were 2855 Lender owned Sales.

Still, together they make up nearly half the sales in February, so far. Perhaps not entirely unexpected, but still a long way from a completely normal economic situation.

The real story is the inventory level, however. I don't think that given our level of inventory that we will reach 10,000 sales in March; we just can't. There simply is not enough inventory to absorb the demand; I think some buyers will put off the decision until they can find what they like; others will leak out and find their way to a new home development, and others may find themselves sitting on their hands and renting for a while longer. Gleaning 10,000 salable homes out of an inventory of 16000 is very difficult, unless people are willing to settle on something they maybe don't like. I think prices are still low enough that Buyers won't feel like settling, so they will wait. It might not work, as prices are also continuing to rise, and at this point it looks pretty safe to say that people are going to have to pay more a year from now than they are today.

Speaking of the prices, the anecdotal info I hear out there is telling me that the competition for the best homes is fierce. Agents talk of writing dozens of offers for a particular client because they feel like they have to shotgun enough to get a hit, even if most of them are insincere offers, since they can only ultimately buy one home. That is what happens when the market gets tight.

Another piece of anecdotal information that I would share is about a particular market. Maricopa, AZ is a city south of Chandler but separated by an Indian Reservation. Maricopa is a mostly new small town, surrounded by miles of farmland, so lots of available inventory for future construction, in a way. Maricopa is a place that suffered foreclosure losses worse than most for this reason, as values just fell away due to not just the large amount of inventory there, but also the potential of additional inventory. The builders were still there, and they were starting homes off at ridiculous prices; I recall seeing one new development starting with a $79,000 price tag for a nice home with a tile roof and 2 car garage; I thought it was a three bedroom, but I won't say for sure. Well, with no inventory like that, the 200K to $300K that many people paid for their home became a reason for a wave of foreclosures and short sales, creating massive amounts of inventory that only drove prices lower. This area was even featured on ABC news as one of the hardest hit areas that would never recover. Well, guess what. The low pricing for some of these homes in the $50K's has virtually disappeared, there are only 4 homes priced between $50K-75K left on the market there. Just a few weeks ago there were 25-30. There are now only 165 single family homes for sale in Maricopa, and there are over 300 pending sales; there are also an additional 200+ under AWC contracts, so you can see the demand happening there. To put that in perspective, we are reaching the strong season for sales in the MLS, and there are 12,000+ pending sales for 16200 active listings; about a 75% ratio. The town of Maricopa is at 305 pending sales for 165 listings; a 185% ratio! They are showing very strong demand down there, even with the new home choices that can be made. However, the inventory level has shrunk precipitously as well, and as the prices rise closer to $90,000, you will start to see a lot of that demand shift to new homes, as choices at a given price are getting to be very thin, and the builders are in the same ballpark in terms of pricing. This is where is begins for the builders to improve. Maricopa is showing that people are still drawn to affordable housing, even on the fringes, and the builders will have a market to build for. I see a lot of good things for Maricopa, a town that is managing its growth very well, and one with a plan for creating its own jobs. Maricopa is a very likely place where I may choose to live eventually myself, based on its proximity to the Mesa airport that I would tend to use more often.

Another area is Wittmann; if you had tracked Wittmann for the last several years, you would have seen a huge change in available inventory; it has shrunk down to only a dozen homes now where there had been a hundred; the beginning price for available inventory out there for a home on an acre is now at $169000 as of today; there simply isn't anything for sale for less than that. That will change when a smaller home comes up, I am sure, but today, that is what you can get.

I expect February to finish in about the same range of closings as last year, but at much higher prices. We will find out later this week.

MLS STATS 2/21/2012

***Inventory Falls into 16K***

Pendings rise, but gain slows from last week

New listing inventory fails to material

Pending: 12,046 ( +135 from last week)

Pending sfam: 10,433 (+131 from last week)

AWC: 7,622 (+40 from last week)

AWC Sfam: 6,608 (+32 from last week)

Active: 16,815 ( -282 from last week)

Active Sfam: 13,091 ( -248 from last week)

Closed 2/13/-2/19/12: 1,770 ( +496 from last week)

Closed Sfam: 1,464 ( +400 from last week)

Median Sales Price: $120,000 (+$11,000 from February 2011)

Number of New Listings in February: 6,022 (-44% from last February)

Inventory continues to fall in the ARMLS region, as we have now dipped well into the 16,000's in overall residential inventory. Single family homes are selling at an even brisker pace, as the number of pendings is gaining almost as many as overall residential, which means they are selling at a faster rate. I do think that we are going to be hitting a ceiling here with pending sales, however. I could be wrong, but I do think there are market forces at work that constrain additional increases in sales.

• Inventory numbers are far too low to support dramatic increases in pendings, or closings, for that matter. People searching for a home now are not finding it as easy as a year ago this week, when we had over 34,000 listings. The buying activity gets stretched out further when people can't pick one off the shelf. Also, The scale of economy doesn't work; we are seeing pending numbers almost the same, but the will of buyers has to be that much stronger to continue to search. This will is expressed in terms of pricing.

• Home prices are already on the rise; as inventory sinks, prices will either be pushed up, or people will give up. We may encounter a short term bench here in February, as prices are sticking pretty close to what they were in January. We don't know how strong the will of the Buyers are to push pricing. In February, the momentum stopped.

• New home builders are becoming more competitive as prices rise, and we may see an outflow of frustrated buyers of resale migrate to New Homes. These new home sales are very good for our economy, so its not a negative issue, but it does serve as a relief valve that is going to prevent resales from making further strides in numbers of sales and also in price, to a lesser degree. I think prices will continue to rise, but not as fast as if there wasn't an availability of new homes available to buyers.

Still, we are at a very good place for sales and inventory; the bias is going to be toward higher pricing, even if there are marginally less sales than last year. I think we would all trade 5% less pending sales for having less than half the inventory available; this contributes toward re-inflation of value, and new home sales, a key component of economic recovery for Arizona.

Continuing to be of interest is the number of new listings coming on the market; its down 44% from last February. We have a full week left in this month, but it is still going to finish substantially less than last year. March is a bigger month for listings, and we may see inventory catch up a bit next month- or not, as March is an exceptional month for sales, and if it is in the ballpark of last year's sales, it is likely to strip away inventory, not add to it.

I don't think we will have as many sales this year as last year, but I do expect it to be fairly similar. I think Pendings will peak under 13,000 this year, but the range we are in got us to 100,000 sales last year, a number we are not in need of hitting due to the lack of inventory. Some of those buyers will undoubtedly pursue new homes as prices rises, which is actually better for our economic growth. The caveat to that is if there is a lot of inventory waiting out there, it should be on the market now, so buyers can get it, before turning to and driving up new home construction. Its better to fill the homes we have, but we have now had over a year of lesser inventory becoming available. If it is out there, the banks have held it too long, and they are missing buyers who can't wait. It just doesn't seem likely anymore that it is out there in great numbers.

MLS Stats 2/14/2012

Active Listings Continue Their Decline

Pendings rise sharply as seasonal demand kicks in

Pending: 11,911 (+630 from last week)

Pending Sfam: 10,302 ( +542 from last week)

AWC: 7,582 ( +97 from last week)

AWC Sfam: 6,576 ( +6448 from last week)

Active: 17,097 ( -294 from last week)

Active Sfam: 13,339 ( -228 from last week)

Closed: 2/6-2/12/12: 1,274 ( -1203 from previous week)

Closed Sfam: 1,064 ( -1,027 from previous week)

Not much to report this week; drab middle of the month numbers. Perhaps of note is that we are very close to hitting another milestone in inventory, or lack therof. We are about to fall into the 16K's, a difficult position no doubt, with March on the way. If we have similar sales to last year, that would mean we would have approximately 1.6 months worth of inventory to begin March with. That is a a sellers' market, people. If we were to draw down 1500 to 2000 homes that month, what next? Entering April we would be in serious lack of inventory given the demand for the next several months. That said, given our still current shaky economy, I have no doubt it will have just as much effect on demand as it does on raising prices. If prices start to rise, we will lose disheartened buyers who don't like rising prices. It happens. Not everyone chases the dragon of rising prices. It will have some effect on total number of sales, and I don't think at this point I see us having more MLS sales than we did in 2011. There is no inventory available to allow that. We should see some stronger price gains this year; not really an insightful position, since its already happening, but as the lower priced inventory dries up, there will be less investment opportunities that investors find attractive, and they will not be buying. However, we are also going to see this build some confidence with regular buyers, which is a far healthier market condition.

I would expect February closings to be less than last year, but also show a good price gain over the same year. We are going to see some yawing in the median price for a bit; after a good month, we might see a slip, but probably followed by another increase. Interestingly, listing prices seem to be climbing at a rapid clip.

From the statistics I have seen, new home sales continue to show great strength over the last 4 years, and I think this will continue, due to general lack of inventory. Builders actually will have some price advantages in some submarkets eventually, as they are have likely picked up some finished lots at extremely reasonable numbers. We probably have not seen a lot of this kind of construction yet, but as prices rise for resale, it will become attractive for builders in place like Gilbert and Chandler, and perhaps Queen Creek, to open up subdivisions if there is a lack of lower priced inventory in those markets. We already know that the inventory is lacking, but prices might have a little climbing to do before builders are fully comfortable with competing against bank resales. We see it in other submarkets as well. Wittmann is a prime large lot custom home area in the west Valley, with prices and resales having risen to the point that builders could probably be making money out there, but we have yet to see the attempt. Land prices are still reasonable there, its an easy build for the most part, and sales have been strong out there, at pretty good price points, yet no new builders have taken the plunge. If I was a builder, it would be the first place I would go to reestablish, as it is not a steep investment to do one home, and chances are you will sell it before its completed. It might not be a homerun profit wise, but I fail to see where there is such a place for a builder in Arizona. I would be very happy with a decent profit on a relatively low cost and low risk build.

Not a particularly interesting week, so I am going to cut it off here. Enjoy your week.

ARMLS stats 2/7/2012

January Sales Flat, but Median Price up again.

Pending Sales Rise, Inventory falling.

New listings down sharply from January 2011

Listing Prices show sharp gains

Pending: 11,281 ( +254 from last week)

Pending Sfam: 9,760 ( +197 from last week)

AWC: 7,445 ( +196 from last week)

AWC: 6,448 ( +177 from last week)

Active: 17,391 ( -387 from last week)

Active Sfam: 13,567 (-321 from last week)

Closed: 2,477 ( + 928 from last week)

Closed Sfam: 2,091 (+ 700 from last week)

Closed January: 6,449

New listings in January: 9,957 ( -2618 from January 2011)

Median Sales Price: $120,000 +$ 2,344 from December 2011

+ $10,000 from January 2011

Median Listing Price: $140,000 +$14,000 from December 2011

+$21,000 from January 2011

January sales were a little slower than last year, as expected, given the low inventory we are experiencing. They were actually just about flat, but down slightly. Take that with a grain of salt, however, its not a signal of a worsening housing market. Home prices were up sharply from January of 2011, with a $10,000 increase. Prices were also up sharply from the preceding month of December 2011, showing about a $2350 gain. Inventory also continued to fall, due to increasing demand, as pendings rose sharply again, as well as a falling base of new listings hitting the market. Listing activity was down over 20% from a year ago, falling by 2618 listings for the month of January. Total residential listings is only 17,391. Compared to February 14th of Last year, when there were 34,342 listings. There is pressure on inventory and pricing in the residential market.

We are fast approaching our busy season in the residential market, and I want to share some anecdotal evidence. I was out on Saturday afternoon looking at some central phoenix area homes with an investor client, and out of the 10 or so homes we looked at, about half either had buyers already there looking, or agents with buyers waiting for us to leave so they could see the home themselves. That is fairly remarkable, as I don't recall every encountering buyers at such a rate on vacant properties. Perhaps that is an isolated incident, which is why I am calling it anecdotal, but I have a feeling we are seeing that happen all over. I am fairly convinced. Why? I went back to a property yesterday to follow up on it, and more buyers walked into it while we were doing a re-examine of the property. If you are an agent, I would be curious if you have encountered any of the same kind of activity.

Lastly, it does appear that the new home market is starting to perk up as well. I discussed the index moving forward at a good pace, and the latest new housing report from Ryness showed more of the same. There were 46 new home sales in its sample subdivisions last week and no cancels. The traffic rate to sales was 10:1; last year at the same time, the traffic to sales rate was 23:1. That shows there is some confidence by the buyers walking into the subdivisions. Its good to see them do better, and it is likely to continue, as the resale market continues to drive upwards in price, and the inventory continues to slide. For many families, an apartment or a condo is a poor option, and renting a house is in many cases twice the cost of buying a new home, so we should see some strengthening activity for the builders continue into the buying season.

One last little thing: listing prices have continued a sharp rising trend, as sellers are gaining more confidence, and as the lower priced inventory dissipates. The condo market is drying up, and the price for a lot of that clearance inventory has already doubled in price. Where many condos were available for the $20,000's of dollars before in central phoenix, it is difficult to find the equivalent for less than $50K now. There were a number at that low ebb during the fall, but the price is being driven quickly forward by lack of inventory.

I do expect sheer volume of sales to be lower through this buying season, as there just are not the buying options available to investors that there were last year when we had such high volume of sales; there is no inventory, however, so that also means we will see prices rises as buyers start to compete. Some overflow can be absorbed by new builds, but not all. I would expect to see some central city property rise in price perhaps more sharply than the overall market, since finding a new home is less of an alternative. Condo prices will likely be stronger to the point that people decide that if they can find a house for not much more, they may go that route. Prices are still incredibly reasonable for a home, with low interest rates, which will encourage many people to buy if they can, as rents are still very high.