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.
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