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.