MLS STATS 3/27/2012

Inventory Slides; pendings still rising.

Median price forecasting strong gains in March

Active inventory heading to unseen levels

Pending: 12,940 ( +135 from last week)

Pending Sfam: 11,081 ( +121 from last week)

AWC: 7,891 ( +76 from last week)

AWC Sfam: 6,887 ( +64 from last week)

Active: 14,399 ( -529 from last week)

Active Sfam: 11,150 ( -424 from last week)

Closed 3/19-3/25: 1,712 ( -163 from last week)

Closed Sfam: 1,418 ( -166 from last week)

Median Price: $128,000 +$5000 from last month

I am not going to spend a lot of time analyzing this week; next weeks end of the month report will be far more informative. There are a couple of items worth noting, however.

Sales this March will be down fairly sharply from 2011. The likely culprit is just not enough inventory to sustain the demand. Having a concentration of houses in Paradise Valley doesn't necessarily help someone looking for a home in Gilbert, so many a purchase is being put off right now by buyers unable to find what they are looking for. The other reason I think March will be slower is that the last two days of the month are on a weekend, and this will push sales into April. Its just a calendar quirk, but it can have a large effect on closings- at least until next month's numbers show up. Its not really a concern; in terms of sales for the size of the market, we are less than half the size of the market a year ago, but with almost as many sales. Not really a sign of weakness; more of a sign of "someone find me a house that I don't have to compete with a dozen other offers on". March will be down a bit, but the other items we track are all going very well.

Pendings do continue to rise; not particularly sharply, but they are rising. The available inventory is falling sharply, however, as we are nearing the 10k's for single family homes. We are only a month into the buying season, and the shelves are looking bare. We are hearing about some slipping prices nationally, but it is difficult to see that happening here. Phoenix was once again one of three cities to show rising prices; Miami and DC were the others. This is no fluke; they have been rising for months here, and given our low level of inventory, we can probably see prices extend gains for the next several months at least. One of the fundamental differences between Phoenix and other parts of the country is that our inventory has already been depleted, so structurally we should see our prices are rising.

There is also the fact that employment appears to be headed toward a strong recovery here in Arizona. There has been proof of this in both retail spending and the demand for workers in some career paths, according to this article at AZcentral.

We are seeing this lack of inventory have a strong effect on New Home Sales also. Last week again showed a very robust sales total, with the Ryness Report showing a reading last week of 1.1. That number might not mean much to anybody, but the only time in the last five years that the index has climbed over 1 was for 1 week back in 2007. There were three times as many new home sales last week as the same week last year. New home sales are getting better as a result of inventory, and New home construction has a gearing effect on job; new construction creates a lot of economic activity, and we can now expect to see a good strong number of new home sales occurring now that there is getting to be price parity with the thin market of resales.

Another item of note is that we do look like we are going to come in much lower for new listing inventory in March. There are not likely to be more sales than listings, but they are not going to be far off. Ultimately, I do think we fall into the 10,000's of listing inventory, as there are not enough listings coming on the market at this point in time to support the inventory levels. I do think we will start to see the law of elasticity start to show up though, and sinking below 10,000 might not happen, as prices will continue to rise, and the demand will be met by increased inventory. As prices rise, there will be homeowners who will no longer be underwater, and will be able to sell. Builders will start to crank up production, and I do believe that builders are going to eventually have some pricing advantages, as is normal for them, since they are on the fringes of the city. They have been pricing homes very low for the last couple of years; they may not have been making a lot of money, but now they may be doing enough volume where they can show some profit. I don't expect inventory to fall much lower than the mid-10K's for single family homes, nor past the 13,000's for overall residential.

I will cover more next week when sales for the month should be somewhat crystallized. I am curious about how the median and the average price finishes this week. If I was a builder right now, I would be seriously considering having some spec homes underway, because there are a number of buyers looking for a home right now who can't find one.

ARMLS Stats 3/20/2012

***Inventory Falls into 14,000's***

Median Price for March up $5,000 so far

Lack of inventory affecting sales?

New listing inventory continues to lag 2011

Pending: 12,755 ( +69 from last week)

Pending Sfam: 10,960 ( +42 from last week)

AWC: 7,815 ( +4 from last week)

AWC Sfam: 6,823 ( +3 from last week)

Active Listings: 14,928 ( -335 from last week)

Active Sfam: 11,574 ( -271 from last week)

Closed 3/12-3/18: 1,875 ( +305 from last week)

Closed Sfam: 1,584 ( +275 from last week)

Closed MTD: 4,382

Median Price for March: $128,000 (February '12: $123,000)

Inventory continues to fall as we continue into the busy season for home sales in Arizona. Inventory has now fallen into a level that I frankly don't think we have seen for decades here; there are not really any records further, but even in 2005 when demand was peaking, I don't recall seeing anything under 18,000 listings. If anyone has information different, I would love to see it, but I think we can safely say we are in unprecedented territory given the size of our market compared to 2005, and the low numbers of homes available. There is going to be a run up in prices, as competition for available homes heats up. We are only a month into the high demand season, and we have already seen fierce competition for available inventory.

Of course, there are many who are frustrated by how many offers are coming in on the best properties right now. With so little inventory available, buyers know they might have to fight to obtain a property, or wait until something else comes along. Many a ready buyer is not showing up in the stats because they have so far lost out. We are at less pendings than we were a year ago by a great number; about 600 less. That is a lot, and much of that can be blamed on inventory problems. There is not much to buy, and although buyers might be realizing this, we are not at a point where buyers will just put an offer on anything. This is not the mad rush of 2005 to get anything with a roof and a toilet; buyers are far more cautious. Consequently, I do think buying activity will be stretched out longer. There are a certain number of Buyers who will fail this month to acquire something, so they will be pushed into April, and perhaps be more aggressive on price than some of the newer buyers in the market; with the limited inventory available, the cycle is likely to be repeated with some ready buyers being pushed into competition in May, and so on. When the natural number of buyers slows down seasonally later in the summer, you might see those months sales' look almost as good as the high season of March-June, simply because there is a backlog of buyers who will finally be able to buy without the competition they are facing now. Of course, by then, the prices are likely to be much higher than they are today.

We are far enough into the month now to see that the median price rises from the early part of the month were no fluke. We currently have a $5000 median price increase from February. That is a substantial numbers; if that were to happen over twelves months, that would be close to a 50% increase from the starting price. I in no way expect prices to increase at 50% this year, but we are on pace for a 25% gain this year; that is the pace, not my prediction. I doubt it will continue to be that high. It is possible though; we have already gone up 6.6% for the year, and that is in a quarter comprised of two slow months; second quarter gains could be stronger yet.

I do think as prices increase, new home alternatives are going to look better to some buyers than trying to wrestle a single family home from other buyers. Prices are becoming more competitive, and we are seeing homebuilder sales- as well as builder confidence -tick up. Locally, our new home sales are staying in a much stronger range than we have seen since 2007. Nationally, the reports of permits rising and builder confidence holding to its best levels in 5 years, according to this story at CNBC.

We are seeing that new listing inventory is continuing to be rather light. 2011 was already a light year for listings, and we are lagging it by nearly 20%. March is the second biggest listing month of the year, and we are so far sticking with that trend of running about 20% behind last year's figures. We don't have as many homes going pending this year, but given the level of inventory being less than half of what was available last year, pending inventory makes up a much larger share of the market. Pending inventory is getting very close to being as high as active listings. That is a Sellers Market, people. There is no way around that. Prices aren't going to 2005 levels overnight, or maybe in the next 10 years, but they are going up, and whatever glut of homes that could possibly show up, maybe even if it were 5000-10000 homes; would be pretty welcome on the market right now, we are so low on inventory. However, that "overhang" doesn't exist it has not raised its head for the last two years, even when inventory has cratered. If the banks have it, where is it? Most banks are putting homes on the market as quickly as they get them, as they are selling. What is available is sold at auction, or is quickly sold on the MLS as part of the normal supply of inventory. If there is "excess" inventory, it is having no effect on the market. Here is a little tidbit about lender inventory. of the 7312 closings in February, only 1575 were listing as lender/reo sales. Of the current inventory of 14,9XX, there are approximately 1366 Lender/REO/HUD listings. There are still a number of short sales out there, without a doubt, but, lets start to get real about this; the wave of foreclosures that happened already happened; it happened two years ago in the summer of 2010, when inventory rose sharply, and prices finally capitulated when condo prices cratered in the later months and early 2011. That has changed, and lender owned, while still a substantial part of the market, is no longer the dominant force in the market. There will be lender owned filtering on the market for quite a while, no doubt, but its not going to be the driving force of the market in Arizona going forward. It looks like a spent force.

Now, that being said, I still worry about gas prices affecting people on the fringes; more than 1 sale will be lost when the buyer decides that driving from a suburb to their job in town is not worth the extra gas. It could affect in other ways though; inner city could lose jobs to suburbs, as companies try to reach their worker bases better. You will see commercial and industrial "pods" show up in the Mesas, Queen Creeks, and Surprises of the metro area. I do worry about the short term affecting new home construction, however. Those builders are mostly on the fringes, and even with the low prices they are able to produce at, its still a tough sell to someone who would have to drive into downtown or even uptown Phoenix for a job. Maricopa is only 45 minutes from Camelback and Highland on the 51, but not at 7-9 in the morning when there is a crush of cars all doing the same thing.

I do think that sales in March are going to finish substantially less than last year, but it won't be for a lack of demand, it will be a lack of supply. We are going to see a sharp uptick in the median, and I will hold back the average price until the end of the month, as well as the new listing price. It is very interesting.

ARMLS STATS 3/13/2012

***SINGLE FAMILY LISTINGS UNDER 12K***

Pendings Rebounding rapidly

Resale inventory additions are tepid at best

Phoenix real estate market starting to make news

Pending: 12,686 ( +458 from last week)

Pending Sfam: 10,918 ( +379 from last week)

AWC: 7,811 ( +213 from last week)

AWC Single Fam: 6,826 ( +193 from last week)

Active: 15,263 ( -557 from last week)

Active Sfamily: 11,845 ( -444 from last week)

Closed: 3/5-3/11/12: 1,570 ( -858 from last week)

Closed Sfam: 1,309 ( -738 from last week)

Inventory continues to crater in the Arizona Regional Multiple Listing Service; single family homes have now fallen under 12,000. That is a a very thin available selection for a market of this size. Four years ago at this time, there were 44,000 single family homes on the market. Even the overall market of 15,283 is tiny compared to relative demand, and we are seeing it now I think show up as affecting pending sales; there simply is not enough supply to feed the demand. Last year at this time there were about 500 more pendings at this time; I think there are a lot of people who haven't been able to buy the home they wanted yet, and that is going to slow the sales numbers for March. At some point, this was going to happen. Last year there were twice as many homes, and buyers could choose; this year there are dogfights to buy the best available property. There are a lot of dogs barking up the same tree right now, and all but one will have wasted their time on that property. It does delay buyers. I think we will finish with less sales in March than last year, possibly by quite a number. However, the result of this solid demand is prices are going to keep rising.

This level of inventory is going to start affecting homebuilders; if they can put out a decent priced home now, they are in the running for a buyer, even if they are priced a bit higher. The median continues to climb, which means new builds are getting more competitively priced, and this should be a huge boon to builders. Arizona seems to be in excellent position to make a return to a good healthy real estate market this year; land may not recover right away, but housing is going all in the right direction.

One note regarding the pendings: even if they are lower, the AWC field is higher than last year, and this speaks to short sales. Short Sales are happening faster now; the increase in AWC can be attributed to this, and AWC do feed the pendings and also closings somewhat under the radar as some spend very little time if any under pending, depending on the agent, and or the banks short sale procedure. We could end up with as many sales in March as we did last year; we have been doing that very thing so far this year with lower pending numbers throughout January and February as there were last year.

New listing activity continues to fall as well; its running about 20% behind last year. These combinations make it easy to see why we would have this dearth of inventory.

We are too early in the month to make a call on the median price, but so far we are seeing stronger numbers than February, and strikingly stronger than March 2011; about 15% higher. I will discuss that more later in the month when the numbers are solidified a bit more.

I do want to address a few things we are seeing about Phoenix real estate; I have been calling this since the fall of last year when it became apparent that inventory was not growing despite the seasonal slowdown: we were going to have this little boomlet due to lack of inventory. We are now seeing this reported in local and national news publications. Here is an article in the AZ Central about buyers being squeezed out by investors. (I thought it was settled science that we had a housing glut?) Of course, this implies optimism if you look at it broadly although the article is more a hit piece on investors than it is reporting the real story that hmm, we might have a recovering housing market.

The Wall Street Journal also leads with a Phoenix real estate turnaround story. You will have to have a subscription to read the whole article, but you get the gist from the lead of the story. This is happening here, and it is happening because the excess inventory has burned off and what remains is what made Phoenix a destination for so many people before: relatively low priced high quality housing, a welcoming business friendly economy, and an incredible climate. We are not healthy yet, but the fever seems to have broken, and the patient is upright again. The next stage is whether this lack of resale inventory results in New homes being built and bought. Construction is a great jobs engine, and it is some of the medicine that Arizona needs right now to bring us back to full speed.

MLS STATS 3/6/2012

***Listings Fall Below 16,000***

February '12 Sales Top Feb 2011 Closings

Median Sales Price rises again

Pending Sale recovering quickly from end of month sales

Pending: 12, 228 ( -224 from last week)

Pending Sfam: 10,539 ( -196 from last week)

AWC: 7,598 ( -113 from last week)

AWC Sfam: 6,633 (-91 from last week)

Active: 15,820 ( -418 from last week)

Active Sfam: 12,289 ( -347 from last week)

Closed 2/27-3/4/12: 2,428 ( +607 from last week)

Closed Sfam: 2,047 ( +538 from last week)

Closed February: 7,281 ( +127 from Feb. 2011)

New Listings Feb: 8,999 ( -1,837 from last year)

Median Sale Price: 122,000 (+2000 from January 2012; +13,000 from Feb'11

Average Sales Price: 166,237 ( +2,100 from January 2012; +10,848 from Feb'11

Unexpectedly, sales for February surpassed last years total, as the extra day we had put us over the top. It was a strong month for sales, regardless, as keeping pace with 2011 would foretell of a very strong resale market. Still, half of all sales were cash transactions, which makes some people uncomfortable, as it implies a heavily investor driven market. I say that lets be content that there are buyers out there willing to pay cash, as the inventory is being cleared up. Money eventually flows to where the best value is, and housing has been that asset. Warren Buffet has even said so. I still did not expect February sales to reach last year's levels, as we just don't have the inventory to sustain that kind of sales rate, unless we have strong increase in prices. We are seeing some price gains, but these are not going to relieve the pressure on inventory as we reach the peak season. A $2000 gain month over month may not see like much, but if you consider that pace over the course of a year, it works out to be about a 20% gain year over year from your starting point. That is significant. I am going to hazard a guess that in the next few months there will be at least one or maybe 2 of a price gain upwards of $3,000 dollars a month.

Prices aside, we have reached a critical point for inventory. We now have fallen into the 15,000's in total residential homes for sale; if sales trends hold, and we have 10,000 sales in march that matches the trend set up so far in comparing to last year, that means we will see 1.5 months of inventory on the market at the end of the month. If current inventory trends stay true, by the time we get to the end of the month, it will actually only be 1.3 months worth of inventory.

I am not going to forecast that; I think that buyers are starting to run into a block wall trying to buy due to lack of inventory to consider, and some buyers will be delayed in their search. Perhaps I am wrong, but I think in March we will not keep up with the trend in 2012 in which sales track 2011. Logistically it looks difficult to do. I do expect prices to continue their gains, however. Pendings recovered from the end of month sales to quickly rise above 12,000 again, which does pace the same as March 2011. Pendings are our best indicator of short term sale success, and it appears we are doing well there.

The median listing price is also rising rapidly, and finished the month $5000 ahead of January, and $25,900 over February of 2011! There are changes coming this year. Its now clear.