***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.
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