Inventory Slides; pendings still rising.
Median price forecasting strong gains in March
Active inventory heading to unseen levels
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.
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