MLS STATS 4/25/2012

Pending Sales Hit 13K- high for the year.  

Listings fall again

Sales to be less than last April due to lack of acceptable inventory

Pending Sales:                                   13,022   ( +256 from last week)
Pending Sfam:                                   11,253   ( +217 from last week)

AWC:                                                7,950    ( -54 from last week)
AWC Sfam:                                       6,916     ( -48 from last week)

Active Listings:                                 13,446     ( -164 from last week)
Active Sfam:                                     10,420     ( -137 from last week)

Closed 4/16-4/22:                             1,964     ( +280 from last week)
Closed Sfam:                                     1,626     ( +228 from last week)

Listings This month:                            7,420


Median Price through April 24:           137,000   (+7,100 from March 2012, +27,000 from last April)

Ryness Report Index:     .87

Pending sales rose past 13,000 for the first time this year, as sales gear up for May and June.  Sales continue to show good strength in the Phoenix market.  Sales are trending less than last year, but the median price is up 24.5% from last April.  It is likely that we will continue to see rising prices for homes through the summer, at least.

Its also being noticed nationally.  This week, Case Shiller noted that Phoenix prices have risen 5 straight months, counter to the overall US market continuing to fall for the past six.  This is even more telling in that context; national weakness, yet Phoenix is improving rapidly.  Might we have our mojo back?

More evidence that the nation is taking note:  The economist for Zillow is forecasting Phoenix to lead the nation in price growth over the next year.  He is forecasting a growth of 6.5% from March 2012 to March 2013.  His guess is in fairly safe harbor, seeing as how we have gained 5.4% from March to April ((137,000-129,900) /129,900= 5.4% )

As I already noted, pending sales are still rising; they might peak out at just over 13,000, but that is a very strong indicator of good sales in the next few months.  We are starting to see that active listings is starting to hit a floor; it is still falling, but the principle of elasticity is coming into play, and you just can't expect the inventory numbers to continue to fall to zero.  The number of new listings should start to increase to meet the demand as prices rise high enough for discouraged sellers who can maybe make a buck or two at these higher prices.

The other release valve for this much stronger demand is in new home sales.  Sales were a little softer this past week in the index, but overall it is still much stronger than it has been in the past 5 years week over week. .87 looks pretty good compared to the past years. The last 5 readings for the index for this past week:

Wittmann Active Listings

2007:  .70  2008: .37  2009: .30 2010: .41 2011: .37

                       
New home sales are getting stronger, and as they do, the land market is also improving.  One of the areas that we follow a lot made some national news last week, when CNBC interviewed Michael Ripson of Ripson Homes, about his Sonoran Acres development in Wittmann/Surprise.  You can see the interview here.  Diana Olick, who covers real estate for CNBC, also wrote an article about the Phoenix housing market, in which she quoted Mike.  Here that article is.  

I think Ripson was being fairly truthful about the conditions, and not just being a salesman.  The number of homes in Wittmann that are available has fallen by about 80 percent over the last few years, and increased sharply in price, back to over $200,000 for a nice custom on an acre.  Here is a map representing the available listings in Wittmann of homes on an acre.  Not a deep bench of homes if you want an acre of land in a rural setting, and traditionally, that is a popular kind of home in this market.

We are following Ripson closely as wee have naturally had a lot of interest in the Sonoran Acres project over the last several years, as we have a lot of inventory of lots in the area.  We are fortunate that we have a lot less money into the lots that Ripson does, but we want him to be very successful there, as it will attract other builders to the area if they see him selling homes.  For what he paid for the lots, which I believe was around $80,000, he was looking at a price range in the $300,00+ plus range.  He has re-calibrated, and is now going to be selling starting at $200K, and he said traffic is good.  He also stated he would be putting up a few more spec homes on the property, so we wish him well.   He is having an open house at the subdivision site at 219th Avenue and Patton Road Thursday, April 26th, if you are interested, from 3pm-7PM.

That was not the only bit of interesting news on the land side this week.  There was a nice deal for the investor for a project in Pinal County, formerly called Silverado Ranch, near the San Tan Valley.  It was already approved for 1800+ lots on 556 acres.  It sold for a bargain at $3,100,000.  A year or so from now, we will look back in amazement that such a property was available for that price.  That is under $1700 per lot for this property!  Yet here it is.  Granted, you had to buy the whole thing, but it is a steal at that price.  They are likely to turn around and make ten times their investment back on that deal, maybe more if they wait it out for more than 5 years.

I know of nothing that good right now, but for the small investor, I do know of a couple of properties that I think are excellent bargains.  I am not going to give them away here, but contact me if you want something even $30-$50K for a property with good potential to rise in value over the next few years.  I know of a few that I have already checked into that I haven't found a home for yet that I think are really nice. That is not always going to be the case.  We are going to wake up one day, and there will be a land market again, and there will be no cheap deals to get into.  Right now, like housing was last summer, prices are very cheap as no one has yet realized that as Steve Forbes said, there is a housing shortage in this country.  Well, all indications are that nowhere is that more true than in Arizona.  He may have been off by one year, but he was right on the money, at least for Arizona.

MLS STATS 4/17/2012

Inventory dives again; weekly sales higher

Median price is still gaining

New home sales showing some strength

Pending Sales: 12,766 (+ 9 from last week)

Pending Sfam: 11,036 (+53 from last week)

AWC: 8,004 ( +68 from last week)

AWC Sfam: 6,964 ( +57 from last week)

Active: 13,610 ( -224 from last week)

Active Sfam: 10,557 ( -183 from last week)

Closed: 4/9-4/15 1,684 ( +245 from last week)

Closed Sfam: 1,398 ( +234 from last wek)

Median Price for April: $136,284 ( +$6,284 from March)

Ryness New Home Index: 1.06 ( .35 Same week in 2011)

New listings in April: 5,173

Housing stats continue to suggest a recovery in housing in Arizona. The inventory continues to fall as demand picks up, and it is pushing pricing higher. It is also pushing some buyers into new homes, and we are seeing a lot more strength in new home sales as well.

There is also a fair amount of anecdotal evidence that new home sales are improving. There was an article about one of our favorite submarkets, the Wittmann area in Surprise, about a builder who is seeing things picking up at his acre lot subdivision. Ripson Homes has been sitting on a stalled subdivision there for quite a while, mostly because the price he needs to sell at was just too much higher than the market. He is seeing some activity now, and that is a great sign for the area. All of his homes are going for $200K or more. We like this area a lot, and I have a number of acre lots and 5 acre parcels in the area that are ideal for a builder. We also can offer seller carryback on a number of them. This is the easiest place for custom builders in this area; the land is relatively flat and accessible, and you are only a few minutes out from Surprise town center right down US 60. If you are interested in finding a lot in this area, we have a number of high quality properties that you can find here.

There are getting to be other articles about home construction in the valley too, in the much bigger business of production construction. Last weekend, we came across this article in the AZ Republic. It is fairly clear of the direction we are moving; the Ryness Report that I quoted up the page is showing a much better new home sales market than the previous 5 years. Its not even in the same ballpark, and its been consistent this year. Investors have been chasing housing, and they have been a big part of the inventory reduction, but now that inventory is gone, where do they go? Houses are still good value, but they are not available cheaply or readily any longer. I think that new foreclosures coming on the market are going to be pressured by people who want to buy a home. Condos are pretty well sold down- there are very few available. This was also forecast by the way, you can go back to my 11/1/11 entry, and I talked about the fact that since inventory didn't end up growing in October, we would have have some rapid price gains and fighting for inventory come March, and we certainly have. We have inventory shortage, and we have rising prices.

Where does that leave an investor? If you don't have pockets deep enough to buy an office building, which might be the other alternative, land is still looking like a relative bargain. We have not seen land being pressured by investors yet, so it is still at a traditionally very low price. It fell as much as 90% in some areas, and it is still languishing at or near those kind of prices. There is not as much for sale as there was earlier from banks, but there are still opportunities. If you are a small investor, and can find a lot with utilities, and it is less than 25 percent of what homes in the area are going for, its probably not a bad deal historically wise. That is a number that builders would readily pay to build a home on. Right now, that is relatively easy to find that and even much less, and as home prices continue to rise, those numbers only look better.

I don't want to tie a recovery in land too close to the housing recovery, but how can you not? We saw this happen last fall with condos- its going to happen with land as well- it might not be as sudden or immediate, but look; custom home builders haven't even started up yet. This article about Ripson Homes in Surprise is a brand new situation, as it wasn't possible until prices rose high enough to allow him to turn a profit. (He is in to those lots for $80,000 each as I recall) We have lots with well shares out there for under $34,000, with seller carryback! If he can build a home and turn a profit there, what can a builder do buying a lot for less than half the price do? See, we are underpricing the "real value" of those lots as well, and we could very well end up selling them at much higher prices when the market realizes that the economic value is closer to $50K-$60K- that is the price they can buy a full lot, build on it, and still make money.

I had a number of people that I talked to who weren't interested in buying condos when they there $25,000-$30,000 last fall- now however, you can't find anything for less than $60K for the same type of home in east Phoenix. Land is going to function similarly when people start seeing there is a demand for these kind of lots from small builders, like Ripson.

There are other areas less developed, like the Hidden Valley area of Maricopa, where land is frightfully inexpensive right now, if you can find something of quality. Maricopa is growing, and custom builders who deserted it 5 years ago will come back, and we will see that area rebound. Buying a 5 acre parcel for under $50K would be a bargain to a builder who was going to use it, just as a $30,000 condo was a steal for someone who would live in it-or rent it out, for that matter. For that $50,000, a builder would get 4 lots- that's $12,500 a lot. Put another $25K in for a well, and you have a building lot for under $20,000. If he can sell a new home for $125,000 on an acre and a quarter, and the recent new home sales figures seem to show that he can, he will make money on the land. Its a numbers game, and as prices increase, there is profit to be made for a builder.

As far as this week's stats go, you can see the inventory falling. In April we tend to reach a peak on pending sales, as April is usually slightly quieter than March is, before rebounding in May and June. It seems to be that way again, but the difference is prices will be driven upwards. We can expect prices to be driven upward through June, at least. Demand might fall, but so might the sky, so there is no point worrying about it. Right now, we have almost normal market demand, critically low market inventory, and below "real economic value" prices. That's a recipe for price increases. We also probably (i say probably because I can't prove it) have a strong influx of people. This only increases the pressure on housing. This is why we are seeing the new construction start to ramp up, which leads to pressure on land prices. Its all cyclical, and land has not had its rebound yet, and right now it probably doesn't take my expertise to point out a parcel of land you can make money on; most stuff is underpriced. I still would talk to a good land guy or gal though, because you don't want to end up buying something that doesn't work for you. For every good deal on land, there are half a dozen bad ones. Buy a good piece, even if it costs you a little bit more, because it will be the one buyers want first when they are looking.

If you are interested in hearing more about Land, contact me and I will tell you about my favorite places to acquire quality property.

ARMLS STATS 4/10/2012

Single Family Pendings now outnumber listings

Inventory Slides into 13,000's.

Median Price moving sharply higher again?

Pending: 12,757 ( +467 from last week)

Pendings sfam: 10,983 ( +393 from last week)

AWC: 7,936 ( +216 from last week)

AWC Single Fam: 6,907 ( +186 from last week)

Active: 13,834 ( -187 from last week)

Active Sfam: 10,740 ( -164 from last week)

Closed 4/2-4/8: 1,439 ( -1432 from last week)

Closed Sfam: 1,164 ( -1198 from last week)

Median Price for April*: $135,900 ( + $5900 from March'12)

*Through April 10th

I had a full post for you today; unfortunately it was accidentally erased, and I just don't have time to rewrite the whole thing, so this will be a very brief commentary this week.

The stats at the beginning of the month don't always tell you much, but what is interesting is that pending single family sales now have exceeded the number of single family homes available. Fascinating, considering where we were April 8th, 2008. (55,700 listings, 6270 pending sales) When you compare those ratios, you can see why we are not in the same predicament in Arizona as we were four years ago.

Secondly, the overall number of listings fell into the 13000's- I didn't expect to see us that low, but here we are. Pending sales are growing too, so it will be interesting to see if overall pendings exceed listings. Its not a ratio that really means anything, but when you look at that as a relationship to previous time periods, it shows how far we have come back.

Lastly, we are already showing a strong jump in the median price from last month, when it rose $7000. I actually expect it to be higher than a $5900 gain by the end of the month. It can't go up forever, but it has a little room to run, given the low level of inventory available.

I had a whole thing on the new housing market as well, but I am not going to re-do that this week. I am actually going to start doing these posts on wednesday in the future so I can pull in the new home sales reports, as they are gaining significant importance in our housing market again. The index is running at its highest point since the middle of 2005, which is excellent news. That doesn't mean as many new homes; there are less subdivisions open than at point, but the sales per subdivision is getting back to a much stronger level. I'll talk about that in a future post.

One last thing: I am starting to think we are out of the danger zone for the resale market; whatever wave of foreclosed homes that they are calling for again doesn't look capable of altering the market for very long. We are beginning a job creation mode in arizona, which construction always does, and diagnosing a well patient is not that interesting. I am going to turn the blog more in the direction of the land market, which is what I prefer to talk about anyway, and about issues and property. The opportunity going forward is in land investment, which has not recovered in pricing yet. There is tremendous opportunity to buy land as an investment now, and there will be demand for it from builders and developers again, as we continue to grow. This blog will become about land investment, which is the area I actually work in. The housing market is important, and we will keep an eye on it, but more important to me is working with investors who want to take advantage of the coming upcycle in an asset, that unlike housing is becoming, is still under-appreciated.

MLS STATS 4/3/2012

March Median Price Rises almost $7,000

March Sales Fall short of Last March; lack of inventory is culprit

New resale listings fall sharply from last year

Single Family inventory falls to 10,000's...

Pending: 12,290 ( -650 from last week)

Pending Single Fam: 10,590 ( -491 from last week)

AWC: 7,720 ( -171 from last week)

AWC Sfam: 6,721 ( -166 from last week)

Active: 14,021 ( -378 from last week)

Active Sfam: 10,904 ( -246 from last week)

Closed 3/26-4/1/12: 2,871 ( +1159 from last week)

Closed Sfam: 2,362 ( +944 from last week)

Closed March: 8,861 ( -1093 from March 11)

March Median Price: $129,900 ( +$6905 from Feb; +$119,900 from 3/11)

March Average Price: $180,688 ( +22942 from March'11, +14,337 from 2/12)

New listings in March: 9,545 ( -3007 from March'11)

Year to date listings: -20.8 % from last year

New listing Median price: March: $149,900 Up $5K from Feb'12, Up $32,000 from 3/11

There are a lot of statistics to go over this week, but it seems to indicate we are moving in a very good direction for housing. I still see obstacles to a full recovery, and I will touch on those, but by and large, we are moving ahead very well this year.

First off, the sheer numbers of homes sold did go down from March of last year. Fairly substantially too. This was not unexpected. Last year, we had over twice as many homes available, and at cheaper prices. This year, the shelves were very bare, and when you have so little inventory, and a lot of buyers, you are bound to lose out on sheer numbers. We have almost as many pending sales of homes as we have listings of homes now; we have fundamentally fallen into shortage of available properties. The number of sales is down, no doubt, but I would be a lot more concerned about it, except that the median price rose by almost $7000 since last month. To put that in perspective, it took the last six months of 2011 for the price to rise by $7000. That is an indication of solid demand, and lack of inventory. I have mentioned it before, but I do think we are going to tend to see less sales this year than last year, simply based on the smaller size of the market- less inventory, higher prices. There is also another outlet for this buying energy, of course, and that is new home sales. I might get to that a bit later.

One of the stats I don't look at very often is the average sale price. That is simply the total dollar value of the homes sold divided by the number of homes sold. The median is calculated for us, and it is weighted differently, utilizing the number of homes; and giving less weight to the high dollar figure homes that sell. It is less volatile and a lower number than the average. As we can see above the average has taken a sharp upward turn this month as well. Its a very good indication that either low priced inventory is already gone, which it is, and that higher priced homes are selling as well, since the average is pretty far above the median price. Both good strong indications of recovery.

Another interesting number from March is the new listings. It was markedly less than last year, and last year was a lot less than 2010. When you see so few new listings, we are going to have a draw down of inventory. We will likely fall into the 13,000 by the end of the day, and we are likely to see pending numbers push past inventory levels by the end of the month; it could be close, but it seems like it might happen. Pendings will likely rise again in the next few weeks, and inventory will fall, and the numbers will cross beams. It seems an awful long way from this, doesnt it?:

Pending Sales: 4205 ( +369 from last week)

Pending + AW/C 4933 ( +477 from last week)

Closed Escrows: 506 ( -159 from last week)

Active Listings: 55516 (+543 from last week)

Closed Month to Date (1/29/08) 2144

Yes, that January of 2008. 55K listings, only 4,205 pending sales. How far we have come fundamentally! It is very easy to see when you consider this is where we came from, why we won't be going back there. It would be virtually impossible to reach that level of inventory again, with so few sales. That was not even the peak of inventory! We just have turned the corner fundamentally, and while there is word of a coming wave of foreclosures again, it might not turn out to be much more than a pleasant roll of fresh inventory for desperate buyers here. Even if the market added 5,000 new listings at this point, we would still be undersupplied, and those most likely would be absorbed within the month. This article is a better description of what is happening in Arizona than the idea of an inventory swell.

There are no shortage of articles talking about housing recovering here. Here are a few, both local and national:

AZcentral

KTAR

CNBC- (Article mentions Arizona as a place to own property and land to counter inflation caused wealth destruction)

AZcentral- Southeast valley

AZcentral Prices heading up

These are just some examples of articles that are latching on to the idea that our market is headed in a good direction.

One of the fallouts of this turnaround in housing is this, however. For you investors who are going to start thinking about buying a house to rent it out, you may be getting in too late. The price of houses has risen dramatically in the last three months, and while still undervalued historically, there is not as much meat on the bones now. You also have two other problems: 1. Right now, there is little available inventory to buy, and you will likely have to compete very hard to acquire it, perhaps even overpaying enough that you will have to look at less acceptable rental terms. 2. When everyone decides to do something, it eventually becomes not such a great idea. If everyone is buying for the idea of renting a property out, eventually rents are going to fall when there become too many properties. It also fundamentally changes the consumers' mind to the point that they think owning a house becomes a good idea, and might go off and buy themselves. You have to buy right in order to make the rental work, but you also may want to sell that property eventually if renters become difficult to obtain. I think going forward, I am looking at condos and housing prices for investors as getting too high. That brings me to this:

• Vacant land is becoming a better investment than a home at this point. Prices have risen in housing, while land prices are still languishing pretty close to what you would call a bottom. If you can still buy an asset that was priced at the bottom, you are doing well. Throw in that property taxes are at a low ebb for the next several years, and that land has virtually now maintenance to speak of, and you have a low hold cost asset that will likely appreciate greatly as housing turns around and we return to a normal market. Prices are off as much as 90% for land in certain areas around the valley, and it is an incredible opportune time to buy. We can see housing recovery, but land prices are still where you would expect at the bottom of a recession. The right areas and parcels offer incredible values right now. Housing is still a fine deal, but you are beginning to reach what I would call full mid-term valuation for housing. Condo prices have doubled since October in Phoenix; single family home stocks have dried up, and risen closer to what its value to a wage earner is. It is still a little below, but it is rising fast. Without substantial wage increases, I think you will see houses get to the point where careful mortgage lending says a wage earner can afford. We are not at that point yet, but I do think we will see median prices top out in the short to mid term near $150,000. Builders have pricing power at that point to offer an alternative, which has long been the case in Arizona, so buying a home past that point as an investor is not to me, a great deal. It might still work, but the rewards are less, and the risk is higher. I think its very appropriate to say this: "if you are an investor, you should have bought last year." Land has the opportunity to rise rapidly as builders, including infill builders reach the point where they can build and make some money. If you are a small investor, if you can find infill land, or even some building lots with utilities, they are offering really good value right now. There are few custom or small builders who have made efforts to get started again, and this is an opportune time to acquire what they will want when they do. They might be looking for prices to rise just a bit further, or have a firm idea that prices are going to stay where they are before they get started, but they will get started again, and they will require lots to build on. We are already seeing it with the big builders, but the custom builders always follow eventually.

Watch inventory numbers closely over the next few months. I am curious if inventory can continue sliding, or if we will see pricing encourage people to sell their homes to meet demand over the next several months. By the end of June, the cycle will slow a bit, and I do think we will see inventories bounce back a bit after that point, but could we see price spikes over the next several months due to us falling perhaps into the single 000's for inventory? It could happen. It is not very scientific, but I have gone around to builder websites looking for spec inventory, and I have to say, it is very thin. The builders have not prepared for large demand, as up to this point, it hasn't existed. They are seeing more demand now, as a new home sales index has shown. There have only been three weeks since 2006 where the index has risen over 1.0; once in 2007, and the last two weeks. It has spent the last five years languishing between .25 and .50. The builders are seeing traffic, and more importantly, people who are actually buying again, and that is evidenced by the a traffic to sales ratio that has fallen from what was tpyically 24:1 to 10 to 12:1. That is a marked improvement, and has to make them more optimistic.

I carried on here longer than expected, but it is an exciting week for the housing market. We have turned a corner, and even though things are not perfect here, we are seeing job growth, and we are seeing prices stabilizing to the point that our greatest jobs producers, the Builders, are price competitive again, which will only enhance our recovery. We can look forward to better times, it seems.

Have a great week!