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