ARMLS DATA 11/15/2011

Pendings Rising through seasonal slowdown

Inventory slightly off, but flat.

Median listing price making big moves?

Pending: 11,070 (+234 from last week)

Pending Sfam: 9,629 (+231 from last week)

AWC: 7,698 ( +100 from last week)

AWC Sfam: 6,654 ( + 78 from last week)

Active: 19,630 ( -24 from last week)

Active Sfam: 15,392 ( -48 from last week)

Closed 10/7-10/13 1,367

Closed Sfam: 1,177

Median Listing price November 2010: 114,900 November 2011: 144,900

Pending sales are continuing to rise in November, but sales are rather slow. November is traditionally a slow month, and I don't think this will be an exception. The good news is that pendings are higher, and inventory is thin, as new listing inventory continues to slide compared to last year. There is also an article in housingwire.com that foreclosures are the lowest percentage of sales since 2009.

We have low interest rates, we are starting to see a dearth of low priced condos in the middle part of the city where my investors would like to buy them, and the economy is showing real signs of recovery. If we can continue with this pace, our spring buying season ought to be a strong one. Demand is likely to be there, and with the relatively few available homes for sale, we should see a good uptick in prices and optimism.

One stat I would like to focus on this week that is interesting but one we don't take note of is the the median listing price. It is not the most telling of stats, but it is an indicator of market optimism or supply. If it goes up, it means people are asking for more money for their homes, people with higher priced homes think they may be able to sell, or simply that the available supply of low priced homes is vanishing. The number stays relatively stable most of the time, so its not particularly noteworthy to spend time hashing it out, but I want to point out something today that I find very interesting. Lets' look at the median listing price for the last year or so.

October 2010: 119,900

November 2010 114,900

December 2010: 109,900

January 2011: 119,000

February 2011: 119,000

March 2011: 117,900

April 2011: 119,000

May 2011: 119,000

June 2011: 119,000

July 2011: 121,900

August 2011: 120,000

September 2011: 129,900

October 2011: 136,900

November 2011: 144,900 (mid month)

As you can see, that number was very stable over the long run, and had been so through much of the last year while inventory was high. Once inventory was depleted, we are now seeing a definite higher trend in what the asking prices of properties out there are. Its a combination of many things, including fewer listings, which tends garner more impact from the higher dollar properties that get listed. That's not telling, but less listings is in of itself a good sign- less inventory will create price bumps. That is not the only reason though. There are a lot less low priced condos, and prices at the low end appear to be rising as a result. We have been chasing those as investments, but they are more difficult to come by. There are less foreclosures, so more of the inventory that is out there is likely to be higher in price as it is not a distress sale. As a broad indicator of a healthy market, the substantial rise of the median listing price in the second half of this year forecasts optimism, either forced or deliberate, by people who are pricing the homes going on the market. Its a strong sign of faith in market price increases. We have seen much smaller gains in the median price increases so far, but they are off their lows, and the trend seems to be higher.

Okay, that's about all I have to say about that today, but there are some reasons for optimism going forward.

ARMLS STATS 11/08/11

Pendings Jump, Inventory flat

Inventory likely not increasing enough to meet spring demand without driving prices

Pending: 10,836 ( +326 from last week)

Pending Sfam: 9,398 ( +256 from last week)

AWC: 7,598 ( +103 from last week)

AWC Sfam: 6,576 ( +83 from last week)

Active: 19,654 (+44 from last week)

Active Sfam: 15,440 ( +32 from last week)

Closed 10/31-11/6 1,941 (-60 from last week)

Closed Sfam: 1,616 ( -97 from last week)

Closed October (updated): 7,612 ( + 105 from earlier estimate)

Sales activity is rising in November, which is a bit unexpected but welcomed, while inventory continues to stay flat. November new inventory is also relatively flat, it appears, but we also will not expect blowout sales in November. We are in the doldrum months, but they are really not performing poorly. The sales figures are better than last year, and prices seem to have stabilized, although we would like to see some increases. Anecdotal evidence is pointing to a shortage of condo or starter property in some areas, as prices in several properties we have pursued for investors have jumped well above asking price. There is simply not the inventory that we have all become used to kicking around the last several years, and the sellers are starting to realize it. That doesn't mean we are going to have prices shooting skyward anytime soon, but the slack is being pulled out of the rope, so to speak. I believe that the spring buying season will do the heavy lifting on prices. We are simply not adding enough inventory to account for sales in those months, and if this trend stays until February, you will have serious competition for housing at that point. It could drive prices, or it could drive people holding inventory to place it on the market. If there is a lot of latent inventory out there, that could happen as well.

Pendings in October were slightly ahead of where they are now, but they are not far off. I would expect to see 7000+ sales in November, possibly down a bit from October. I would also expect we will see lower inventory coming on the market this month than last year. If December follows the trend of last year, when there were 8200+ sales, we could see inventory take a good hit then as well, as December is the poorest month of the year for new inventory; we could go into January with even tighter supply than we see now. Its still hard to tell, but that looks to be the case.

There is not much else to glean from this week's stats, other than October sales finishing above 7600 puts it a little closer to being a stronger month than I thought. 8000 would have been a big surprise for October, so 7600 is a good number.

So much about pricing depends on the lending industry's participation in it, and through mixed parts of government interference and caution, banks are being bottle necked from full participation in home lending.

ARMLS is forecasting a slight right in prices for November, based on pending info, and a sharp fall in December, also based on contracts signed. I don't know if I find that accurate, but we will see. I can't check those numbers, so I don't use them. There are a lot of contracts to be signed for December closings still to be done, so I doubt the median price is going to be fall as far as they forecast. Their sample of December sales is so small as to be useless at this point.

MLS STATS 11/1/2011

Sales softer in October: 7502; Still higher than Oct '10 by 15%

Median price slightly lower, but is it really?

Inventory levels slip after rising slightly through most of October

New listing inventory: down sharply again from last year in October

Pendings: 10,510 ( -915 from last week)

Pendings Single Fam: 9,142 ( -799 from last week)

AWC: 7,495 ( -164 from last week)

AWC: 6,493 ( -127 from last week)

Active: 19,610 ( -123 from last week)

Active Sfam: 15,408 ( -99 from last week)

Closed 10/24-10/30: 2,001 ( +447 from last week)

Closed Sfam: 1,713 ( +390 from last week)

Closed October Preliminary: 7507 ( +986 from October 2010)

New listings in October: 9575 ( -2712 from Oct '10; second lowest '11)

Median Price: $112,000 ( - $1,000 from September)

October sales were softer, as expected, registering as the third worst month of 2011, after February and January. 7502 is a mediocre number, but not bad, considering its still 15% better than the 2010 October sales. October has been a traditionally slow month anyway, so it wasn't surprising. A 15% gain places it right in the swing zone for sales this year compared to last year; The average is 12.8 % increase in sales year over year, so its actually better than average. Of course, we would all like to see a much stronger sales figure, but this is not bad news.

On another front, active listings fell at the end of the month, after rising for a number of weeks in October; the rises were all quite slight, and this week's fall has wiped out about half of the inventory gains since the end of September. Inventory doesn't look like its going to rise much before February, since November is one of the slowest month traditionally for the number of new listings coming on the market. That could change, I imagine, but there is nothing in the statistics right now that are implying that: new listing inventory continues to fall, and sales are stronger than last year. The situation is this: we have two to three months before heavy seasonal demand comes around again, and two of those months, November and December, are not known for big inventory increase months; they are usually the opposite. September and October were those months last year, and that didn't materialize, as inventory has been basically flat since September 1st. December was actually a good sales month last year, so you could see some inventory burn at the end of the year even. There is a very good chance, as we have been predicting, that inventory levels going into the superb sales month of March will be just about where they are now. If that is the case, we will start to see a lot of inventory burn, unless there is a big influx of new inventory from the banks.

We are likely to see prices rise as well, since many people are going to be bidding on few properties. I didn't do stats for 4th quarter last year, but inventory September 22, 2010 stood at 38,840. That is twice where we are right now. That was also a time period in which sales were much softer than they have been running this year, and with inventory being added at a pace approaching 17.5% higher than this year. Its a 30% differential in sales and inventory, and we might be forgiven for anticipating even stronger demand for housing in 2012, as the economy seems to be picking up a little steam. March could be a very telling month for how the housing industry is going to be doing. There just seems to be an event coming that will change the impression of housing here. Unless more inventory comes available from banks or flippers, its going to be very difficult to find a home here that you want by May. There will just be too much competition for it. I keep trying to think of scenarios in which this would not be the case, but I can see only one: that people will be unwilling to pay higher prices for property than they have been, and demand simply folds up. Its possible, but given that rents have been strong, and new family formation, it seems to me that demand is likely to increase, despite prices rising, as housing is being absorbed, rental or sale.

In support of that point, I recently looked at rental listings for homes in Maricopa. There were a large amount of them, which is what I expected. Almost 200, in fact. What I didn't expect was that I could hardly find one that had been listed for more than 60 days. That tells me that even in a seemingly saturated market like Maricopa, rentals were turning over very quickly. To take the Maricopa example a little further, there were actually more listings pending than available, so housing is being absorbed very quickly on all front there.

I don't see this trend reversing before February, when the demand actually starts to really pick up. If you are an agent, be prepared to tell your clients that they may lose a number of potential purchases if they don't put their best foot forward.

I mentioned the slight drop in median price; it did fall overall, but there is something else behind the slight drop. The problem with the median price as a measurement is that it brings a great disparate kind of property into the calculations. The long and short of it is this: month over month, median prices of single family homes was level at $120,000. But the median overall fell by $1000, from $113,000 last month, to $112,000. I can tell you that right now, we are seeing a run on these very low priced condos that are on the market, and they are selling at cash prices from lenders, so they are not only becoming a significant portion of sales, they are at very low prices compared to single family homes. Single family homes since August, are up $4,000. We are not seeing a drop in the single family market, which makes up the bulk of sales. Condo prices, since banks are making it extremely difficult to borrow on, are forced to sell for cash prices to investors, which drives the values extremely low. This kind of inventory also appears to be drying up, as I have been pursuing these for investors, and we are having difficulty finding the same deals we had earlier.

I already touched on it, but I did want to mention again, new active inventory for October was down sharply from last year, and down from last month. It is the second lowest total all year, barely losing out to July. The trend is toward lower inventory not higher, and while that could change next year, I do think we can expect better level of sales too, and probably at higher prices. We have baby boomers who are retiring as well, and we have people gaining confidence in the economy, to some degree, and this will only increase demand.

The trends are overall pretty positive that February will be the beginning of a very interesting time in real estate in Arizona.