ARMLS STATS 6/22-6/28/09

Pendings Dip as End of Month Sales Hit
Single Family Inventory Falls into 24K's.
Sales likely to top 9000



PENDING: 13,470 ( -89 from last week)
Pending s. fam: 11,995 ( -47 from last week)


AWC: 5,425 ( +23 from last week)
AWC Sin. Fam: 4,860 ( -5 from last week)


Closed Weekly: 2,033 ( -61 from last week) Closed Single Fam: 1,796 ( -83 from last week)

Active Listings: 32,517 ( -299 from last week)
Active Sing.Fam: 24,923 ( -275 from last week)

CLOSED MTD(6/28): 7,648

CLOSED Single Fam: 6,795

As of last night, pendings were higher than last week, but end of month sales are starting to come in, and the pendings are dropping off the board as sales increase.

I am short on time for commentary today, but I will just say we seem to still be heading in the right direction. Inventory is still falling, although at a slower pace as we are now closer to equilibrium in the market. Pending sales are rising, denoting continuing depth in buyer activity, although AWC seem to be reaching its potential. It is likely that we are going to top out between 9000 to 10,000 sales per month over the summer-it is a highly acceptable number, but these are not the boom numbers of 2005, nor should they be. The important thing, these are numbers we could live with long term, and for that we all should be grateful. Housing is going to become an economic driver for us again, as over supply and demand problems are going to be overshadowed by our long term growth. This creates a situation in which builders can start seeing a market for their product again. We are not without problems; certainly there are too many foreclosures as part of the inventory, and unfortunately, there are far too many abandoned or uncared for homes-unless you are a house flipper, for those people, it is an opportunity.

A perfect example of this mixed bag is this article that came out in the AZ Republic about Maricopa. The town, despite being a poster child for everything that went wrong in the boom, is now experiencing somewhat of a renaissance. Inventory has fallen sharply, sales are strong, and new commercial is going in. Again, its not the boom, but its sustainable growth of the kind that still allows families to invest in a home and create a nice lifestyle for themselves. Yes, there are foreclosures, yes there are empty homes still, but things are better, even in the midst of this massive economic downturn, and they are thriving. This is one of the success stories that I discussed would come about eventually-we will see good news here and there, but conventional wisdom will write it off as an isolated case, until BOOM! one day there will be an article in the paper about how prices are getting too high for the average mcdonalds worker to buy a home. This is the cycle of real estate, and while the most recent one was one of the severest in our history, it follows the same pattern.

We seem to have escaped June without the Tsunami of foreclosures hitting us, but we are reaching what would have to be considered our potential for sales in the current economic cycle. Sales are flattening out at these levels. It is a good solid number of course; in June 2005, as of June 28th, there were 6927 single family sales; compare that to the 6795 single family sales we posted in the same amount of days, and we can see that we are running at a pretty good clip. Obviously, overall value of sales is drastically less, which apparently is how everyone wants to measure whether we are in a good or bad market. We attract companies, jobs, and young talent with families in that order because of the affordability of our housing here, and our long term growth is far superior at these prices than they were at the ridiculous prices of 2005. There is a lot of pain in this price deflation no doubt, but the foundation of our future growth is being laid down. We are not a high tech state yet, so prices need to be in line with the kind of jobs we can expect. It is quite apparent now that we have home prices in that range, we have a large buying class again. It is something that builders will do well to remember.

ARMLS STATS FOR GREATER PHOENIX 6/23/09

ACTIVE LISTINGS FALL INTO 32,000's
Sales Fall Slightly behind May's Pace
Pendings and AWC restart climb

Pending Sales: 13,559 ( +257 from last week)
Pending Single Fam: 12,042 ( +117 from last week)

AWC: 5,402 ( +142 from last week)
AWC Single Fam: 4,865 ( +112 from last week)

Closed 6/15-6/21 2,094 ( +371 from last week)
Closed Single Fam: 1,879 ( +350 from last week)

Active Listings: 32,826 ( -449 from last week)
Active Single Fam: 25,198 ( -338 from last week)

Closed MTD thru 6/21/09: 5,557 Closed 5/21/09: 5,656
Closed Single Fam: 4,956 Closed 5/21/09: 5038

So far the thousands of foreclosed homes that were predicted to hit the market in June has failed to materialize in the inventory report. I had been told by many agents and several banks that June, like April, was a month that we would be swamped by new listings of homes. It hasn't happened; in fact, our inventory of homes has dropped steadily in June. It is not dropping a 1000 a week any more, but as we fall there are elasticity issues that would mean a 1000 a week drop would equate to a weekly drop of 3%-that would be a massive number, and is not realistic. We dropped a healthy 449, which roughly speaking is 1.5%. Inventory levels are bound to fluctuate a little going into the fall, but for reasons I have elaborated on before, the number of listings going on the market are not as steep as predicted, and not as high as last year. There is no doubt foreclosure inventory out there, as noted in this article, but these homes rarely come on the market all at once, and so far, our market is absorbing inventory the banks do put on the market, and inventory is still shrinking. May had 2000+ less listings than May of '08; June is looking like it will have a similar fate. We still have three excellent months of sales after June, as last year September surprised by posting the best sales month of the year locally.

The statistics are a bit mixed this week however, as our sales pace fell a little behind May's. That doesn't mean we will finish less than May, but it would have been nice to be blowing the doors off May. The numbers have been predicting it however, as there were more Pending Sales during May then there are now. These are still very healthy numbers, but we might finish behind May's total.

Interestingly, Pending and AWC contracts are higher, however, which denotes continuing strength. AWC contracts are at their high, so we are seeing more new activity going into the summer. We may have peaked, but it may also be a plateau; a healthy level of sales and activity that can be maintained for a while. Nothing wrong with this level of activity. We are beginning to see that inventory is insufficient, and that builders are starting to stir, as they begin to see opportunities to sell homes again, foreclosures properties or not.

We have also seen some stability in the New Home market, as builders have reduce spec inventory substantially, and buyers start looking around for other choices as inventory of resales has fallen. These are not boom numbers for builders, but they are stabilizing at levels we haven't seen for a few years. A major new housing index, which apparently I can't mention here, has risen and stayed above a level not seen since 2006. There are reasons for optimism, but the prices of new homes is going to be much lower, with much more basic living than we had a few years ago.

A very good week nonetheless, and breaching 2000 sales for the week is a strong indicator that we will finish June in excellent position. As I have said, it will be difficult to not acknowledge that we are in a housing recovery by the end of July.

ARMLS STATS FOR GREATER PHOENIX 6/16/09

Single Family Listings fall to 25,000's
Sales Pace slightly ahead of May '09
AWC Contracts Rise, but Pendings dip-Short Sales to Blame?

PENDING: 13,302 (-120 from last week)
Pending Single Fam: 11,865 (-118 from last week)

AWC: 5,260 ( +225 from last week)
AWC Single Fam: 4,753 ( +198 from last week)

Closed 6/8-6-14/09 1,723 ( +113 from last week)
Closed Single Fam: 1,529 ( +95 from last week)

Active Listings: 33,275 ( -529 from last week)
Active Single Fam: 25,536 ( -471 from last week)

Closed MTD (6/14/09) 3,405 (MTD 5/14/2009: 3,331)
Closed MTD 6/14/09) 3,029 (MTD 5/14/2009: 2968)

Inventory continues to recede in Phoenix despite dire predictions of a wave of foreclosures overwhelming market. It is still likely that we are also going to have a W-Shaped recovery in housing, with inventory staging a rise either in the late summer, or during the fall when buying activity abates somewhat. There are foreclosures out there, without a doubt, and they will return to the market at some point, and will make an impact. Whether or not that can turn around a recovering market is debatable. For now, inventory has reached a very comfortable place for us compared to many markets around the country. The Twin Cities supply is over 7 months, Las Vegas is similar, and the L.A. Times reports that California's supply is "back to normal" with just under a 10 month supply. We are in relatively good shape here inventory wise. I think it will probably create some sense of stability for homebuyers, which will in turn lead to us exiting the psychological minefield we have been wandering through for several years. As we saw in May, our median home prices in the MLS are already rising (see last week's post). We continue to hear anecdotal evidence of buyers climbing all over each other for the best listings, and the obviously, we are seeing the number of homes available drop precipitously over the last several months.

Let's put the inventory numbers in even better perspective. 7,990 single family homes sold in May between $0-$500,000- June is slightly ahead of that pace, but let's just say 8,000- I think it will be higher, but let's use a conservative number. There are as of now 19,383 listings between $0-$500,000 in the MLS. At current sales rates, that is a 2.4 month supply of homes. Someone might look at that number, and say well that is the best month of sale for the year, what about the months of January and February, etc? A fair point, but we have to consider we are six months away from January, and we are anticipating being in full recovery in the resale market by that point. There will be foreclosures, there will be pricing issues at the higher end, but we will be stable by that time. In the meantime, we are in a strong sales season until October, at least, in which inventory will continue to abate. The statistic itself is a current snapshot measurement, so when we were back in January, the supply ratio was much higher. If you want to look at the yearly rate, why wouldn't we wait until all the statistics are in for the year? We are trying to look at this in the now, and right now, our supply of homes in this category is 2.4 months.

I am also hearing evidence of builders raising their heads, preparing for another run at construction. No doubt, the housing industry will be a leaner place, with less opulent homes, but if they are seeing reasons for starting up operations again, all the better. We need them for the jobs they provide, and for those of us in the land market, we need them to start viewing where they anticipate growth to be.

I wanted to touch briefly on the pending- AWC relationship. Our AWC contracts continues to rise, but are we seeing that rise because of new contracts, or is it being inflated by the number of long-term short sales clogging it up? July is not expected to be as strong as June, so it is entirely possible that our demand numbers have peaked, and that pendings will start to recede. The number of AWC may predict slightly otherwise, but until the evidence of sales starts showing up with these dramatically higher AWC levels, I am going to tend to think the number is artificially high by short sale listings. It still means they are potential sales, so that is a good thing, but the number should be thought of as diluted, as whatever number of sales that number represents is probably going to be spread over several months time, at least, as short sales take that kind of time to manifest. I run into the same thing with short land sales- they just don't occur rapidly as a normal contract.

I do think we will probably finish ahead of May's sales in June-the fact we are slightly ahead predicts this, as in the past a slightly faster pace is amplified at the end of the month by the last week of sales, so there is a chance we could finish considerably stronger than May, although right now, given some of the demand numbers, I wouldn't predict it. June is likely to be statistically a dead heat with May, although inventory levels look to be lower by that time, making the numbers somewhat better.

It is going to be interesting to see what effect the $8000 tax credit starts having on sales going into the late summer; however, the talk of extending it and even increasing it might dent its effectiveness. I think extending it past this year at this time, might be wholly unncessary; I think you want to drive people to buy sooner than later, and by allowing it or increasing it may not necessarily have the desired effect. A downside effect may be that it causes another real estate bubble, as anytime you start filling a baloon with subsidies this is the case. Look at the automotive business in Arizona a few years ago, with the renewable fuel fiasco, the boom in ethanol production that has now gone bust in the midwest, and frankly, we probably needn't look past the housing bubble created here by cheap easy financing. I think the view to shut that down after November may be unpopular in my industry, but these things need to be curtailed, and we are going to be in recovery or not, regardless if they pass that subsidy again. It should have been done 2 years ago, and we would have not suffered through as bad a slump as we are. To pass it now is just pouring gasoline onto a fire. The fire is lit, sometimes you just need to step back and let it burn.