MLS STATS 3/6/2012

***Listings Fall Below 16,000***

February '12 Sales Top Feb 2011 Closings

Median Sales Price rises again

Pending Sale recovering quickly from end of month sales

Pending: 12, 228 ( -224 from last week)

Pending Sfam: 10,539 ( -196 from last week)

AWC: 7,598 ( -113 from last week)

AWC Sfam: 6,633 (-91 from last week)

Active: 15,820 ( -418 from last week)

Active Sfam: 12,289 ( -347 from last week)

Closed 2/27-3/4/12: 2,428 ( +607 from last week)

Closed Sfam: 2,047 ( +538 from last week)

Closed February: 7,281 ( +127 from Feb. 2011)

New Listings Feb: 8,999 ( -1,837 from last year)

Median Sale Price: 122,000 (+2000 from January 2012; +13,000 from Feb'11

Average Sales Price: 166,237 ( +2,100 from January 2012; +10,848 from Feb'11

Unexpectedly, sales for February surpassed last years total, as the extra day we had put us over the top. It was a strong month for sales, regardless, as keeping pace with 2011 would foretell of a very strong resale market. Still, half of all sales were cash transactions, which makes some people uncomfortable, as it implies a heavily investor driven market. I say that lets be content that there are buyers out there willing to pay cash, as the inventory is being cleared up. Money eventually flows to where the best value is, and housing has been that asset. Warren Buffet has even said so. I still did not expect February sales to reach last year's levels, as we just don't have the inventory to sustain that kind of sales rate, unless we have strong increase in prices. We are seeing some price gains, but these are not going to relieve the pressure on inventory as we reach the peak season. A $2000 gain month over month may not see like much, but if you consider that pace over the course of a year, it works out to be about a 20% gain year over year from your starting point. That is significant. I am going to hazard a guess that in the next few months there will be at least one or maybe 2 of a price gain upwards of $3,000 dollars a month.

Prices aside, we have reached a critical point for inventory. We now have fallen into the 15,000's in total residential homes for sale; if sales trends hold, and we have 10,000 sales in march that matches the trend set up so far in comparing to last year, that means we will see 1.5 months of inventory on the market at the end of the month. If current inventory trends stay true, by the time we get to the end of the month, it will actually only be 1.3 months worth of inventory.

I am not going to forecast that; I think that buyers are starting to run into a block wall trying to buy due to lack of inventory to consider, and some buyers will be delayed in their search. Perhaps I am wrong, but I think in March we will not keep up with the trend in 2012 in which sales track 2011. Logistically it looks difficult to do. I do expect prices to continue their gains, however. Pendings recovered from the end of month sales to quickly rise above 12,000 again, which does pace the same as March 2011. Pendings are our best indicator of short term sale success, and it appears we are doing well there.

The median listing price is also rising rapidly, and finished the month $5000 ahead of January, and $25,900 over February of 2011! There are changes coming this year. Its now clear.

ARMLS STATS 2/28/12

Inventory Drops Sharply Again

Pendings rise sharply as we reach Buying Season

Prices Rising as competition for available homes reaches boiling point

Pendings: 12,452 ( +406 from last week)

Pending Sfam: 10,735 ( +302 from last week)

AWC: 7,711 ( +89 from last week)

AWC Single Fam: 6,724 ( +116 from last week)

Active: 16,238 ( -577 from last week)

Active Sfam: 12,636 ( -455 from last week)

Closed: 2/13-2/19 1,821 ( +51 from last week)

Closed Sfam: 1,509 ( +45 from last week)

Median Sales Price: $120,950 ( +950 from last week)

New Listings in February: 8,150 (February 2011: 10,836; Last Month: 10,095)

Statistics this week bear out what I have been saying since last fall when inventory failed to rise as expected: We have a short term housing shortage on our hands. I have heard from several different agents about the difficulty of locking down a house, whether you are an investor or not, as there are a lot of buyers compared to the available product. Pending sales are rising pretty quickly, and we are also seeing a growing number of AWC's, as short sales do make up a large share of eventual sales. The number of Closed transactions in February that are marked as "Short Sale Approval Required" is 1393. That could end up being something like 20% of the total for the month. Banks are streamlining this process so it does go faster, and I expect to see short sales hanging around for quite a while. On the other hand, lender owned sales so far this month are at 1254; a lower number than I would have expected to see. Last February through the 27th of February, there were 2855 Lender owned Sales.

Still, together they make up nearly half the sales in February, so far. Perhaps not entirely unexpected, but still a long way from a completely normal economic situation.

The real story is the inventory level, however. I don't think that given our level of inventory that we will reach 10,000 sales in March; we just can't. There simply is not enough inventory to absorb the demand; I think some buyers will put off the decision until they can find what they like; others will leak out and find their way to a new home development, and others may find themselves sitting on their hands and renting for a while longer. Gleaning 10,000 salable homes out of an inventory of 16000 is very difficult, unless people are willing to settle on something they maybe don't like. I think prices are still low enough that Buyers won't feel like settling, so they will wait. It might not work, as prices are also continuing to rise, and at this point it looks pretty safe to say that people are going to have to pay more a year from now than they are today.

Speaking of the prices, the anecdotal info I hear out there is telling me that the competition for the best homes is fierce. Agents talk of writing dozens of offers for a particular client because they feel like they have to shotgun enough to get a hit, even if most of them are insincere offers, since they can only ultimately buy one home. That is what happens when the market gets tight.

Another piece of anecdotal information that I would share is about a particular market. Maricopa, AZ is a city south of Chandler but separated by an Indian Reservation. Maricopa is a mostly new small town, surrounded by miles of farmland, so lots of available inventory for future construction, in a way. Maricopa is a place that suffered foreclosure losses worse than most for this reason, as values just fell away due to not just the large amount of inventory there, but also the potential of additional inventory. The builders were still there, and they were starting homes off at ridiculous prices; I recall seeing one new development starting with a $79,000 price tag for a nice home with a tile roof and 2 car garage; I thought it was a three bedroom, but I won't say for sure. Well, with no inventory like that, the 200K to $300K that many people paid for their home became a reason for a wave of foreclosures and short sales, creating massive amounts of inventory that only drove prices lower. This area was even featured on ABC news as one of the hardest hit areas that would never recover. Well, guess what. The low pricing for some of these homes in the $50K's has virtually disappeared, there are only 4 homes priced between $50K-75K left on the market there. Just a few weeks ago there were 25-30. There are now only 165 single family homes for sale in Maricopa, and there are over 300 pending sales; there are also an additional 200+ under AWC contracts, so you can see the demand happening there. To put that in perspective, we are reaching the strong season for sales in the MLS, and there are 12,000+ pending sales for 16200 active listings; about a 75% ratio. The town of Maricopa is at 305 pending sales for 165 listings; a 185% ratio! They are showing very strong demand down there, even with the new home choices that can be made. However, the inventory level has shrunk precipitously as well, and as the prices rise closer to $90,000, you will start to see a lot of that demand shift to new homes, as choices at a given price are getting to be very thin, and the builders are in the same ballpark in terms of pricing. This is where is begins for the builders to improve. Maricopa is showing that people are still drawn to affordable housing, even on the fringes, and the builders will have a market to build for. I see a lot of good things for Maricopa, a town that is managing its growth very well, and one with a plan for creating its own jobs. Maricopa is a very likely place where I may choose to live eventually myself, based on its proximity to the Mesa airport that I would tend to use more often.

Another area is Wittmann; if you had tracked Wittmann for the last several years, you would have seen a huge change in available inventory; it has shrunk down to only a dozen homes now where there had been a hundred; the beginning price for available inventory out there for a home on an acre is now at $169000 as of today; there simply isn't anything for sale for less than that. That will change when a smaller home comes up, I am sure, but today, that is what you can get.

I expect February to finish in about the same range of closings as last year, but at much higher prices. We will find out later this week.

MLS STATS 2/21/2012

***Inventory Falls into 16K***

Pendings rise, but gain slows from last week

New listing inventory fails to material

Pending: 12,046 ( +135 from last week)

Pending sfam: 10,433 (+131 from last week)

AWC: 7,622 (+40 from last week)

AWC Sfam: 6,608 (+32 from last week)

Active: 16,815 ( -282 from last week)

Active Sfam: 13,091 ( -248 from last week)

Closed 2/13/-2/19/12: 1,770 ( +496 from last week)

Closed Sfam: 1,464 ( +400 from last week)

Median Sales Price: $120,000 (+$11,000 from February 2011)

Number of New Listings in February: 6,022 (-44% from last February)

Inventory continues to fall in the ARMLS region, as we have now dipped well into the 16,000's in overall residential inventory. Single family homes are selling at an even brisker pace, as the number of pendings is gaining almost as many as overall residential, which means they are selling at a faster rate. I do think that we are going to be hitting a ceiling here with pending sales, however. I could be wrong, but I do think there are market forces at work that constrain additional increases in sales.

• Inventory numbers are far too low to support dramatic increases in pendings, or closings, for that matter. People searching for a home now are not finding it as easy as a year ago this week, when we had over 34,000 listings. The buying activity gets stretched out further when people can't pick one off the shelf. Also, The scale of economy doesn't work; we are seeing pending numbers almost the same, but the will of buyers has to be that much stronger to continue to search. This will is expressed in terms of pricing.

• Home prices are already on the rise; as inventory sinks, prices will either be pushed up, or people will give up. We may encounter a short term bench here in February, as prices are sticking pretty close to what they were in January. We don't know how strong the will of the Buyers are to push pricing. In February, the momentum stopped.

• New home builders are becoming more competitive as prices rise, and we may see an outflow of frustrated buyers of resale migrate to New Homes. These new home sales are very good for our economy, so its not a negative issue, but it does serve as a relief valve that is going to prevent resales from making further strides in numbers of sales and also in price, to a lesser degree. I think prices will continue to rise, but not as fast as if there wasn't an availability of new homes available to buyers.

Still, we are at a very good place for sales and inventory; the bias is going to be toward higher pricing, even if there are marginally less sales than last year. I think we would all trade 5% less pending sales for having less than half the inventory available; this contributes toward re-inflation of value, and new home sales, a key component of economic recovery for Arizona.

Continuing to be of interest is the number of new listings coming on the market; its down 44% from last February. We have a full week left in this month, but it is still going to finish substantially less than last year. March is a bigger month for listings, and we may see inventory catch up a bit next month- or not, as March is an exceptional month for sales, and if it is in the ballpark of last year's sales, it is likely to strip away inventory, not add to it.

I don't think we will have as many sales this year as last year, but I do expect it to be fairly similar. I think Pendings will peak under 13,000 this year, but the range we are in got us to 100,000 sales last year, a number we are not in need of hitting due to the lack of inventory. Some of those buyers will undoubtedly pursue new homes as prices rises, which is actually better for our economic growth. The caveat to that is if there is a lot of inventory waiting out there, it should be on the market now, so buyers can get it, before turning to and driving up new home construction. Its better to fill the homes we have, but we have now had over a year of lesser inventory becoming available. If it is out there, the banks have held it too long, and they are missing buyers who can't wait. It just doesn't seem likely anymore that it is out there in great numbers.