It appears the time has come to get serious once again about market statistics as for the first time in three years the numbers they are a-changing.
There was 2007, when week after week there was ludicrously high inventory and ridiculously low sales combining to leave the Phoenix real estate market with a year or more of inventory of single family detached homes. Then came April 2009 and the numbers flipped on a dime, the already falling bank owned inventory barely kept past with rising sales and inventory fell off to about three to four months, something vaguely resembling normal.
Fast forward to now and the continuous conversation about the end of the economic world and housing as we know it. From the Washington Post with a hat tip to the Notorious R.O.B., who’s a nice guy in spite of the name:
The latest sign that the economy is losing steam: Home sales fell 27 percent in July, the steepest one-month drop since figures were first compiled in 1968, according to a report released Tuesday. Analysts had expected sales to decline following the expiration of a federal tax credit for homebuyers this spring, but the drop was nearly twice as large as forecast.
Whatever are we to do while the sky falls around us? Keep a sense of perspective, perhaps.
In June 2010, there were 6,739 single family detached homes sold in Maricopa County. While “normal” for the post-April 2009 period, sales figures this high had not be seen since the 2005 Phoenix real estate boom and also had not been seen prior. In July, sales fell off to 5,169 – yep, that’s a 23 percent drop off from June. And it also is a return to what once had been considered a relatively brisk month of sales. August may be the telling month, as sales are off again – by how much we really won’t know until the closings of tomorrow and Tuesday hit, as the end of the month usually sees a rush.
(This reminds me greatly of the buyers who once were upset that they couldn’t get a sub-five interest rate anymore; when I purchased my first house in 1998 I was pleased as punch to be able to get down to the low eights. And don’t even get me started on the late 1970s. Perspective, perspective, perspective.)
If you read Rob’s full post, you’ll also note that NBC’s Brian Williams opined on the supply of homes jumping above the one year mark. Locally, though, we remain at a five month supply of single family detached homes.
And here comes a mea culpa … one of the reasons I tracked inventory levels on a weekly basis is the trend always was more important to me than the snapshot and with a weekly update it was easy to see the trend. Having not tracked the numbers in some time, I only can tell you what has happened from snapshot to snapshot. Inventory had been hanging around 3.7 months for a long time; there’s little doubt we’re trending up even though we still remain in the neutral market of four to five months.
Everyone is pointing to the end of the $8,000 homebuyer tax credit as the reason for the drop in sales; in a backhanded way, this almost strikes me less as speculation as an indirect call to bring the credit back (which I believe would be a remarkably stupid idea.) Seeing the number of short sales on the market and the large percentage of the active listings that seem to fall into this category, I personally see more impact from the never-closing nature of the short sales than a tax credit that rightfully shouldn’t have impacted someone’s buying decision.
On a larger scale, though, it seems the slowdown may be due to the old fashioned lack of confidence in the economy. Let’s face it, the new administration brought with it a wave of hope for a bright future and so far little has changed fundamentally economically. The problems are a bit too big for hope to solve. Companies downsize and learn they can survive at the lower staffing levels (though, inevitably they’ll ramp up the staffing once the turnaround is in swing because nearly all seem to have a very, very short memory when it comes to economic cycles.)
Now, should the national lack of confidence influence your decision? Not really. What matters as an individual buyer are your own individual circumstances. You do not exist in a vacuum and as I’ve told buyers for some time when they ask about a property’s prospects, there’s still the possibility of the value going down before it starts coming back – and when it comes back it will be at a far more gradual rate than 2005. But if you have the means to take advantage of the relatively low pricing and the timeframe that will allow you to hold the property five, ten, 15 years or more … you’re in a position many others aren’t in.
The absorption rate numbers will return this Tuesday as the trends finally are changing and anecdotal evidence just isn’t sufficient.