The ARMLS August STAT Report (http://www.armls.com/statistics/stat-library) is out with figures for July. Since I recently discussed the June figures, let’s take a brief look at changes in July. While I like to depend on STATS this article also refers to Cromford Report data (http://cromfordreport.com) for its Cromford Index as well as their long-term trends.
Same as June, July’s market is fairly static, being largely influenced by seasonal summer trends. One of my favorite analysts, Tom Ruff of the Information Market, says “Real estate is a cyclical business, and our current phase just turned one year old this past week. A cycle by its very definition is a repeated sequence of events. The characteristics of our present phase include flat prices, tepid demand, and typical supply.” Let’s examine Tom’s description of prices, demand and supply, starting with supply.
Typical Supply – check!
- Inventory (Active Listings) has been higher this year than in 2012 and 2013. It has even been a little higher than the early 2000s. This looks like very typical inventory levels. However, note that both Active Listings and New Listings have been quietly decreasing since March.
- As Tom (and other experts) point out, the drop in ARMLS’s New Listings is attracting attention. After peaking in April, this year’s summer fall-off in New Listings is somewhat more rapid than expected for the quieter summer season. It will be troubling if this trend doesn’t reverse itself in August or September.
Tepid Demand – check!
- Monthly Sales are down, while Average Days on Market and Months Supply of Inventory are increasing.
- The Cromford Index (a leading market indicator) dropped below 100 in December of 2013, suggesting a buyer’s market. The Index has risen continuously since bottoming out in March, but recently that’s been due to decreasing inventory rather than improving demand. Demand continues weaker than expected, so buyers aren’t taking advantage of having more inventory to choose from than last year.
Flat Prices – check!
- Remember in our last articles we said that Sales Prices indicate reality, while New List Prices indicate hope? In July, Sales Prices have slipped a bit while New List Prices edged up. Sellers are still hopeful.
- ARMLS’s Sales Price Forecast accurately predicted a drop in average price and increase in median price. This could signal some softness at the extreme upper end of prices, but prices are flat.
Playing Monday morning quarterback, we see Tom is right on all three accounts. Some things to watch for:
- New Listings needs to increase very soon or we could see total inventory begin to drop more rapidly. Keep your eye on New Listings.
- Prices help us decipher the market. If demand increases, prices tend to respond by rising; inventory decreases in the short term. If demand is weak, prices tend to fall; inventory increases in the short term. In our mixed situation where prices have been firm while inventory is dropping, weak demand is indicated. Watch next month’s Sales Prices and Sales Price Forecast.
- Actual sales are a good indicator of demand. Watch what happens to Sales when the next STAT Report comes out after Labor Day and compare to recent months.
Look for our next Valley of the Sun market update in mid September. I welcome your comments about this article—email me your thoughts and share your ideas about other topics to discuss. I’m Ron LaMee, email@example.com.