CURRENT AS OF October 31, 2007

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Building Permits

Obviously we’re seeing the standard decrease in permits issued for this time of year. However, this is a 38% decrease from last year’s numbers. No surprise here, the builders are holding back until they dump some of the inventory they have sitting around. Interesting point- notice the divergence going on in the indicators. Seems as if they are disagreeing with each other. Typically, this can indicate a reversal of direction in the overall trendline. It will be interesting to see what happens in the upcoming 3-4 months. I’m going to be watching this one closely.

Interest Rates

Not much change from last month. There’s a ton of talk going on within the political world, and with Bush’s new plans on the horizon, we could see some interesting movements here in the future. Again, we have some slight divergence here- notice how the EMA line has already leveled itself out, while the Momentum line has crossed the baseline. I’m hoping in the next month or so all three indicators will start heading for, or, crossing over the baseline in a downward direction. This will reinforce a great buying signal.

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MLS Actives

oh yes, the drama over all the actives on MLS right now. The media hypes it daily, every Realtor® knows it’s blight. huh- too bad they don’t know how to invest in property! Notice how the Raw Data indicator seems to have peaked somewhat, almost turning over to a flat or downward position. Pretty interesting. The VERY interesting thing to me is that we were seeing signals of a slowing momentum 5 months ago based off the other 2 indicators. They’ve already crossed over each other and dropped off, reversing directions. While they don’t seem to be angling for the baseline just yet, they sure are much closer to it than they have been in over a year now, and that’s a great sign to me. Again, strong divergence in the indicators about 6 months ago or so. I’ll be anxious to start seeing the Raw Data indicator decline as the buying activity increases, sucking up the available inventory. Again, if those indicators start moving toward the baseline in a downward slope, that’s another great sign for buyers/investors.

MLS Solds

ok- we see a 38% drop in solds from this same time last year. That’s pretty drastic. This chart shows how seasonal our market is, and we’re right in the middle of the slowest time of the year. So that’s adding to the results you see in this chart. Also, keep in mind that with such extreme movements, you’ll see even more extreme movements in the indicators, since they are based on momentum. This can skew the indicators somewhat. So in reality, it may not be as bad as you think. I see that the EMA indicator crossed over the momentum, but then is already heading down lower before the blue line shows signs of slowing. Now, I anticipate these indicators to level off starting in Feb 2008, and possibly even show signs of increasing towards the baseline again. Investors are jumping back into the market now, which will definitely influence the Solds every month. I believe we’ll see the correction in the market coming up soon to where it levels out, and then starts to increase early 2008. With reports of Arizona remaining to be one of the hottest states for population growth, I anticipate this downward trend in Solds to turn around pretty quickly.

Absorption Rate

Now the fun part- this is my favorite chart! Why you ask? I see this as a ‘motivated seller’ chart. The more active listings we have, the more motivated sellers there are. The higher the absorption rate, the longer people can expect to wait for their house to sell. If you don’t know, absorption is the measure of how many months of inventory we have right now. So, we take the amount of houses for sale, and divide by the amount of houses that sold this month- gives us just over 15 months of supply for October of 2007. This means that if all things remain equal, it would take 15+ months to buy out the existing inventory of homes for sale. Now keep in mind, this is only resale homes on MLS- this does not take into account the new homes the builders have sitting. So in reality, this number may be a little bit higher. THIS IS EXCITING FOLKS!

So we’ve nearly doubled our absorption rate in the last 12 months. Now, see how the indicators crossed the baseline back in late 2003? I bet had any of us had this information, we ALL would’ve been buying every property we could and hanging on for the ride at the beginning of 2003! Now see where the indicators would’ve told us to sell as they headed back up to the baseline in mid-2005. WOW! September of 2006 we see some divergence in the indicators- they start dropping back down, as the raw data is still rising. They have since leveled off pretty close to the baseline again. The EMA has barely crossed over the momentum line, with a slight peak upwards. The Raw Data indicator has also turned slightly downward, indicating a slight decrease in absorption in the last 2 months. We could start seeing an overall decrease in the absorption rate here very soon. Meaning, more houses will start selling, and less homes will be available for sale.

This is an exciting chart that I plan on keeping a close eye on here over the next few months. As the public and media realize that the home prices aren’t dropping much more, there will be an increase in buying activity. That will be coupled with the cooperation of lending institutions and new loan programs that will be re-released in 2008, thus encouraging sellers to go ahead and buy.

Notices of Foreclosure

We see a 179% increase in foreclosure notices within the past year. That’s pretty huge. On average, Maricopa County will see 800-1000 foreclosure notices every month. We’re over triple that rate now, and I anticipate seeing it hit 4000/mo in 2008. Bush’s foreclosure ‘rescue’ program is said to only affect 12% of the people with adjusting arm’s- so I don’t see that as helping out too much overall, but it may have some influence on the charts. In 2002 we see a steady downtrend in momentum. It then levels off throughout the boom, and has since sky rocketed, showing no signs of slowing down. This is not a seasonal chart whatsoever, so it’s pretty easy to see the overall direction of the trend. Looking at this chart, I don’t expect to see a slowdown in foreclosure notices anytime soon. Yup, that just means more deals for investors to pick up and build their portfolios! Due to our overall population and job growth rates, I bet the average foreclosure rate remains higher than previous years, even after this market settles back down again. For now, let’s just watch those foreclosures rise, and capitalize when possible!

Trustee’s Deeds

This correlates to the foreclosure notices above. Pretty similar- it just measures how many houses actually get sold at the auction. When I say sold- it means it either sold to a 3rd party investor, or, it sold back to the bank as an REO. Keep in mind, many people end up saving their homes from foreclosure, or, selling before the foreclosure sale. These are all the ones that don’t. Again, this is somewhat of a trailing indicator, much slower than some of the previous charts. But, it gives a good ideas of what’s happening out there. To me, I see it as how many investors are in the market vs the overall market. I’m going to develop a new chart out of this data- sort of an ‘Absorption Rate for Foreclosures’ of sorts. Stay tuned for this coming very soon…

Again, as in the previous chart, we see a dramatic rise in deeds being issued. As soon as I start getting stats on REOs, I’ll bring you charts on how many are going back to the bank versus selling by other means. Other than that, not much else to watch on this chart until it shows signs of slowing down.