The Comford Report
Courtesy of Cromford Associates LLC | www.cromfordreport.com

Market Summary for the Beginning of March
If you are watching average sales prices then you are probably bored - nothing much is happening at the moment. They are not going up or down, just wobbling around unsteadily like the Inception top, although they gave up around 12% between July and January.
However we don't advise watching prices right now. They are the very last indicator to turn round at both the top and bottom of a cycle. The indicators you should watch instead are behaving in very interesting ways at the moment. Most of these ways are very positive. Nothing is certain in this world but the current trends are pointing to another market recovery attempt, similar to the one we saw in 2Q 2009.
Supply
We measure supply using active listing counts. These are coming down fast in many (but not all) areas. The total number for all areas & types in ARMLS residential resale as of March 1 was 40,240. On February 1 this was 42,522 so we are down 5.6% in a single month. Last year on March 1, we had 42,139, so we are down 4.5% in 12 months. This latter number doesn't sound very impressive, but supply was growing last year from June through November, peaking at 45,960 on November 20. Supply has fallen by 12.5% since November 20 and this is a definite signal that overall supply is now on a strong downward trend.
Demand
We measure demand using two primary indicators - recent sales and pending listings - and we also keep a watchful eye on total listings under contract (i.e. pending plus AWC). At the moment we are recording 7,155 sales (all areas & types) during February 2011. This is 8.6% higher than January and 11.4% higher than February 2010. Not too shabby. In fact this is the second highest February sales total for ARMLS (Feb 2005 came top). Pending listings were 11,997 on March 1, up 13.6% from February 1 and 1.8% below March 1, 2010 when we in the grips of tax credit buying fever. These are good demand numbers.
Supply vs. Demand
Demand is strong and supply is falling, so that ought to be good for the market. However sentiment is still very negative after the double dip price drop during the second half of 2010 and it always take several months for an improvement in the market balance to be reflected in pricing.
Let us look at segments of the market to see where things are improving fastest.
Where Is Supply Going Down Fastest (over the last month)?
A. Special Listing Conditions (all types - Greater Phoenix):

• REO supply is down 15% - the main reduction is here!
• Short Sale & Pre-foreclosure supply is down 4%
• Normal supply is down 3%

B. Price Ranges (single family detached in Greater Phoenix):

We see that the sweet spot for falling supply is between $75,000 and $225,000
C. Cities (single family detached):

Notice how some of the cities that fared poorly in 2010 are now coming back with a vengeance. Anything over 10% reduction in supply per month is exceptional, particularly for larger cities such as Queen Creek (which for us includes the San Tan Valley area), Goodyear and Maricopa. Maricopa's supply was growing fast until late November when the trend reversed sharply. Could this be the Bristol Palin effect?
Whatever the reason we cannot deny that the bottom end of the market is coming back into fashion. Falling supply this early in the season is a very unusual and positive sign.
Just don't expect prices to be affected yet. Give them time.