Home Sales:  Return to Normal.


The Good: Sales are not as bad as some might lead you to believe. Property sales have stayed well above historical lows set in 2008 and if anything, totals lead us to conclude that the market is at least stable. A quick analysis shows that the 3rd Quarter of 2010 ranks statistically in the middle of property sales totals in comparison to the last three years. Overall volume we are seeing is also well above numbers coming in during January of this year. Our conclusion is that the market is a lot more stable than some believe, however, there is plenty of uncertainty looming.

The Bad:  There still remains a real threat of another dramatic increase in inventory starting towards the end of the first quarter of 2011. If more banks follow Bank of America’s lead it is likely trustee sales will fall to their lowest levels all year. This pattern was seen last year with bank initiated “holiday moratoriums,” which caused a very large spike in trustee deed filings throughout the following year. The difference from this year and last is that there is no government incentive out there to lure buyers in to absorb the additional inventory. At current sales levels the market will have a very difficult time digesting another spike in REO properties.

Outlook:  The holiday season is typically slow for property sales and we expect sales to soften up over the next quarter. The market may experience a lack of quality inventory due to reduced trustee sales which may further erode sales levels throughout the quarter.

Foreclosures:  More Uncertainty Looming

Building Permits:  Time to Buckle Down.

The Good: Properties affected by a foreclosure accounted for over half of all residential permits (additions, remodels, etc.) issued in the third quarter. As long as a steady stream of REO properties are being resold in the region then contractors should have plenty of prospects to target. Though the summer showed some weakness, as we approach the fourth quarter we expect the declines to level off from here.  Also, there are several new builders breaking ground in Pinal County which should bring numbers up in the future.

The Bad:  Permitting levels fell a combined 12.44%, primarily dragged down by low totals coming out of production/tract home starts. Home starts in the area dropped 7.6% overall and are well below the highs set in the first quarter. This is not to be unexpected; builders in the area are dealing with a very different market than they were in the first quarter when production was ramped up due to a hot housing market. Commercial construction (tenant improvements, shell construction) also dipped further in all three counties. 

Outlook:  It appears the summer swing is finally over as permitting totals dropped 19.57% in September to lead us into the 4th quarter. We expect current permitting volume to persist throughout the quarter as the usual holiday slowdown sets in. Those working in construction related industries should prepare themselves for lower levels of activity until next year.