Starting with the basic ARMLS numbers for June 1, 2018 and comparing them with June 1, 2017 for all areas & types:
Active Listings (excluding UCB): 16,018 versus 18,476 last year - down 13.3% - and down 1.9% from 16,329 last month
Active Listings (including UCB): 20,809 versus 23,281 last year - down 10.6% - and down 2.9% compared with 21,440 last month
Pending Listings: 6,608 versus 7,324 last year - down 9.8% - and down 10.6% from 7,393 last month
Under Contract Listings (including Pending, CCBS & UCB): 11,399 versus 12,129 last year - down 6.0% - and down 8.8% from 12,504 last month
Monthly Sales: 10,081 versus 9,858 last year - up 2.3% - and up 9.8% from 9,178 last month
Monthly Average Sales Price per Sq. Ft.: $164.03 versus $150.51 last year - up 9.0% - and up 0.7% from $162.81 last month
Monthly Median Sales Price: $262,900 versus $240,000 last year - up 9.5% - and up 3.9% from $253,000 last month
We can see that the supply of active listings without a contract dropped again during the month of May but the deficit compared with 2017 narrowed slightly to 13.3%. May was a weaker month for new listings, down about 1% compared to last year. This was a contrast to April which had seen a stronger rate than 2017. We normally see total supply drop between May and June and we still expect this downward trend to continue until September.
The sales count for May was very strong, topping 10,000 for the first time since 2011. However the number of listings under contract at the beginning of June is much lower than last year - down 6%. Even with this possible sign of wavering demand, supply is so weak that sellers still have a huge advantage in negotiations. This situation inevitably leads to price increases and the annual rate of change has reached 9% for average $/SF and 9.5% for median sales price. This growth is about 4 times the inflation rate and with interest rates rising, homes are obviously getting less affordable. At some point this trend will impact demand, which is why we are keeping a close watch on the annual sales rate and the number of listings under contract. However we are not at all in the sort of situation we faced in 2005.
The rise in interest rates does not just tend to lower demand, in the current circumstances it can lower supply too. Home owners with an existing mortgage will be less inclined to move if their next mortgage is going to be at a much higher rate than their existing one. This is more likely to be the case with every passing month. As a result we do not see prices as likely to fall because of interest rate rises, but we do anticipate limited growth in sales volumes.
We started referring to the chronic low inventory over 5 years ago and it is now at the lowest level we have seen during those 5 years. Fluctuations in demand are unlikely to have much impact on the market until we see an increasing trend in listing counts. This was the first sign of a slowdown in April 2005 and will be the first sign of a slowdown if and when we get one in the future. It came suddenly and unexpectedly in April 2005 and it may do the same at any time. However, nobody paid any attention in 2005 and I am assuming we are all older and wiser now.