For the past several months we have watched the Tucson real estate market slowly recover with the percentages of homes coming on the market decreasing (as compared to a year ago) while the percentage of pending contracts has been steadily increasing.  This month, the market experienced a bit of a hiccup.  Here's what is going on:

Home Sales Volume and Home Sales Units

In both of these categories we see a decrease from last year's numbers.  While that is no surprise, it should be noted that month over month, both of these categories have increased.  In particular, I like to keep my eye on the Home Sales Units because volume is easily affected by the price range of homes being sold and a market typically recovers from the bottom up.  The great news is that this is the sixth consecutive month that homes sales units have increased while active listings are still decreasing each month.

Median and Average Sales Price

Again, both of these categories have experienced a decrease from last year in the 11-12% range.  However, month-over-month, the average sale price experienced another increase (2.65%) while the median sales price went down half a percentage point.

Pending Contracts

Here is where we see our hiccup.  For several months this number has increased by a greater percentage than the percentage of new and active listings coming on the market.  This month (June 2008) we experienced a sharp decrease in pending contracts.  It went down by 36% over the pending contracts in May and is a whopping 54% less than the pending contracts last year at this time.  If this happens repeatedly, that would be very bad news for the stability of our housing market.  I am hoping it is just a hiccup and that we will continue to recover slowly but surely.

Active Listings and New Listings

Both of these categories experienced a decrease over last year's numbers.  New listings are down 26% from last year while active listings are down 6%.  Both of these numbers are also down from last month, so the trend is continuing.  If pending contracts come back up and new and active listings continue to decrease we will continue to make progress

My Analysis

It is interesting to me to see such a huge drop in the number of pending contracts here in Tucson.  Particularly in the summer months, that is strange.  There could be any number of reasons for this.  While I don't know what agents are experiencing statistically, a couple of things that I have noticed in my own practice are as follows:  First, with interest rates fluctuating, I have seen buyers become more timid as rates increase and seem to come out of the woodwork as they go back down.  Historically, rates are incredibly low, but buyers are in the mindset of getting the most for their money.  Secondly, many buyers are putting offers in on short sales which have a longer period between making the offer and having a pending contract.  If this is a major factor in the drop in pending contracts, we can expect to see a large jump in pending contracts over the next 30-90 days, providing that these short sales culminate in successful sales.

Short sales sometimes fall apart at the end.  I personally have had two buyers whose short sales fell apart in July after we had been waiting over two months for an answer from the bank.  At this point in the market, banks seem to have become increasingly skittish and this could be adding to a lower pending rate.  If they continue to balk and back out at the last minute on the short sales, we will have a glut of foreclosures in 60-90 days which will bring down our values, but also provide great investment opportunities for buyers. 

I'll be keeping my eye on the numbers.  If anyone is interested in specific numbers by zip code, please give me a call at 520-481-3695 and I can get that information to you.