Our local housing market is coasting into December with the probability of posting our best sales year since 2010. Sales were up in most cities in the region in November adding 7% to October’s tally (908 – 974) and coming in a whopping 28% ahead of last November’s paltry 700 sales. Pending sales are off for December and that will determine if we have just a pretty good year or a good year. Either way it won’t be a great year but at least its better.
Prices were off slightly in November from the prior month ($339,508 – $327,895) but still maintained an 8% increase over November 2015 ($303,050). Given the current trend, median prices in most areas should be at their highest level since 2008. They won’t be back to 2008 levels, unfortunately, but they will be higher than any year since the great dive. We’re also seeing some plateauing in our higher price cities while prices continue to post double digit increases in lower cost communities. Part of that is lack of inventory in some areas, especially affordable inventory, forcing buyers to look further afield for their housing choices.
That issue of affordability was the subject of a recent brainstorming session hosted by the California Association of Realtors® attended by over 100 economists, local officials, building industry representatives and housing advocates. There were some very disturbing statistics discussed at this meeting including things like:
- 25% of people selling homes in California are moving out of state
- 50% of renters say they would like to purchase a home but can’t afford one
- 25% of household earnings are spent on housing costs, more than 30% if you’re a renter
- California ranks 49th in homeownership rates and 50th in affordability
- California added four new jobs for every new home built between 2010 and 2015. It should be one home per 1.5 jobs. San Francisco added 6 new jobs for every new home built.
- Fewer than ½ of Inland Empire buyers can afford a median price home. That dips to fewer than 1/3 in Orange County and just 14% of Bay Area buyers.
Recognized as a serious problem at both the state and national level, it will be interesting to see how our new administrations will respond. Sacramento has already identified transportation and housing as primary focus issues for 2017 but it will remain to be seen if they can get out of their own way to actually address the problem. Many of California’s housing problems are caused by legislative and regulatory burdens that keep land from being developed and increase compliance costs on areas that are developable.
Some of the proposed ‘fixes’ are actually counter-productive like the recently passed inclusionary zoning initiative approved by Los Angeles County voters.
Look for Sacramento to tie development to state funding offering incentives to regions that step-up while penalizing those that don’t (except for Los Angeles and San Francisco, of course). Expect attempts to encroach on local control by mandating that Sacramento can override municipalities if they don’t meet state mandates for affordable housing. Anticipate calls for ‘new funding sources’ including a re-introduction of last year’s bill that called for a $75 per document fee on existing homeowners to fund new homeownership opportunities.
Just don’t expect any real relief in the way of CEQA reform or regulatory or fee reductions. Don’t be silly.