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Increasing Optimism…Tempered by Reality

2017 is off to an inauspicious start. I’m talking about the housing market of course, the protesting and divisiveness of politics depends on your perspective I suppose. Turns out Love Trumping Hate involves a lot more arson and assault than we thought it would.

Based on December pending sales, we knew January housing was not going to be great, and it wasn’t. If you don’t many much in the pipeline you can’t close them. In spite of being down 21% from December (916 / 729), sales of single family homes across the region were still up 7% over last January (679). That’s not too bad.

Prices continued to ratchet up slowly. Median for the region was up just 1% over December ($327,039 / $330,127) but maintained a 6% edge over January 2016 ($310,211). Temecula’s median fell 5% ($435,000 / $414,700) from last January, Perris stayed exactly the same at $270,000, Menifee was up 9% ($290,000 / $320,000), San Jacinto jumped 13% ($214,900 / $247,450) and most other cities posted moderate gains. Interesting to note a trend that started last year in higher price areas like Orange County and the Bay area, impacting our housing market as well. Cities with the highest median price, like Temecula and Murrieta, have experienced low single digit appreciation while more affordable areas continue to surge into double digits.

This, of course, is a function of affordability and availability, both of which are suffering in some areas of the state and may be visiting our region as well. Inventory has been dropping since mid-year and has fallen 33% in the past six months (2,478 / 1,658).

While it’s not unusual for January inventory to fall off some, this leaves us with just 1.5 months of inventory, the lowest point in over 2 years!

So much depends on the mood of the state and nation over the next 100 days, and that’s a real crapshoot. At the state level we’re well on our way to drafting 3,000 or more bills for this session! (Does California really need 3,000 more laws guiding our every breath?) Regardless, we’re going to get them. For every bill that would help housing in the Golden State like Marc Steinorth’s AB 53, which would establish a tax deductible savings account for first time homebuyers, there are 10 bills that would make it more difficult to develop, to buy or to finance. At recent state meetings our Chief Lobbyist in Sacramento joined others voicing cautious optimism that the pool of moderate Democrats may be sufficient to forestall some of the worst excesses possible under the new super-majority legislature. We’ll see.

Equally concerning is the federal landscape.

One of the new administration’s first moves removed a 25 basis point mortgage insurance premium reduction enacted just weeks before. We understand this was part of an overall roll-back and review of last-minute acts by the previous administration and our national association has presented documentation on why reinstating that particular reduction will stimulate the housing sector.    

Despite concerns and ‘calls-to-action’ within our own ranks, we are reminded that there is very little to ‘act’ on yet. The National Association of Realtors® has been a consistent advocate for private property rights and homeownership. It isn’t news to members of Congress that we consider the mortgage interest deduction to be sacrosanct and will go to the mat over this one.

Any tax reform would need to address this issue very carefully as it is generally considered one of those 3rd rail items like Social Security and Medicare. Similarly the fate of the federal backstop for mortgage insurance from Fannie & Freddie is critical to the market and the availability of a 30 year mortgage.

We are encouraged by recent discussion regarding changes to both Dodd-Frank and the CFPB. Dodd-Frank was a typical knee-jerk reaction to issues barely understood by the act’s namesakes. It has stifled private sector investment in the housing market, kept small local bankers out of the game completely and prevented thousands of qualified buyers from purchasing their first home. Similarly the unregulated regulatory agency that is the CFPB may be due for a comeuppance as well. One can only hope.

February won’t be a great housing month but keep your fingers crossed for a Spring resurgence. Winter rains may lead to blossoming home sales.

Written by Gene Wunderlich, Sr. Staff Writer

Gene Wunderlich is the Government Affairs Director for Southwest Riverside County Association of Realtors. If you have questions on the market please contact me at GAD@srcar.org or to keep up with the latest legislative and real estate trends go to http://gadblog.srcar.org/.

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