As expected, February housing sales were not strong. No worse than last February, but not good. February sales were down another 6% from January (729 / 682) and four (4) units less than last February (686). Scarcity of pending sales + short month = sales drop. But pending sales are up 14% coming into March so we should start to see some gains this spring. Just in time for increased interest rates.
Last year sales jumped 30% from February to March, but that’s likely to be suppressed this year. We just don’t have houses for sale! Inventory of active listings fell to just 1.2 months, or 1,597 units. Last February we had 1,969 units, a more comfortable 3.5 months. As I’ve mentioned, before everything headed south a few years ago a ‘normal’ market, or market in balance, was 6-7 months. We haven’t been normal for awhile. Of course you already know that – we’re California!
At any rate, you can’t sell what you don’t have. Murrieta has 1.3 months, Temecula 1.1, and Menifee has just .9. If you’re doing the math, that’s about 31/2 weeks inventory. In that respect, our market is even tighter than most of the rest of the state where they enjoy a lavish 3.7 months.
We’re going to need even more housing if LA continues their wicked ways. A couple months ago I told you about an ordinance they’d passed mandating inclusionary language into their development plans. This week they’re be voting on Measure S, which would put a moratorium on any development in LA for 2 years. Look for more people headed our way after being priced out of the market in LA and OC. We’re going to need housing for another generation of commuters unless we can add a lot of jobs too. Or push them further East.
But what happens when you have too many people after too few homes? Prices go up. And up. February regional median was up 7% over January ($330,127 / $353,261) and up 9% from 2/2016 ($321,104). While Temecula’s median price rose to $446,693, thanks to a few well-priced sales their average price jumped to $491,487. We hit that peak once last year, but before that you’d have to go back to June of 2007 to see prices at that level. Temecula’s still got a ways to go before they hit the peak month of $575.935 in June 2006, but it’s definitely progress from $263,118 in January 2009.
Prices fluctuated month-to-month with some cities up, others down, but every city in the region is up year-over-year by an average of 9% to $353,261, nearly double the appreciation for the rest of the state, up 4.8% to a $489,580.
There’s a lot we’re keeping our eyes on legislatively as well because that can impact the housing market in ways we can’t even foresee. At the federal level we’ve been encouraged by action on the EPA’s ‘Waters of the U.S.’, a fight Realtors® have waged for years. Promised actions on Dodd-Frank and the CFPB could also bear good fruit for housing. The Fed will almost certainly raise their rates by mid-month and, at some point, mortgage interest rates will follow suit.
Somewhere north of 2,500 new bills were submitted for consideration this session in Sacramento, a few less than the 3,000+ many were fearing. But what they lack in quantity they also lack in quality, as there is a surfeit of bad policy with just a sparse sprinkling of good. During press conferences legislators bemoan the price and scarcity of housing in California – A CRISIS! Then they go back to their office and write bills to make it worse.
I know. Let’s raise taxes!