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Market Correction?

The housing market in our region appears to be in a state of flux right now across several indices. Historically June has been our highest month for single family home sales – and it may be again this year. But sales are well off last year’s pace, posting the lowest 1st half sales in the past four years, some 9% off last year’s 1st half (5,953 / 5,404). This may not be a localized phenomenon since sales across the state were down 4.6% in May. Pending home sales coming into July are also down 6% from June indicating that July will not be a gangbuster month either. As I said last month, I hate to call a trend predicated on a brief data window, but we’re running on six months of reduced volume sales at this point. So lagging sales is one factor to consider.

Another factor indicating a market shift is median price data. Our median price has dropped for three consecutive months and fallen four out of six months this year. The decline has not been precipitous, falling just 1% in the past quarter ($376,833 / $374,605) but that reverses a trend of steadily escalating prices reaching back nearly six years. Median price for the region is up just 2% since January ($368,333/ $374605). Year-to-year the 1st half rate of appreciation has slowed from an average of 7% to just 3% this year. That’s another factor to consider.

If there’s a bright spot, its inventory. Available inventory is up 10% month-over-month (2,203/2,454) and up nearly 30% from a year ago (1,743). That 700+ additional units is more than can be attributed to the 550 unit drop in sales across the same period. Inventory is back to mid-2016 levels and that’s good. Increased inventory combined with reduced sales inevitably leads to slower price appreciation, as we’re witnessing. Months inventory stands at about 2.5 months in June compared to just 1.7 months last June.

Temecula and Murrieta continue to suffer from reduced effective inventory in that last month. Each city had four sales in excess of $1,000,000 yet Temecula shows 78 properties listed over $1,000,000 and Murrieta has 88. That’s a 22-month inventory in that price range and reduces the effective inventory in each city by nearly 20% for properties available to 98% of prospective buyers. Hasn’t hurt them so far but sellers of higher end properties will need adjust their expectations accordingly if they have any timeframe for a sale.

Not saying this is the end of our rally market – according to ‘experts’ that’s still a way down the road. And by slowing some now, we may avoid a more serious correction in the future. But the market has shifted. My friends working with banks are getting more indications that banks are ramping up the foreclosure market again, yet that isn’t reflected in the numbers at all.

Distressed properties still represent a scant 2% of both active and sold properties – 1% short sales and 1% REO’s. Rising interest rates have impacted buyer’s ability to purchase and new homes coming on the market in cities across our region give buyers more opportunities outside of the existing resale market. And by all indication, the market for new homes is strong. So, while there’s no immediate cause for alarm, change is in the wind. Stay cool, my friends.

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/.

 

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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