S.H.I.F.T. (Study of Housing: Insight, Forecast, Trends) was the title of a recently commissioned study by the California Association of Realtors® that delved into the current housing market with an eye to the future. Some of the findings are intuitive (rising interest rates impact affordability), some are self- explanatory (the U.S. economy is our biggest strength right now), some are ongoing problems (California continues to build far fewer homes than needed), some are eye-opening (78% of respondents believe now is NOT a good time to buy in California), and some are downright scary (California will become a majority renter state by 2025).
We’ve just returned from a series of state and federal meetings where we had the opportunity to celebrate some legislative victories from the past year, lick our wounds over others and foment plans to deal with the changed political landscape we will encounter at the city, county, state and national level in 2019. We are indeed fortunate that much of politics (but not all) is local as our cities remain solidly conservative with well-grounded new members replacing outgoing council members. As I have stated on numerous occasions, after talking with my counterparts around the state I wouldn’t trade my job here with any other around California. We remain in a somewhat unique bubble of fiscally responsible governments, forward-thinking planners and great quality of life that much of the rest of the state only wishes they could emulate.
That is one reason why the S.H.I.F.T. study also found an interesting 2 step process among current home sellers. Step 1 has 21% moving to another county and those are predominantly relocating from over-priced coastal areas to the Inland Empire, with Riverside and San Bernardino Counties picking up nearly 250,000 residents who decided to remain in California for now. Step 2 is for people who are priced out of the IE and move to Texas, Arizona, Utah and Georgia as their top destinations. 29% of sellers today indicate they’re moving out of state (up from 10% in 2013).
We’re seeing these issues played out in our local housing market right now as sales continue to lag behind last year while prices continue to rise, albeit at a slower pace as we near yearend. October housing sales for the region were up 7% over September (833 / 896) but down 5% year-over-year (941/896). Pending sales are off 7% going into November (822 / 755) so don’t look for any great improvement as we head into the holidays. Prices fell month-over-month in October, down 3% from September ($376,028 – $388,878) but remained 5% ahead of October 2017 ($376,028 / $356,722).
Since December 2017, our inventory has nearly doubled (1417 / 2815) and has more than quadrupled our post-recession low of 602 homes available in March of 2013! Our current inventory stands at just over 3 months, and while that’s a significant improvement over the 1 month or less we’ve seen in the recent past, it’s still just half of the 6-7 months that has long been held as the norm for a market in balance. We’ve grown so accustomed to extremely low inventory we forget what a normal market looks like.
So, while S.H.I.F.T. happens, that appears to be all it is at this time. Underlying fundamentals of the economy are still sound and this adjustment to a long-running recovery hopefully is just that – nothing more sinister or deleterious. At least that’s what they told us last week. Of course, we just saw a sea change in D.C. so things could come off the rails anytime now. Fingers crossed.