As expected, our 2019 housing market is off to a slow start. How slow? Well, I’d have to go all the way back to 2008 to find a worse January. And since 2008 was by far our worst sales year of the century, that’s quite a commentary on today’s market. A grand total of 583 homes sold across the region last month, down almost 20% from December and 15% less than we sold in January 2018. Puny but not unexpected.
As I pointed out on the demand chart, pending sales are a precursor of future closed sales and last month there were only 560 pending sales. January pending sales have increased to 721 indicating that February sales are rebounding. Historically, that’s a little early to see a volume increase like this and may be positive indicator of homebuyer interest heading into spring. From there on it’s anybody’s guess.
And when I say ‘guess’, that’s mostly what I’m seeing right now. Nobody is staking any hard positions on what the future holds for housing including people that get paid big bucks to know this kind of stuff. So, what do you expect from me? My opinion is free and worth every penny. However, the prevailing consensus seems to be that 2019 housing sales will range from a slight dip to flat to a slight increase. In other words, more of the same. Nothing to brag about. Increased employment coupled with rising wages are offset by continued price appreciation and rising interest rates. But optimism that the Fed will temper their rate increases this year coupled with slowing price appreciation may lead to renewed buyer activity this spring. Again, an early February boost may be reason for optimism.
Some buyers may be waiting to see what impact the new tax policy will have on their finances as well. Some Californians will benefit from the policy while others will get dinged. Those that benefit will likely be lower to mid-range households enjoying a lower tax rate and more take-home pay allowing them greater spending latitude, including stepping into the housing market. Those not benefitting greatly will already be homeowners impacted by interest rate caps so the downside potential for housing is reduced. First-time homebuyers are not going to be purchasing a $750,000 property in most cases and will not be impacted by those market constraints.
Our local market also reflects what’s happening statewide and nationwide right now with the slower median price gains we saw in the 4th quarter continuing into the new year. After reaching a peak of $388,878 in September, median price for the region has declined by 5% over the last three months of 2018 to $370,706 in January. That’s an increase of just 1% over January 2018 and the slowest January appreciation in the past 8 years. By comparison, January 2018 pricing increased 10% over January 2017 ($330,156 / $368,333), which was a 6% increase over January 2016 ($310,311), which in turn was a 7% increase over 2015 ($287,506), and so on, and so on. Of course, that’s still a 22% improvement over the past four years and that’s not bad. Don’t expect that run rate to continue this year.
Not as many homes were listed in January so our unit inventory dipped a little but slower sales and reduced absorption boosted months of inventory to 4 months – the healthiest inventory we’ve had in a decade. More homes mean more choices for buyers. Longer time on market means price reductions to be competitive. Slower price appreciation and stable interest rates means more affordability. More people working within higher pay means more buyers in the market. Overall means good market?
Last night’s question was appropriate – “What will we do with this moment”?
Gene Wunderlich is Vice President, Government Affairs for Southwest Riverside County Association of Realtors. If you have questions on the market, please contact me at GAD@srcar.org.