In days of yore, miners would carry a small caged canary underground with them. The theory was that if the canary got woozy, fell off its perch, or outright expired, it was time to get out of Dodge pronto. Today
there are some who suggest housing needs a canary test to see if the air is going out of the market. I’m not so sure. Time will tell, of course, but it appears there’s still some upside to be gained in this recovery.
Our local housing market experienced a little bounce in February. That’s somewhat unusual but not unprecedented in that February sales are generally a little softer than January, plus it’s a short month and all. But as forecast by pending sales coming into the month, sales in February were up about 12% over our dismal January, managed to top last February by 3%, and were nearly on par with 2017. That’s good. Pending sales are up another 12% heading into March so it looks like we’re entering the spring buying season with some momentum.
Inventory dropped a few points in February as more homes sold, the 5th consecutive month of inventory declines. As a result, we’ll be coming into the season with a little less competition on the market than a few months ago, but still about 25% more than we had a year ago. That likely translates to slower price appreciation as indicated by the meager year-over-year median price gains experienced by most cities last month. Of course, the fact that there were price gains is, in itself, a good sign. Overall the region posted a .55% (that’s ½%) month-to-month increase ($370,706 / $372,800) and was up 4% over last February ($359,314). Wildomar and Lake Elsinore prices remained the same month-to-month, Menifee homes were up $50, Hemet was up $250 and Temecula median increased $750. We’ll see if we can keep that positive appreciation flowing in the face of estimates calling for anywhere from a 3% appreciation at best to a 6% decline at worst.
As mentioned above, sales did pick up in February adding some 12% to January totals (583 / 663) and besting last February by 3% (645). Interest rate drops encouraged some fence-sitters to act before they go up again, while continuing positive job and wage growth enabled others. We must also remember that this volume of sales is occurring in addition to an increase in new home production and sales across our region.
The number and scope of new products coming on the market in almost every city in our region is encouraging and allows more upward movement while freeing up some lower end product enabling first-time homebuyer access. While new homes are generally priced at a premium over existing housing stock, the added inventory does act to restrain rampant appreciation. More supply to meet demand has that effect and why we’ve been promoting #Supply=Solution for so long.
It will be interesting to see what impact Governor Newsom’s promise to build 3.5 million new homes over the next few years has on the market. Without meaningful changes to CEQA and addressing the myriad cost and regulatory burdens faced by developers, more affordable workforce housing will remain an elusive goal. Lawsuits against non-compliant cities will do little good, while tying transportation (gas tax) funds to the housing element may actually be counter-productive. Efforts to expedite or densify housing around transportation hubs does nothing for regions like ours and only serves to justify more money channeled to coastal and highly urban areas, already the beneficiaries of much state largesse.
At any rate, we’re coming into prime housing season with a little tail wind, and that’s a good thing. If all of you could just step up, sell your house and buy a new one the next couple months, that would certainly keep the momentum going. Thank you in advance.
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.