For just the 2nd time in the past 12 months sales of existing single-family homes exceeded prior year sales in May, up a whopping 19% from April (920 / 1,131) and up over last May by 5% (1,074). Year-to-date we’re still about 3% off of last year’s pace (4,317 / 4,171) and some 10% behind our most recent best year in 2017 (4,626) but it’s a start. At our Legislative Meetings in D.C. last month, National Association of Realtors Chief Economist Dr. Lawrence Yun forecast a pickup in activity after a slow start to the year, so hopefully this is the start of that.
As you might infer from that, the slowdown in sales has not just impacted our local market but has been felt across the state and the nation as economists struggle to explain why. As has been consistently pointed out, the underlying fundamentals of the economy continue to be strong with unemployment at historic lows, wages and consumer confidence up, and mortgage interest rates dipping below 4% again in recent weeks.
After some delay in household formation, we are also seeing Millennial and Gen X’ers increasingly entering the housing market across the country, but California remains a difficult place for these young folks to get started in their housing quest due to shrinking affordability. Places that are benefitting from this affordability/lifestyle boom include cities like Seattle WA, Madison WI, Omaha NE and Durham NC. Sadly, there are no California cities in the top 10 destinations for these young buyers, although we do have two of the bottom five.
While our sales are down 3% from last year and 10% from the year before, our median prices are up by almost the same amount.
Median price for the region increased 3% month-over-month ($379,111/ $388,974), up 4% year-over-year ($375,000) and up 2% year-to-date ($369,951 / $377,964). While the rate of increase has slowed during the past few months, we’re still up 10% over this point in 2017 ($341,142). Good for homeowners, not so good for those trying to become homeowners.
Locally our cities are doing their part to add housing inventory. At our recent Breakfast with the City Managers event, every Manager reported that their city was approving housing applications as expeditiously as possible for both single and multi-family projects. But while this will add to the overall supply, which is great, it will do little to improve affordability, especially for first-time buyers.
Constrained by the various fees, taxes and regulatory burdens placed on entitlements, coupled with the rising costs of construction and shortage of workers, developers are building the type of home they deem most in demand and will maximize their return.
Unfortunately, those aren’t entry level homes built to be affordable. Low to moderate income workforce housing remains elusive and is the fastest appreciating segment of the market, making it increasingly difficult for our young folks to remain in California.
And despite the Governor’s assurances that housing is priority #1 for his administration, and the promise to increase construction from the current 80,000 – 100,000 units a year to 300,000 – 400,000 units, he has yet to put forward a plan defining where, how and how much. Meanwhile the legislature is doing everything they can to making housing more difficult and expensive to build or rent. They just killed a bill which would have allowed for higher density housing in transit or jobs rich areas yet advanced a bill which will establish state-wide rent control, in direct contravention of the will of the voters last November who defeated Prop 10.
Finally, my thanks to the City Managers who came out to educate and inform nearly 400 of our members last week at our 9th annual breakfast. Always a highlight of our year.
Proud to Announce a New Program from SRCAR – We were recently awarded a grant of $50,000 to implement this program to assist Veteran first-time homebuyers. Veterans on limited fixed incomes are among those most impacted by their inability to make the transition to homeownership. Even though a VA loan requires no down-payment or closing costs out of pocket, they are still faced with the expense of furnishing a home, including appliances. Through this program, SRCAR will help them take that first step on the ladder by providing a refrigerator, washer and dryer to qualifying buyers.
If you know any veterans buying, or thinking about buying their first home, please pass this info along.