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A HUGE Month!!

Predicated on historical precedent and declining pending sales coming into the month, I was not expecting much in the way of sales activity in July. BOOM! Seemingly out of nowhere we get the 2nd best month of the year, in fact the 2nd best month in the past 25 months! Across the region we sold 1,107 homes in July, just 24 fewer than the 1,131 sold in May of this year. Before that you’d have to go back to June of 2017 when we sold 1,360 homes.

So July was good. So good, in fact, that we pulled within 40 homes of last year-to-date selling 6,337 homes through July compared to 6,377 in 2018. That’s still a bit off the 7,008 pace set in 2017, but not bad. Here’s hoping we can keep that momentum going.

But lagging sales isn’t just a local phenomenon – it’s an issue that’s being debated statewide and across the country. During a period of economic prosperity, rising wages, record low unemployment and near-record low interest rates – why isn’t housing holding up its end of the deal? In California we continue to point at reduced inventories, and especially reduced availability of affordable homes. First time buyers are faced with median prices of over $700,000 in San Diego County, $800,000 in Orange County, $500,000 in Los Angeles and even

$450,000 – $480,000 in Murrieta/Temecula. Median prices of $285,000 – $300,000 in Hemet and San Jacinto are not easily affordable but relative to surrounding markets look increasingly attractive. Prices in those areas are also rising at a faster rate than some of our more pricey neighbors.

So we understand housing access is a problem in California, but what’s constraining sales in the rest of the country? Turns out there are no magic answers. Even a home priced at the U.S. median of $226,800 may be a stretch for folks who live wherever that home is. Another problem is consumer confidence. There’s a kind of perception that even though the economy appears to be running flat out on all cylinders, there’s underlying concern. After all, this ‘recovery’ has now set a record for a bull run – more than a decade as of June. ‘Everybody knows’ that the economy is cyclical so sooner or later… And some fingers are pointing to late next year or early

2021 as potential downturns, fingers that belong to people who are paid to know. As it’s currently a media narrative, this can become a self-fulfilling prophecy at some point.

Younger folks, including that pent-up Millenial generation, lived through the last recession with their parents a decade ago during their formative years. Many experienced the loss of a home first-hand. While 70% still hold their longer-term goal of homeownership, short-term they’re hesitant to take on more debt right now (for many saddled with student debt) and worry about a downturn on the horizon. Makes sense.

Others argue that while June 2009 marks the official start of the current recovery, sectors of the economy recovered at different rates. GDP growth was anemic, at best, for much of that time. Lending rules were tightened to the point of strangulation in the aftermath of the melt-down. Technology, housing, healthcare and manufacturing, all experienced recovery years apart, some as recently as 2017. In our market, median home prices have still not recovered to their pre-recession peak. Temecula median price will be the first Southwest city to fully recover if it stays on track through year-end.

So has the recovery really run for a decade or do we still have time and room to grow? Having dropped by as much as 65% in some of our local markets over 18 months, prices didn’t start to appreciate again until 2012, and have increased about 7% each of the past 7 years. Last month our regional median added 2% month-over month ($388,642 / $394,594) and 4% up year-to-date ($378,156). As I’ve pointed out before, compared to the 30% – 35% appreciation we experienced from 2001 – 2006, 7% is a sustainable growth rate IF we have products to sell, IF they are affordable, IF we’re not taxed and regulated out of existence, and IF the rest of the state and nation don’t collapse around us. We could still have some growth years ahead.

To end on a happy note, by the time you get my next newsletter, Sacramento will be wrapping up for the year. Property and business owners can breathe a sigh of relief that they may have escaped some of the worst bills we’ve seen in a while. But don’t get too comfy, they’ll be back in January.

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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