From a point mid-year when it looked like another year of slumping sales at a local and state level, the market picked up steam in the last half driven by continued low interest rates and an increase in homes for buyers to choose from. November sales did drop 16% from October (992 / 832) but still posted a year-over-year increase of 8% (769). That keeps our year-to-date volume for the region 3% ahead of last year (9,855 / 10,182) but well out of the record territory set in 2017 (10,791). Still not a bad year considering the inventory of new homes our cities have brought to market the past 24 months competing/augmenting existing home sales. Year-to-date the state has pulled ahead of last year by 1.9% through October, so our local market is performing slightly better than the rest of the state.
Median price also continued it’s upward trend in November with all cities posting higher numbers than a year ago. Setting aside the anomalous 26% spike in Canyon Lake (that’s what happens when your sales drop but over 1/3 of your sales are higher end homes), regional median price climbed 2% month-over-month, ($391,433 /$399,555), 7% over last November ($371,333) and maintained a year-to-date increase of 3% ($374,262 / $386,460). At 3% that rate of appreciation about half what it’s been the previous five years, but we’re still moving in the right direction.
Readers may recall that I anticipated price appreciation edging into negative mode in the 3rd quarter of 2018 as more and more forecaster were calling for a market correction this year into next.
Obviously, that didn’t happen and, based on underlying economic factors, most prognosticators today are calling for continued market strength through next year in both sales and price gains. Interest rates should remain at near record lows through 2020, encouraging more Millenials to launch their foray into the world of home ownership. That’s good news.
Homeownership levels have increased by nearly 3% nationwide (62.9% / 64.8%) over the past three years, and even California has increased their rate by approximately 1% in the past year (53.2%), reversing a five- year trend of declining ownership. This is definitely good news and may delay California’s trajectory toward majority renter status by 2025, although our legislature is doing everything, they can to curtail the construction of much needed housing to meet increased need. The bad news? While as recently as a decade ago the average age of a 1st time homebuyers hovered around 31, today the average California home buyer is 47 years old!
Still more good news, Fannie Mae and Freddie Mac, the preeminent loan underwriters in the nation, have just revised their conforming loan limits for 2020. For Riverside County that loan amount will increase from $484,350 this year to $510,400 on January 1. If you buy a few miles south into San Diego County your loan limit will be $765,000.
That’s because San Diego is considered a ‘high cost’ area while we continue to get lumped into the ‘Inland Empire’, including San Bernardino and other price/value leaders. Fair? Probably not, but at least it’s an improvement and manages to keep ahead of our current medians in higher cost cities unlike what happened to us in 2008 – 2009. Back then our median prices were in the mid-$500,000’s and conforming loans were around $417,000.
As a result, banks invented increasingly exotic loan vehicles to entice buyers and the result, as they say, is history. Any clouds on the horizon? Sure. Our nation is in the grip of flu season and impeachment blues. Congressional inaction has hampered some economic growth and the upcoming election season will undoubtedly result in further inaction as legislators strive to limit their voter alienation quotient by avoiding major issues. California legislators will be back after the 1st of the year and if you thought this year was tough for businesses, taxes and regulations, you’d best buckle up for the ride we’re in for next year. The new year will also bring some musical chairs to our local political scene as residents from our cities, county and legislature jockey to fill open, or soon to open, seats. Plus, we’ve got as many as 18 ballot propositions to look forward to. Yeah, it’s going to be a year.
If I don’t see you between now and year-end, here’s wishing you and yours the merriest Christmas, the happiest holiday season, and a healthy and prosperous New Year.