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The Houses of August

While some (mainly progressive) economists were cautioning that the economy would fall off a cliff in August amidst a new CV-19 surge, the end of/or reduction in unemployment benefits, and continued stodgy recovery, recent jobs and stock market reports point to a somewhat more robust reality.

Let’s start with a brief nod to the employment front where some 1.4 million jobs were added in August driving the unemployment rate down by 1.8% to 8.4%. That means in the past four months, even while under debilitating lockdown, the economy has already recovered nearly half the jobs lost in the government mandated recession. Workforce participation likewise is increasing, bringing us within 2% of pre-pandemic levels.

I mention jobs because it directly relates to our housing market. You may recall a few months back when I passed on the prognosis from NAR Chief Economist Dr. Lawrence Yun who was forecasting a V shaped recovery for housing, indeed being the driving force for the rest of the economy to recover. At the time he advised that even if unemployment reached 20% (which it never did), that still meant 80% of folks were working and, despite pandemic cautions, were still engaged in the age old practice of buying and selling homes. Today’s unemployment at 8.4% puts even more people back into the housing market, including many venturing in for the first time encouraged by record low interest rates.

Month-to-month sales volume declined in our market by nearly 15% (1,250/1,068) but was just 9 homes shy of the volume for August 2019. That leaves us some 3% off the pace year-to-date (7,414/7,169). However, last September sales volume declined by 12%, this year pending sales are up 3% heading into September. A couple more good months will put us on track to match 2019 numbers. Given what we’ve been through and the ongoing vagaries and length of the pandemic response, that would be a very positive outcome for our market.

Median prices also continued to climb across the region as lack of inventory forced would-be buyers into multiple-offer scenarios resulting in sellers claiming 100% of asking price in most cases, even more in others. Median price was up 5% month-over-month ($420,701/$444,500), and 12% ahead year-over-year ($391,022). Year-to-date our margin over 2019 remains at 7% ($383,010/$412,083). Driven by the sale of 22 homes over $1,000,000, Temecula set a new average price record last month at $652,976 against the previous high-water mark of $575,935 set in June 2006. Canyon Lake posted 7 sales in excess of $1,000,000 for an average price of $649,872. That’s still a ways off their prior peak at $696,385 in March 2007, but increasing strength in the high end of the market is a good sign.

Which brings me to our inventory situation. While our inventory of available homes rose 4% last month (799/832), we have 65% fewer homes to sell than we did last August (2,353). For the third consecutive month sales have exceeded inventory and absorption remains robust as we measure inventory in weeks rather than months. Effective inventory becomes even more constrained in cities like Temecula, Murrieta and Canyon Lake with 25% – 35% of available homes listed in excess of $1,000,000. That leaves 95% of buyers (on average) chasing an even smaller piece of the pie – those ‘affordable’ units under $500,000. For those first time/millenial buyers, that’s an even steeper hill to climb toward their American Dream and losing the race time and again to better funded/cash/higher bids is frustrating. But apparently worth the effort as reflected in the smile of new homeowners.

Stay healthy, stay safe, and let’s get our businesses, schools, and lives open again.

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.

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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