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The Definition of Insanity

Let’s start with congratulations to all the recent election victors. Thanks as well to those who stepped up, gave it a run and came up short. Thanks for volunteering to be of service to our communities. A tip of the hat to all us survivors of another political season as well. There’s still a lot we don’t know about the outcome as of this writing, but it appears that while California residents justifiably and loudly complain about how the state is being run, they sent all the same lawmakers back to Sacramento, apparently expecting a different result, so…

Housing continues to perform well as across our region we posted another month-over-month increase in sales, up 3% (1,168 / 1,206) and up 18% over last October (992). That not only catches us up to last year-to-date (9,380) but puts us ahead of 2019 by 2% (9,543). Pretty amazing considering the cliff the market tumbled off back in March. From our low point in May (695), we’ve averaged 1,145 sales every month since. Pending sales dipped 7% coming into November so we can expect some normal seasonal slowing ahead, but we should still finish well ahead of last year’s pace.

Pushed by this heavy demand, shrinking inventory, and record low interest rates, median prices continue to appreciate, up 1% month-over-month ($444,500 / $446,486), but up a stellar 12% over last October ($391,433). The forecast for 2020 median appreciation was pegged at around 3% – 4% but year-to-date we’re running a solid 8% ahead of 2019 ($385,150 / $418,429). After a slow start in January, Temecula’s median price has exceeded $500,000 every month, venturing as high as $555,000 in August. Driven by 17 sales in excess of $1,000,000, Temecula posted an average price of $621,365 last month. Not to be left too far behind, Murrieta had 16 sales in excess of $1,000,000, their 2nd month above $500,000 median and an average price of $569,859. Canyon Lake, Menifee, and Lake Elsinore each posted a $1,000,000+ sale last month as well.

Meanwhile our inventory of homes for sale contracted by another 4% last month, down to just 855 homes across ALL price ranges. That’s down 61% from last October when buyers had 2,205 home to select from. We also lost another 3 days off the inventory – down to .7 of a month from .8 last month. That’s literally 3 weeks of inventory when a normal market is 6-7 months. Homes are languishing on the market for just 6.2 days on average whereas last month they were sticking around for a solid week. That’s down 76% from a year ago when the average home stayed on the market for 25.4 days. Aside from being a hyper-competitive market right now, some of that reduction in days-on-market is due in part to a new practice in our MLS allowing agents to show ‘Coming Soon’ listings. This gives aggressive buyers a few days’ notice of an upcoming property, providing a jump on the market resulting in quicker sales.

How can you sell 1,206 homes when you only have 855 available? Absorption! In addition to what’s on the market, we’re selling virtually every new listing that comes on the market (99%) in less than a week.

The California Association of Realtors® just provided their update and forecast during what would normally have been our annual meeting and there’s some fascinating info in it. In summary, the trends we’re seeing locally are being repeated across the state with sales and prices both up to record levels. Inventory is also sagging statewide – down to 2 months, and properties are only staying on the market 11 days on average. As a result, median price hit an all-time high for the state of $706,900, which negatively impacts housing affordability across the region. Yet in spite of declining affordability, the share of first-time homebuyers rose to 38.4%, exceeding the long run average of 37.2 for the first time since 2010.

Here’s some other startling, but unsurprising, factoids of the market. In 2019, and estimated again in 2020, 30% of sellers were leaving the state. That’s the highest number since 2005 when 31% hightailed it for greener pastures. Another 36% are moving within the same county and 18% to another county. LA County lost an estimated 200K residents to the IE between 2010-2018, their first choice, with another 80K moving to OC, 60K to Texas, etc. So if LA County residents are increasingly moving inland as their first choice, where are inland sellers going? Not within California, that’s for sure. First choice is Arizona (apparently taking their political habits with them), then Texas, Utah, Nevada, Georgia, and so forth.

While most cities in our region boast homeownership rates of 60% – 70%, 46 of California’s largest cities are now majority renter cities with Santa Monica leading at 72% renters, LA and SFO at 63%, and even San Diego and Escondido at 54% and 51% respectively. Those cities have created their own problems with restrictive and pricey housing policies, but they must also govern a majority renter city differently than we do. Where there is no pride-of-ownership, quality of life, education, and public safety assume different priorities – hence the return of rent control initiatives every couple of years.

So, hang in there – this bumpy ride’s not quite over yet but there may a light at the end of the tunnel.  Of course, it’s 2020 so that may just be another train coming.

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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