¾ of our housing year is now behind us giving a pretty good idea of how 2016 will go down in the record books – and it’s shaping up to be a pretty decent year, all things considered. Single family home sales which started the year at an agonizingly slow pace, was followed by two good quarters including a surprisingly robust 3rd quarter.
Even a 10% month-over-month drop in September (1,095 / 982) didn’t derail the progress from July and August. So we’re heading into the last quarter with a slim 3% sales margin over 2015 (8,432 / 8,721). Of course as you’ll see on the accompanying graphs, sales tend to drop off in Q4 but unless they fall of the tracks completely we should still post our best year since 2012. Pending sales indicate October sales will remain at close to September levels rather than drop as much as they have in prior years so we’ll see how that works.
Median prices also dipped 1% month-over-month ($337,222 / $334,861) but remain 7% ahead of last August ($310,583) and 7% ahead year-to-date. That 7% increase puts our annual gain slightly ahead of the California average of 5.8%. Median prices have remained relatively flat for the past four months with June at $333,447, July at $333,278, August at $337,222 and September at $334,861. But while sales tend to drop at year-end, median prices typically hold their own or increase slightly meaning we should end 2016 with another comfortable yet sustainable gain in home equity. Some forecaster are calling for 2017 to be the year prices finally claw back to the their peak levels of 2007-2008. Of course others are predicting a collapse of the market in 2017 so who know? Not me!
Inventory continues to be a problem, declining again in our region by 5% month-to-month and 9% year-to-year. And it’s a problem plaguing not just our region but our state and is starting to impact national sales as well. We’re just not building enough supply to meet the demand and that limits sales potential and affordability. First time homebuyers make up less than 30% of the market, well off their historic norm of 38%. That’s the Millenials, many burdened by college debt and just not able to afford a starter home. But Boomers are also not moving like they used to. Previous generations stayed in their homes 3-5 years between moves, then it jumped to 6-7 years, now it’s more than 10 years. 71% of Californians over 55 have not moved since 1999!
Even with increased building in our region, statewide supply generation of both single family and multi-family remains 65,000 units behind what is required.
While the Inland Empire is a close 2nd to the Silicon Valley in job growth, Riverside County remains the 8th most underbuilt county in the state. That disparity has reduced the ability of the average worker to buy a median price home in our region from over 60% just 3 years ago to 41% today. That’s well under the national average of 57% but still much better than San Diego County at 26%, Orange County at 22% or San Francisco at 13%. Even Los Angeles County, with an HAI (Homeowner Affordability Index) of 30%, bled nearly 25,000 residents to the IE last year chasing jobs and homes.
I’ve included a few summary slides our California Association of Realtors® Chief Economist Leslie Appleton Young presented to us at our recent state meetings. Next month I’ll have more information from my upcoming meetings with our National Chief Economist following those meetings. We’ll also have some other questions answered by that time about the direction our country has chosen to follow for the next four years. I don’t know if there’s a right or wrong solution to that but there’s certainly a better or worse scenario. Let’s hope we chose the right path.