During the past year, as I’ve reported on shrinking housing inventories coupled with strong demand, many of you have asked me the same question – ‘why aren’t prices going up?’ There was no answer other than – ‘they should be’. Even the government can contravene the laws of nature for just so long.
So, after 4 years of relatively stable pricing, where annual medians for the region rose a scant 9% from 2009 – 2012 ($234,974/$256,539), suddenly this year prices have started posted significant gains over last year. January’s median price was up 19% over last January ($217,924/$262,930) and February’s was up 14% over last year ($237,842/$274,353). This is the highest median price we’ve seen for the region since August 2008 when our median price dropped through $280,662 on its way to our low of $210,317 in April, 2009. We’re up 23% from there.
Most cities are scoring well with Temecula prices up 21% year over year $(279,009/$355,950), Murrieta up 19% ($261,199/$322,574), Wildomar up 17% ($205,941/$246,302), Lake Elsinore up 17% ($179,136/$215,502) and Menifee up 14% ($171,625/$199,165). For the region, only Canyon Lake had a year over year decrease of 7% ($330,140/$306,625) but with the wildest gyrations in the region, Canyon Lake could easily post a 40% gain next month by selling a couple $1 million homes.
In Murrieta, last month was the highest median price they’ve enjoyed in nearly 5 years, since April 2008 when the median hit $326,978 on its way down to $252,082 (1/10). For Temecula, they had a couple good months last November and December but prior to that this is the highest median since March 2008 when it hit $356,383 on its way down to $263,118 (1/10).
So you don’t lose perspective, even with the recovery of 26%, at $355,950 Temecula is still 38% under its peak of $575,935 (6/06) and at $322,574 Murrieta is still 44% below its peak of $576,224 (5/06). But at least we’re trending in the right direction finally. That’s good news.
Does this mean we’re out of the woods? Well, only time will tell on that. The next few months will be critical as the feds deal (or no deal) with issues like our mortgage interest deduction and the future of Fannie Mae, Freddie Mac and the FHA.
Housing availability will also play a significant role in that recovery. Our year over year sales are down 18% (601/491) and our inventory of available homes is down a whopping 72% from last February (2,240/617) to just a 1.4 months’ supply. We’re replacing just half of what we’re selling.
New home builders are rushing to fill that inventory vacuum but their lead time to occupy reduces the immediate impact they can have on the market. Benefitting from strong demand, new home builders are also enjoying anywhere from 12% to 30% pricing premium over comparably sized existing inventory.
And to end on a positive note. In February standard sales accounted for 81% of our active inventory and 61% of sold properties . There are only 8 bank-owned homes listed in Temecula and 9 in Murrieta as of a couple days ago. If you’re a buyer, it’s a competitive market. If you’re a seller – happy days are here again (or at least you can hear the band warming up – don’t get crazy).