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That’s a Wrap

Everybody seems to be breathing a sigh of relief at the end of 2019 – some because it was a pretty good year, others because it was not a pretty good year. Of course, the fact that we’re still breathing at all is a pretty good sign as far as I’m concerned. If you had a good year, here’s to another and another, and if it was not a pretty good year, every day is a chance to make it better in 2020.

Personally, I think everybody should be taking a deep breath because 2020’s going to be quite a year. We’ve got a national election coming up that will be among the most divisive we’ve seen – and that’s saying a lot. We’ve got a lot of local elections that will set up our city, county and state political landscape for the next decade. And our legislature rev’s up again Monday (1/6) and they’ll immediately set to work trying to Hail Mary a lot of crap that didn’t make it through in time last year, plus come up with thousands more ways to control your life, your business and your home. Oh well, that’s enough Zen for one newsletter, let’s talk about housing.

You remember back about mid-year when it was looking like the year was going to be another down year for sales like last year? Well, after a customarily solid May and June, Buyers kicked into gear with an unusually strong July and August and just kept rolling right through the end of the year. Some people blame low interest rates or pent-up demand, others point to Millenials. It’s probably a combination of all three but certainly continued low rates are driving both sales and refinances. This time last year we expected interest rates to be at 5% or more by now, instead they’re hovering in the high3%’s. Good news if you can find an affordable house.

Sales of single-family homes edged up 3% month-over-month (832 / 860) and surged 16% over last December (720).

That last-minute push propelled the regional market to a 4% finish over 2018 volume (10,579 / 11,042) producing the 4th strongest finish of the decade. Resales of existing homes have fluctuated within a 10% margin for most of that time, which is interesting given the increase in population across the region in the last 10 years. It’s the same phenomenon we’ve noted at the state level as well, that sales have stayed relatively flat since 1987 in spite of adding more than 10 million people. New home construction siphons off some sales from existing homes, but 1) we haven’t built that many new homes in the past decade, and 2) after some period of time those new home scycle into the used home category. But they’re not.

While sales remained fairly lackluster over the period, prices continued to increase.

Across the region our median price appreciated 49% in the past decade. In spite of a 3% decline from November ($395,555 / $385,900), December was still up 4% over last December ($372,364) to post a 3% improvement for the year ($374,104 / $386,413). That’s half the rate of appreciation we enjoyed the past few years but still moving in the right direction. Propelled by the sale of 12 homes in excess of $1million, Temecula’s average price stablished a new price peak for the year in December ($595,118) bringing their average price for the year to $555,320, surpassing the peak point of $543,545 set in 2006. Joining them in setting new average price peaks, Menifee surpassed its 2006 high point ($363,137 / $370,425) and Perris hit new heights as well ($375,828 / $390,973). It’staken13yearstoregainwhat we lost in 18monthsbackin 2008-2009 and all of our cities aren’t back yet.

Looking ahead, January will be customarily grim.

Pending sales coming into the month are off 17% (862 / 672) and inventory is down to just 2.1 months – 1.7 in Temecula, 1.9 in Murrieta and 1.5 in Perris. After seeing inventory expand to nearly 4months and 2,900 units in the past year, we’re now down to just 1,720unitsfor sale, the lowest number since January 2018. Also, in December we sold nearly 1.4 homes for every new home listed. Nearly 2:1 in Murrieta. That will certainly constrain sales into 2020. You can’t sell what you don’t have – and right now we don’t have. Last December we had more than 2,300 units for sale and kept that many units or more available for buyers right through October when inventory took a precipitous dive. Right now, Hemet has 100 more homes for sale than Murrieta or Menifee and 160 homes more than Temecula, and with a median price around $270,000, entry level buyers should look eastward before leaving the state entirely.

You’re by-city demographics reports will be out sometime Q1, but in the meanwhile we’re always happy to answer your housing questions. Happy New Year.

Written by Gene Wunderlich, Sr. Staff Writer

Prior to his retirement in 2021, Wunderlich served on a number of local non-profits and boards. He spent the past decade as a legislative advocate for the housing and real estate industries as well as a coalition of local Chambers of Commerce advocating on behalf of small and local businesses.

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