Don’t know if you noticed ho media headlines for the first half of January trumpeted the onslaught of buyers heralding a jump on the spring buying season. Realtor.com told us: “Early-bird home buyers turn January into the new April” while MSNBC announced “Competition for housing is so high, the spring market is starting now”. But by mid-January Housing wire reported that “The Housing Market is off to a slow start in January” and Financial Samurai cautioned “It’s Time to Start Worrying About the Housing Market Again”. Not to be outdone, CNN just came out with “Coronavirus Threat Set to Trigger a Massive U.S. Housing Market Crash”. It’s not even mid-February and I’m already exhausted for the year. It’s less stressful to follow the election!
So, ignoring the media crisis du jour, how did 2020 actually start in Southwest California? About as expected – no surprises, no rush, no crash. January is always a slow month and this year was no different. After a decent December that capped off a pretty good 2019 season, pending sales were down coming into the month so all things considered. we pretty much knew what was going to happen. And it did, but maybe not as bad as it could have. Sure that closed sales were down 21% from December (860 / 679) but they were 16% better than January 2019 (583), so that’s not bad. And pending sales coming into February are up 20% (672 / 843), so subtract two holidays, add a leap day, multiply by low interest rates carry the seven, = February should be even better.
What about prices, you ask?
More good news. January median price ticked up 2% from December ($385,900 / $395,188) and improved 6% over last January ($370,706). That’s good news for home sellers, but not so good if you’re trying to buy– especially if you’re a first-time home buyer. Not only that but there’s way fewer options to choose from right now. We’ve had eight straight months of inventory declines dropping us 6% month-over-month (1,720 / 1,623) and down a whopping 30% from last January (2,317). Inventory is at its lowest level since January 2018 and, after rising to 4+ months a few times in 2019, has now dropped to around 2monthsin most markets.
As I’ve cautioned before, some percentage of sales and inventory can be attributed to increased new home construction across our region, and we are appreciative of the efforts our cities and county are making to address the housing crisis.
But that’s still a grim inventory number coming into the year. If we’re going to have a robust buying season, it’s imperative we add to that listing inventory because you can’t sell what you don’t have. And right now we don’t have! Despite the Governor’s pledge to add 350,000 new dwelling units to the state every year, in 2019 the state actually produced fewer that it had in 2018 – down around 108,000 units. And projections from both the California Association of Realtors and the Building Industry Association are forecasting less than 1,000 additional homes built in 2020 – from 108,170 to 108,620. Not only a far cry from the Governor’s 350,000, but less than the 180,000 we need just to keep pace with growth. Probably a good thing people are leaving the state – take some of the pressure off.
The good news is that aside from CNN’s threat of a crash (when was the last time they were actually right?), most prognosticators of any repute remain optimistic for housing in 2020. With economic indicators all still in positive territory and interest rates expected to remain near record lows for the year, there are few indicators of a recession, or even a correction, this year. C.A.R is forecasting modest gains in sales and price, while CoreLogic is even more bullish on the market this year than they were last, and they usually do a pretty good job. Let’s hope they’re right.